Jargon, Decoded · Part 52 of 53
Offer for sale and delisting: when promoters sell shares, and when they buy everyone out
What an offer for sale is
Companies issue new shares; shareholders sell existing ones. An offer for sale (OFS) is the second kind, done in bulk: a promoter or large investor offers a block of shares they already own to the public. The company’s share count doesn’t change and the company receives nothing — the money goes to whoever sold.
You meet OFS in two places:
- Inside an IPO. Many initial public offers are a mix of a fresh issue (new shares, money to the company) and an OFS (existing shares, money to the sellers). The DRHP post explains why that split is the first thing to check.
- After listing, through the exchange. SEBI (the Securities and Exchange Board of India) runs a separate OFS window on the stock exchanges for listed companies, under a framework last rewritten on 10 January 2023 (SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/10). The seller announces a floor price by 5 pm the day before; non-retail investors bid on day T, retail investors on T+1; at least 10% of the offer is reserved for retail investors (bids up to ₹2 lakh) and at least 25% for mutual funds and insurers. It’s open to companies with an average market cap of ₹1,000 crore or more, with a ₹25 crore minimum size — and, whatever their size, to promoters selling down to meet the minimum public shareholding rule.
Delisting is the opposite move: the promoter (the “acquirer”) buys out the public so the shares stop trading altogether. The rules are the SEBI (Delisting of Equity Shares) Regulations, 2021, amended on 25 September 2024 and 3 September 2025 (consolidated text). In outline:
- The company’s shareholders must approve it by special resolution, and public shareholders’ votes in favour must be at least twice their votes against (reg. 11).
- The price is found by reverse book building: public shareholders bid the price at which they’re willing to sell, and the discovered price is the one at which enough shares have been tendered to take the acquirer’s holding to 90% of the shares (reg. 21). The acquirer can’t bid below a regulated floor price (reg. 19A).
- Since the 2024 amendment, an acquirer of a frequently traded company can instead offer a fixed price at least 15% above the floor (reg. 20A), and if a reverse book building falls short, may make a counter-offer provided its holding plus tendered shares reaches at least 75% and at least half the public shareholding has been tendered (reg. 22(4)). The 90% test for success still applies.
- Shareholders who didn’t tender can sell to the acquirer at the delisting price for at least a year after delisting (reg. 26).
The rules in one table
| Item | Fresh issue | Offer for sale | Delisting offer |
|---|---|---|---|
| Who sells | The company (new shares) | Existing holders | The public, to the acquirer |
| Money goes to | The company | The sellers | The public shareholders who tender |
| Share count | Rises | Unchanged | Unchanged |
| Public shareholding | Rises | Rises | Falls toward zero |
| Price set by | Book building / fixed | Floor price + bids | Reverse book building (or fixed price) |
Worked example 1: a promoter OFS to reach 25% public
Hypothetical. The free float post noted that Desi Bites’ fictional public shareholding, 20%, would be below India’s 25% minimum. The exchange OFS window is one way a promoter fixes that. Desi Bites’ ₹80 crore market cap is far under the ₹1,000 crore threshold, but a promoter selling to meet the minimum can use it anyway, and in one tranche can go below the ₹25 crore minimum size.
| Item | |
|---|---|
| Shares the promoter offers | 62,500 |
| Floor price (hypothetical) | ₹600 |
| Size at the floor | ₹375 lakh (₹3.75 crore) |
| Reserved for retail (at least 10%) | 6,250 shares |
| Reserved for mutual funds and insurers (at least 25%) | 15,625 shares |
| Promoter holding after | 9.375 lakh shares (75%) |
| Public holding after | 25% |
| Total shares | 12.5 lakh — unchanged |
The company raises nothing. Its share count, earnings per share and balance sheet are exactly as before; only the names on the register change.
Worked example 2: a reverse book building for Desi Bites
Hypothetical. Now the other direction. Desi Bites’ promoter, at 80%, proposes to delist. The floor price works out at ₹650. To reach 90% the promoter needs 1.25 lakh of the public’s shares tendered. Public shareholders bid:
| Bid price | Shares tendered (lakh) | Cumulative (lakh) | Acquirer’s holding if accepted |
|---|---|---|---|
| ₹650 | 0.2 | 0.2 | 81.6% |
| ₹700 | 0.3 | 0.5 | 84% |
| ₹750 | 0.35 | 0.85 | 86.8% |
| ₹800 | 0.3 | 1.15 | 89.2% |
| ₹850 | 0.25 | 1.4 | 91.2% |
| ₹900 | 0.4 | 1.8 | 94.4% |
| ₹1,000 | 0.3 | 2.1 | 96.8% |
A further 0.4 lakh shares weren’t tendered at all.
- Walk down the table until the cumulative column first reaches 1.25 lakh. That happens at ₹850 — the discovered price, 30.8% above the floor.
- If the acquirer accepts, every share tendered at or below ₹850 (1.4 lakh) is bought at ₹850, whatever its holder bid. Cost: ₹1,190 lakh. The acquirer ends at 91.2%.
- Shares bid above ₹850 aren’t bought in the offer. Their holders, and those who never tendered, can sell to the acquirer at ₹850 for at least a year after delisting.
- The acquirer can also reject the discovered price, in which case the offer fails and the company stays listed — or, if the conditions above are met, try a counter-offer.
Notice who sets the price: the last shareholder needed to reach 90%. A few holders bidding high can move the price a long way — here, to 30.8% above the floor.
Common mistakes
- Reading an OFS as the company raising money. It doesn’t. A promoter OFS changes who owns the shares, not what the company has. Whether it’s a signal about the business depends on why they’re selling — meeting a public-shareholding rule is very different from an early exit.
- Assuming a delisting will happen at a big premium. The acquirer can reject the discovered price and walk away, and the shares stay listed. Buying a stock because a delisting is “coming” is a bet on an offer that may never be made or may fail.
- Not tendering and forgetting about it. After a successful delisting the remaining shares no longer trade on the exchange. The right to sell at the delisting price lasts at least a year; after that, an unlisted minority stake is hard to sell.
- Confusing the floor price with the offer price. The floor is the minimum the regulations allow. The price paid is discovered by the bids, or set as a fixed premium over the floor.
Takeaway: an offer for sale moves existing shares to new owners and puts no money into the company; a delisting does the reverse, buying the public out at a price the public’s own bids discover. In both, read who is selling to whom, and why.
This post is for educational purposes only and is not investment advice. Wealth Primer explains concepts, not recommendations — nothing here is a suggestion to buy, sell, or hold any specific security or fund. The author is not a SEBI-registered Research Analyst or Investment Adviser. Any prices or figures used as worked examples are historical and shown only to illustrate a calculation. Past performance does not indicate future results. Please do your own research or consult a registered adviser before making investment decisions. See the privacy & disclaimer policy for more.