India’s Offer-for-Sale (OFS) Route in Disinvestment
The Offer-for-Sale (OFS) route in disinvestment refers to a method by which the Indian government sells its stake in public sector undertakings (PSUs) to reduce its shareholding, aiming to meet public shareholding norms set by the Securities and Exchange Board of India (SEBI). Initiated in 2012, OFS is utilized to facilitate government’s disinvestment objectives, including reducing its fiscal burden and making PSUs more autonomous by decreasing government influence. It focuses on minority stake sales where the government retains control post-sale, and strategic disinvestments leading to the transfer of management control. Despite its potential for improving PSU efficiency and market competitiveness, the OFS route faces challenges like limited interest from private and foreign institutional investors, valuation complexities, and resistance from political and labor groups. Enhancing the strategic planning of disinvestment announcements, ensuring attractive pricing, and addressing supply-demand dynamics are crucial steps forward.
