Feb 11, 2013, 09.29 AM IST
Emerging as the most-preferred share sale route for listed firms, the OFS (Offer For Sale) mechanism has been used by as many as 22 companies to raise a collective amount of about Rs 39,000 crore since its launch about a year ago.
The companies having tapped the OFS route this year to help their promoters raise funds through sale of shares include public sector giants like NTPC and Oil India , both of which managed to elicit impressive investor interest.
Among the total 22 companies that have used this mechanism to sell shares in the last 11 months, the largest has been the Rs 12,666-crore issue by state-run energy major ONGC in March, 2012.
The OFS method allows the companies to sell shares in a simplified process in the stock market through a one-day auction process.
It was introduced by market regulator Sebi early last year to help the companies meet minimum public shareholding limits (25 per cent for private sector firms by June 2013 and 10 per cent for PSUs by August this year).
Three firms, NTPC, Oil India and Adani Enterprises, have used the OFS route this year and all of them were fully subscribed.
The blockbuster NTPC stake sale fetched the government Rs 11,500 crore and was over-subscribed 1.7 times. Prior to that, the government garnered Rs 3,100 crore from sale of 10 per cent stake in Oil India in another fully-subscribed issue.
The firms that tapped OFS last year include Wipro, Adani Power, Jaiprakash Power Ventures, DB Corp, Muthoot Cap, Sical Logistics, Reliance Power, NMDC, Hindustan Copper, Pioneer Distilleries and Eros International. Among these, all issues were fully-subscribed, except Wipro and Pioneer Distilleries.
Both DB Corp and Adani Enterprises have twice used this mechanism to sell stake.
In February last year, Sebi had created two new routes for share sale by promoters to meet minimum public holding norms, Institutional Placement Programme (IPP) and OFS.
These two are fast-track stake sale programmes available for share sale through auction method, as against long-drawn traditional processes like Follow-on Public Offers (FPOs).
So far, only two companies have opted for IPPs.
"Promoters need to bring down their stake to 75 per cent as per Sebi guidelines. In last few months, markets have been good, riding high on reforms measures. Any issue that is priced right, investors flock that counter. Companies are coming up with OFS because there is appetite in the market for the same," Ashika Brokers' Research Head Paras Bothra said.
"OFS route can become more popular if stock market continues with its uptrend in short-term," he added.
Experts believe that attractive pricing and buoyant market conditions have also helped in the success of recent OFS issues. The BSE benchmark Sensex has gained nearly 11 per cent since March 2012 till date.
NTPC stock price
On December 11, 2013, NTPC closed at Rs 139.30, up Rs 3.30, or 2.43 percent. The 52-week high of the share was Rs 167.25 and the 52-week low was Rs 122.65.
The company's trailing 12-month (TTM) EPS was at Rs 14.55 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 9.57. The latest book value of the company is Rs 97.49 per share. At current value, the price-to-book value of the company is 1.43.
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