Definition
An Offer for Sale (OFS) allows eligible existing shareholders of a listed company, such as promoters or the government, to sell their shares to investors through the stock exchange. No new shares are issued, and the proceeds go to the selling shareholders rather than the company.
Example
Suppose a listed company called ABC Ltd shares trade at Rs. 500 each. Its promoters decide to sell their holding through an OFS and announce a floor price of Rs. 480, which is lower than the market price. You place a bid for 10 shares at Rs. 480 each. If your bid is accepted and you receive full allotment, you receive 10 shares of ABC Ltd in your Demat account, and the promoters receive the money. ABC Ltd itself receives nothing, and its total number of shares remains unchanged.
Caution
A lower floor price in an OFS does not guarantee profit. Investors should check the company’s performance and the reason for the sale before bidding.