Offer for Sale Through Stock Exchange: How OFS Bidding Works for Retail Investors

Now and then a listed company’s promoter, or a large investor, tells the exchanges at 5 pm that it will sell a block of shares the next morning. By the following evening the deal is mostly done, and retail investors get their own day to bid. That two-day window is an offer for sale through stock exchange, usually just called an OFS, and it lets a small investor buy straight from a promoter or big shareholder at a price set by bidding rather than by the normal order book.

The rules are compact but full of small traps: a ₹2 lakh ceiling that is counted across exchanges, a cut-off price you don’t get to see until the institutions have bid, and a discount that may or may not be offered. We’ll go through the framework clause by clause and then run one hypothetical OFS from notice to allotment.

What an offer for sale through stock exchange actually is

An OFS is a sale of existing shares. No new shares are created and the company doesn’t receive a rupee; the money goes to whoever is selling. That is the same split you see inside many IPOs, which we covered in fresh issue vs offer for sale. The difference is that this OFS happens after listing, in a separate bidding window that the exchange opens for one stock, while normal trading in that stock carries on alongside it.

The rulebook is SEBI’s comprehensive framework on OFS of shares through the stock exchange mechanism (circular SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/10, January 10, 2023). It replaced nine older circulars going back to 2012. NSE’s operating guidelines (circular NSE/CMTR/72975, last revised on February 24, 2026) fill in the mechanics, such as series codes and which PAN categories count as retail.

Who is allowed to sell

• Promoters who must raise public shareholding. Promoters and promoter group entities of companies that need to meet the minimum public shareholding rules can use OFS.
• Anyone large in a big enough company. In companies with a market capitalisation of ₹1,000 crore or more, any promoter, promoter group entity or non-promoter shareholder can sell through OFS. The ₹1,000 crore test uses the average daily market cap over the six months before the month in which the OFS opens.

Buyers are everyone registered with a broker on BSE, NSE or MSEI, except the promoter group. There is one exception: when a non-promoter shareholder is selling, the promoters may buy in that OFS, subject to SEBI’s takeover, ICDR and listing rules.

How big it has to be

The minimum size is ₹25 crore, where “size” means the number of shares offered multiplied by the floor price. A promoter can go below ₹25 crore only if that single tranche gets the company to minimum public shareholding.

The timeline, from notice to allotment

The whole thing runs on a T and T+1 calendar, where T is the first day of the offer.

• T-1, by 5 pm: the seller files the notice with the exchanges. The exchange can allow up to 6 pm, case by case, if it records its reasons. The floor price has to be disclosed by the same deadline. The notice also names the seller, the exchanges and the designated stock exchange, the opening and closing times, the allocation method, the number of shares, any green shoe (extra shares the seller may choose to sell), the seller’s broker, any retail discount and the retail reservation percentage.
• T day: only non-retail investors bid. Institutions and others place limit orders. The exchange shows a running indicative price, which is the volume weighted average of all valid bids, along with cumulative bid quantity. Bids below the floor price are rejected. A cut-off price for the non-retail book comes out of these bids.
• T+1 day: retail investors bid. Non-retail bidders who missed out on T day can choose to carry their bids forward, at the cut-off price or higher.

Bidding happens during normal trading hours. The stock’s usual price band doesn’t apply inside the OFS window, though normal tick sizes do. If a market-wide index circuit breaker shuts the market, the OFS halts too.

On T+1 you are not bidding blind. The institutions have already shown you the price they were willing to pay, and the rules don’t let you bid below it.

Retail rules: the ₹2 lakh line and the cut-off option

At least 10% of the offer size is reserved for retail investors. A retail investor here is an individual whose total bids are worth not more than ₹2 lakh, added up across all exchanges. NSE treats PANs in the Individual, HUF, NRE and NRO categories as retail and identifies them through its client database. Cross ₹2 lakh in total and your retail-category bids become ineligible. Bids you placed in the general (non-retail) category, if any, are still considered there.

A few more details matter on bid day:

• You can bid at cut-off. Sellers must give retail investors the option to bid at the cut-off price instead of naming a price. Margin for a cut-off bid is calculated at the cut-off price discovered on T day.
• You can’t undercut the institutions. Retail bids below T day’s non-retail cut-off are rejected. If the non-retail book was undersubscribed on T day, retail can bid at the floor price instead.
• 100% upfront. Retail bids need 100% of the order value as margin, in cash or cash equivalents. On NSE these bids go in the RS series, while non-retail bids use IS.
• There’s no indicative price for the retail book. You see cumulative retail bid quantity during the day, not a running price.
• Oversubscription means proportionate allotment. If retail demand at the cut-off is more than the retail quota, everyone at cut-off gets a proportionate share.

How the discount works

The seller may offer retail investors a discount, and it has to be disclosed up front in the notice. Under a multiple clearing price OFS, the discount can be applied to the retail cut-off price or to each investor’s own bid price. Under a single clearing price OFS, it’s applied to the retail cut-off. SEBI’s circular also allows the discounted retail price to end up below the floor price.

A worked example: one OFS from start to finish

Everything below is hypothetical. The company, the investor and every number are made up to show the arithmetic.

The promoter of Tapti Specialty Chemicals (hypothetical) files a notice at 4:30 pm on T-1. It offers 50,00,000 shares at a floor price of ₹400, using the multiple clearing price method, with a 10% retail reservation and a 2% retail discount on the cut-off price.

• Offer size: 50,00,000 × ₹400 = ₹200 crore, comfortably above the ₹25 crore minimum.
• Retail quota: 10% of 50,00,000 = 5,00,000 shares.
• Non-retail book: the other 45,00,000 shares. Within the offer, at least 25% of the shares offered (12,50,000) is reserved for mutual funds and insurance companies, subject to the allocation method.
• Single-bidder cap: no one other than a mutual fund or insurer can be allotted more than 25% of the offer, so 12,50,000 shares at most.

T day: the institutions set the bar

By the close, valid non-retail bids look like this: 20 lakh shares at ₹420 or higher, 15 lakh shares between ₹415 and ₹419, 18 lakh shares at ₹412 and 9 lakh shares between ₹405 and ₹411.

Count down from the top. The first two bands add up to 35 lakh shares. Adding the ₹412 bids takes the total to 53 lakh, which is more than the 45 lakh on offer. So ₹412 is the cut-off, the lowest price at which the whole non-retail book gets sold.

Only 10 lakh shares are left for the 18 lakh bid at ₹412, so those bids get about 55.6% of what they asked for. Because this is a multiple price OFS, the bidders above the cut-off pay their own bid prices. The 9 lakh shares bid below ₹412 get nothing. Total demand at or above the floor was 62 lakh shares, about 1.38 times the non-retail book. Bidders who missed out can carry their bids forward to T+1 at ₹412 or higher.

T+1: Ritu bids

Ritu, a hypothetical retail investor, sees the ₹412 cut-off on the morning of T+1. She bids for 480 shares at cut-off through her broker. Her margin is worked out at the T-day cut-off:

480 × ₹412 = ₹1,97,760

That’s just under the ₹2 lakh limit. Had she asked for 490 shares, the bid would be worth ₹2,01,880 and would fall out of the retail category altogether. The same thing happens if she splits her bids, say 300 shares on NSE and 200 on BSE at cut-off. That adds up to ₹2,06,000 across the two exchanges, so both bids lose retail eligibility.

Retail demand closes at 12 lakh shares, all at or above ₹412, against a quota of 5 lakh. That’s 2.4 times oversubscribed, so everyone at cut-off gets 5 ÷ 12, about 41.7% of their bid.

• Ritu’s allotment: 480 × 5 ÷ 12 = 200 shares
• Her price after the 2% discount: ₹412 × 0.98 = ₹403.76
• What she pays: 200 × ₹403.76 = ₹80,752
• Margin released: ₹1,97,760 − ₹80,752 = ₹1,17,008

Unallotted funds are released after the exchange downloads the obligations, and retail pay-in and pay-out follow normal secondary market settlement. The shares then reach her demat account through the usual settlement route.

What if retail had stayed away?

Say only 3 lakh retail shares were bid. The other 2 lakh shares in the retail quota don’t go back to the promoter. They go to the non-retail bidders who carried their bids forward to T+1, at ₹412 or above, in order of price. The rule works in reverse too: if the non-retail book is undersubscribed, the leftover shares can be taken up in the retail segment.

The rules lock sellers into the deal they announced. Once the price and quantity are out, they can’t trade around the offer for weeks.

Rules that protect the buyer

Cooling-off periods. The seller can’t buy or sell the company’s shares for a set period before and after the offer. That’s two weeks for the most liquid stocks, four weeks for liquid ones and twelve weeks for illiquid ones. Liquidity is defined by mean impact cost for a ₹1 lakh trade. Promoters of liquid or illiquid stocks may sell only through OFS or QIP, with at least two weeks between offers.

Withdrawal and cancellation. An OFS can be withdrawn before it opens, and the seller then has to wait 10 trading days before trying again. Once bidding starts it can’t be cancelled, with one exception. If T day brings too little non-retail demand at or above the floor, the seller may cancel the whole offer, including the retail day. NSE wants that decision filed by 5 pm on T day.

The seller has to deliver the shares first. The seller deposits the entire quantity, including any green shoe shares, with the clearing corporation before the offer opens.

Penalty for buyers who don’t pay. If a buyer defaults on pay-in, 10% of the order value is charged as a penalty and goes to the exchange’s investor protection fund. The Settlement Guarantee Fund doesn’t cover OFS trades. The allotment price set on T day isn’t revised because of a default.

How OFS differs from a block deal or an IPO

Next to an IPO or a block deal, an OFS has its own shape. It’s a public, rules-based auction of shares that are already listed, announced the evening before, finished in two sessions, with a ring-fenced slice for small investors. For the bigger picture on primary-market investing, see our guide to IPO investing in India.

Employees have their own lane. Promoters can offer shares to employees as part of the OFS, at the discovered price or at a discount. On NSE, employees bid in a separate ES series on T+1, only at the T-day cut-off. Each employee is eligible for up to ₹2 lakh, and if the employee portion is undersubscribed, up to ₹5 lakh.

A quick checklist before you bid in an OFS

1. Read the notice for the floor price, the retail reservation, any discount and the allocation method.
2. Watch the T-day indicative price and cut-off. Compare the cut-off with where the stock actually closed in the normal market that day.
3. Work out your bid value at the cut-off price and keep it under ₹2 lakh across all exchanges combined.
4. Keep the full amount in your account, because retail margin is 100% upfront.
5. Ask why the seller is selling. Meeting a public shareholding rule tells you something different from a large investor heading for the exit.

The OFS window is short, and that’s the point. The institutions show their hand on day one, retail gets a protected slice on day two, and the seller can’t game the price in between. If you know the cut-off, the ₹2 lakh line and the discount before the T+1 session opens, you’ll know exactly what you’re bidding for.

Disclaimer: This article is for educational purposes only and is not investment advice or a recommendation to buy or sell any security. The company, investor and figures in the worked example are hypothetical. Investing in equities carries risk. Please do your own research or consult a SEBI-registered investment adviser before making investment decisions.