Promoting Transparency: Understanding Minimum Public Shareholding (MPS) and Offer for Sale (OFS)
Minimum Public Shareholding (MPS) and Offer for Sale (OFS) are regulatory mechanisms aimed at maintaining market transparency and encouraging wider public participation in company ownership.
Minimum Public Shareholding (MPS): SEBI mandates that companies must have a certain percentage of their shares held by the public. This ensures market liquidity, prevents manipulation, and promotes investor confidence. Companies often use Offer for Sale (OFS) to comply with MPS norms. Within a specified time frame, companies need to increase public holding to the prescribed level.
Offer for Sale (OFS): OFS is a disinvestment method used by existing shareholders, like promoters or governments or retail shareholders , to sell their shares to the public through the stock exchange. It facilitates efficient divestment. Companies use OFS to meet MPS requirements, as it helps increase public shareholding and diversify ownership.
In essence, MPS and OFS work in tandem to maintain a healthy balance of ownership in publicly listed companies. While MPS norms ensure a minimum public shareholding percentage, OFS provides a mechanism for existing shareholders to divest shares and achieve regulatory compliance.
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