Companies can now offer OFS of shares to employees through stock exchanges

Each employee is eligible for allotment of equity shares up to Rs 2 lakh

The market regulator has allowed employees to bid for the offer for sale (OFS) of shares through the stock market mechanism in addition to the existing outside-the-exchange mechanism.

A circular issued by the Securities and Exchange Board of India (SEBI), which detailed the framework for this said that a certain number of shares should be reserved for the employees and that the maximum bid amount under this category would be Rs 5 lakh.

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The circular said, "In order to enhance efficiency, ease of compliance and reduce cost, based on deliberations in the Secondary Market Advisory Committee of SEBI and discussions with stock exchanges and clearing corporations, it has been decided that the promoters can also offer the shares to employees in OFS through the Stock Exchange Mechanism." It added that it would be an additional mechanism to the existing one.

OFS to employees shall be on T+1 day along with the retail category under a new category called "Employee". The promoters must transfer the total shares of OFS on T-1 day including the shares reserved for the employee category, to the designated clearing corporation.

The employee can bid through this category as well as the other categories, as per applicable limits.

Each employee is eligible for allotment of equity shares up to Rs 2 lakh. Provided that in the event of under-subscription in the employee portion, the unsubscribed portion may be allotted to such employees whose bid amount is more than Rs 2 lakh on a proportionate basis, for a value above Rs 2,00,000 subject to the total allotment to an employee not exceeding Rs 5 lakh.

Allotment under the “Employee” category will be based on the PAN details of employees shared by the company on T-1 day.

Employees must pay an upfront margin to the extent of 100 percent of the order value in cash or cash equivalents.