SAIL OFS: An Investment Opportunity in Disguise

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SAIL OFS: An Investment Opportunity in Disguise

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Shares of SAIL rallied over whopping 400% in the last 9 months. The government on January 13 confirmed the opening of Offer for Sale (OFS) in SAIL for retail and non-retail investors.

With this, the government would divest 5% equity in the firm with a 5% greenshoe option. A greenshoe option is a kind of over-allotment option and give the company the right to sell investors more shares than initially planned by the issuer if the demand for a security issue proves higher than expected. So, in short, if required, Government can dilute upto 10% stake in SAIL via OFS.

What is Offer for sale (OFS)?

Introduced in 2012, OFS makes it easier for promoters of publicly-traded companies to cut their holdings and comply with the minimum public shareholding norms. This is a simpler method of share sale through the exchange platform for listed companies.  Ex- If you own 35% in a company ‘A’ and willing to cut your holdings to 33% then you can do it via a Separate window of OFS.

SAIL OFS details:

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The floor price for SAIL OFS has been set at Rs 64 per equity share and total OFS size has been calculated at at 413,052,528 shares, which will let the government to
collect ~Rs 2,664 crore via this offer for sale.

Simply put, government is willing to sell shares of SAIL at Rs 64 per equity share. You can buy it from government at 64 Rs. and later sell the shares at market price. (CMP is 66.85 Rs.) or hold it for longer term if you are bullish and exit and much higher price

Of the 18 analysts tracking the company, 10 have a ‘buy’ rating, five suggest a ‘hold’ and three recommend a ‘sell’. Motilal Oswal has neutral call on Steel Authority of India with a target price of Rs 81.

And yes, OFS was the reason behind the massive fall in stock price today.

SAIL OFS: An Investment Opportunity in Disguise

The OFS in SAIL opened for non-retail investors today (on January 14) and will open for retail investors on January 15. SAIL received Stellar response from non retail investors as it was subscribed almost 2 times.

SAIL OFS: An Investment Opportunity in Disguise
Source: https://www1.nseindia.com/live_market/content/live_watch/offer_sale/ofs_sale.htm

For retail investors, it will open tomorrow (Jan 15) for subscription:

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Here is how you can get benefitted and process of application:

  • Retail investor can only apply upto 2L Rs.
  • If you are using Upstox and you can simply call directly to their customer care number to OFS application. They will do it for you on call.
  • If you apply at 64 Rs. then probably you won’t get the shares, indicative price of non-retail investors were 65.46 Rs.
  • Apply at 65.46 Rs a share (upto 3055 number of shares).

Note: Do not apply for OFS if the tomorrow’s current price falls below 65.46 Rs per share.

If you are lucky enough to get the shares at 65.46 then you can sell the share in open market at higher price. If you haven’t received then your margin money will be unblocked automatically.

#HappyInvesting

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Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin | akshay.equity@gmail.com

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SAIL OFS: An Investment Opportunity in Disguise
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Akshay Seth is a SEBI Registered Research Analyst. Has taken sessions on 'Equity Analysis' in IIT Madras, IIT Delhi, IIT Guwahati, IIT Mandi, NMIMS Mumbai. Can be contacted for Stock Advice and Learning Stock Analysis (Fundamental & Technical). +91 8826423141 | info@equityboxx.com
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