Offer for Sale - An Alternative Mechanism for Price Discovery of Equity Share: An Empirical Study in Indian Context

Authors

  • Paritosh C. Basu
  • Aman Jain
  • Vaibhav Singhal

DOI:

https://doi.org/10.33516/rb.v42i1.148-169p

Keywords:

Offer For Sale (OFs), Offers For Sale (OsFS), Price Discovery, Divestment, Sebi, Floor Price, Undisclosed Price, Indicative Price, Allotment Price, Promoters, Exchange, Oversubscribed, Undersubscribed, Shareholders’ Wealth, Wealth Destruction, Bombay Stock Exchange, Mumbai, India (BSE).

Abstract

This paper examines effectiveness of Offer for Sale (OFS) as a tool to divest Promoters' shareholdings of a listed entity in compliance with specific regulations promulgated by the Securities and Exchange Board of India. It is based on analytical study of sixty-six OFSs. Specific instances of divestments by certain large corporates have been explained to bring out how improper fixing of floor price can lead to destruction of shareholders' wealth. It explores the reasons behind oversubscription and undersubscription of some of the OsFS. Certain trends in movements of prices have been identified, which can be used by intraday traders and retail investors to avoid immediate losses. The paper also opens upan anomaly in the present process of OFS which can be exploited by institutional investors to earn profits by way of arbitrage at the cost of erosion in wealth of existing shareholders. Recommendations have been provided for ensuring that the process of price discovery becomes a win-win game for all concerned.

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Published

2016-04-01

How to Cite

Basu, P. C., Jain, A., & Singhal, V. (2016). Offer for Sale - An Alternative Mechanism for Price Discovery of Equity Share: An Empirical Study in Indian Context. Research Bulletin, 42(1), 148–169. https://doi.org/10.33516/rb.v42i1.148-169p

Issue

Volume 42, Issue 1, April 2016

Section

Articles
Crossref
Scopus
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Europe PMC

References

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