Rural Electrification Corporation (REC) Offer for Sale (OFS) – April 2015 Issue

by Shiv Kukreja on April 8, 2015


This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

Indian Governments have been known for acting as late as possible in taking important economic decisions. But, contrary to their reputation, this time they are acting fast, quite fast. Soon after getting over with a week full of holidays, the Government is quick to announce its decision to sell its 5% stake in one of its Navratnas, Rural Electrification Corporation (REC).

For financial year 2015-16, the Government has set a target for itself to raise Rs. 41,000 crore by selling its minority stakes and Rs. 28,500 crore by selling its controlling stakes in Central Public Sector Enterprises (CPSEs). To meet its target of Rs. 41,000 through minority stakes, the government has scheduled yet another offer for sale (OFS) on the stock exchanges tomorrow. This time the company is REC.

The government will be selling its 5% stake in the company i.e. 4,93,72,950 shares at Rs. 315 a share as the floor price. With 5% discount for the retail investors, the government will be able to raise approximately Rs. 1,540 crore from this share sale. Currently, the government holds about 65.64% stake in the company, which will come down to 60.64% post this OFS.

Before we check out the factors affecting our decision to invest in this OFS, let us first check the basic details of this offer.

Shares on Sale – The government has decided to offload its 5% stake in REC and will place 4,93,72,950 shares in the offer for sale, out of which 20% shares i.e. 98,74,590 shares will be reserved for the retail investors investing up to Rs. 2 lakh.

Offer Price – Share price of REC closed at Rs. 321.25 on the NSE today. The government has fixed Rs. 315 as the floor price in the OFS, which is a discount of 1.95% to its closing price. As always, the floor price has been disclosed by the government after market hours today.

5% Discount for the Retail Investors – Again, the government has decided to offer a discount of 5% to the retail investors. This discount will be offered on the price at which the retail investors bid in the OFS or the cut-off price set by the government, whichever is higher.

Brokerage – Unlike IPOs, stock brokers levy brokerage charges on these OFS transactions. These charges are normally higher than the rate of brokerage investors pay on their routine transactions. So, if the allotment price is fixed at say Rs. 317, the retail investors will get it at Rs. 301.15 a share plus applicable brokerage charges and taxes thereon. So, the retail investors should consider these charges in their overall cost of acquisition.

Introduction of Cut-Off price option still elusive – Offer for sale (OFS) process is still very complicated for the retail investors. They either require proper guidance or the option to bid at the cut-off price. But, this time also, the cut-off price option is missing.

Only a Single Day OFS – REC OFS will remain open for a single day only and that too, during the trading hours of the stock exchanges i.e. between 9:15 a.m. and 3:30 p.m. You’ll get to know the status of your bids by 6 p.m. and if successful, you’ll get the shares allotted by the designated stock exchange on T+1 basis.

Once bidding starts, you can check the bidding status on the National Stock Exchange as well as on the Bombay Stock Exchange.

How does an OFS process work?

If you are investing in an OFS for the first time and want to know more about the process, here is the link to check the details about it. If you have any query regarding the process, please share it here, I’ll try to respond to it as soon as possible.

How to invest?

You need to contact your broker to know how it is facilitating the bidding process. I think most of the broking firms must be providing the investment facility through their online platforms. If you don’t have access to the online platform, you should contact the customer care department of your broker and get the bid placed through telephonic confirmation.

Should you invest in REC OFS?

Power sector is one of the key drivers for a country’s rapid economic growth and poverty alleviation. Approximately 30% of India’s population do not have access to this basic amenity called electricity. For the past many many years, India’s power sector has been paralyzed with one issue or the other.

Poor financial condition of the state electricity boards (SEBs), unreasonable poll promises made by our politicians during elections, coal shortages due to scams/litigations or high import prices, poorly drafted laws of land acquisition, policy paralysis, shortage of funds or equipments for new capacities are some of the reasons due to which India’s power sector has shown an extremely poor growth.

However, the government is committed to provide electricity to all households over the next few years. Keeping that in mind, the government has recently taken many initiatives, including transparent & competitive auctions of coal mines, implementing gas price pooling policy, encouraging Coal India to meet its production targets etc. It makes me feel that the government is doing an excellent job at the ground level and it should start reflecting in growth numbers very soon.

REC is India’s biggest infrastructure finance company (IFC) for the power sector. Amidst a challenging environment for the power sector, the company has managed to keep its gross non-performing assets (NPAs) under control at 0.8%. Due to its low cost of borrowings, the company has managed to keep its net interest margins (NIMs) at a healthy 5.1% in the nine months period ended December 31, 2014.

From a long-term investment perspective, the stock price of the company is trading at extremely attractive valuations. Assuming the government to fix its allotment price to the retail investors at Rs. 300 per share, the stock is available at approximately 5 times its estimated earnings per share (EPS) and 1 time its estimated book value (BV) for the current financial year. It has also managed to keep its return on equity (RoE) above the levels of 20%. As the company is expected to post an earnings growth of around 30% in the next 3-5 years, its valuation of 5 times earnings seems strikingly cheap to me.

With the government moving in the right direction, an efficient minister heading the power ministry and the interest rates heading downwards, I think India’s power sector should do extremely well in the next 3-5 years. The need of the hour is not to mix politics with economics. Unnecessarily giving subsidies to people who can comfortably afford power makes no sense to me. I think the state governments should focus on making their electricity boards (SEBs) and power generation & distribution companies more efficient rather than subsidizing our electricity bills.

I think this offer for sale is attractively available at Rs. 315 a share and a 5% discount to this price again leaves a reasonable margin of safety for the retail investors. With the government taking it in the right direction, I expect the stock price to move past Rs. 350 levels very soon and to touch Rs. 500 in the next 15-18 months time.

{ 93 comments… read them below or add one }

ketki April 8, 2015 at 10:26 AM

Thanks Shiv,
for the detail analysis and links to all relevant pages. Your guidance is quite valuable for new investors. This is my first time subscription to any OFS. I have applied at floor price of 315. But the indicative price on BSE link says 317.

Does this mean i will not get any shares ? At the end of day will different people get shares at different prices or same price ?



ketki April 8, 2015 at 11:05 AM

does anyone know which price model is specified by REC ?

some info found on web:

11. How will the shares be allotted to me?
The designated Stock Exchange will allot the shares either on a single price or multiple price model as specified by
the issuer. The allotted shares will be credited to the account in a manner similar to the existing equity market


Shiv Kukreja April 8, 2015 at 12:03 PM

It is on a price-priority basis at multiple clearing prices.


Shiv Kukreja April 8, 2015 at 11:55 AM

Thanks Ketki for your kind words!
Allotment and allotment price will depend on the final demand for this OFS. Currently, demand for its shares is high in the OFS. Retail subscription has already crossed 1.6 times. So, I think the government will not be able to fix the allotment price at Rs. 315. I think it is better to bid for these shares at Rs. 317-318 at least. Moreover, different people will get these shares allotted at different prices. If your bid price is Rs. 315 and the government fixes its allotment price at Rs. 317, then you’ll not get any shares.


SB April 8, 2015 at 10:27 AM

Can retail investor opt to bid at the cut-off price?


ketki April 8, 2015 at 11:06 AM

Not for this OFS.


SB April 8, 2015 at 10:30 AM

even I have opted for 315 per share and am unsure if I will get allotment.


Shiv Kukreja April 8, 2015 at 12:29 PM

Hi SB,
Try to modify your bid price to at least Rs. 317. It seems people with Rs. 315 bid price will not get these shares allotted.


Amit April 8, 2015 at 11:07 AM

How can I bid online on ICICIDirect? Its not available under IPO section on their online platform.



prashant April 8, 2015 at 11:46 AM

Under “Equity” tab you should see the OFS option.


Amit April 8, 2015 at 1:12 PM

Thanks Prashant,
I placed bid at 315. Not sure whether I will get it. 1st time I am bidding for OFS.



Shiv Kukreja April 8, 2015 at 1:19 PM

Probability of allotment is low at Rs. 315 bid price.


Amit April 8, 2015 at 1:25 PM

I placed one more bid at 325. Hopefully it will be through.
It shows that one order is placed on BSE and one on NSE. I think system automatically places order either on BSE or NSE and we have no choice of selecting exchange in this case.


Shiv Kukreja April 8, 2015 at 1:32 PM

Yeah, it should, hopefully. But, please remember, your investment amount should not exceed Rs. 2 lakh for your two bids.


Amit April 8, 2015 at 1:39 PM

Its not exceeding 2 lakh.


Shiv Kukreja April 8, 2015 at 1:49 PM

Yes, then it is perfectly fine.


nitesh patel April 8, 2015 at 12:45 PM

at what price you will bid shiv


Shiv Kukreja April 8, 2015 at 12:56 PM

Hi Nitesh,
I have not decided my bid price as yet. Moreover, I would not like to create any kind of controversy or something like that by disclosing it.


SG April 8, 2015 at 1:07 PM

Hi Shiv,

Latest NSE data indicates retail portion subscribed 2.94 times with indicative price of 319.38. Is the cut off price likely to be equal to indicative price when the bid window ends given that issue is already oversubscribed?

What will be the proportion of alocation v/s shares applied for?


Shiv Kukreja April 8, 2015 at 1:17 PM

Hi SG,
Allotment will be done on a price-priority basis. So, if your bid price is at or above the floor clearing price, only then you’ll get the allotment. It is very difficult to guesstimate the floor clearing price based on the current indicative price. The higher the indicative price, the higher your bid price should be from the floor price of Rs. 315.


SK April 8, 2015 at 1:23 PM

1) If retail investor bids at 317 and 317 is the floor price decided later on. Will the investor get 5% of this price?
2) if retail investor applies at 317 and later floor price would be decided 316.
Will retail investor get shares at 317 or 316?


Shiv Kukreja April 8, 2015 at 1:39 PM

Hi SK,
1. Yes, a retail individual investor investing a total of Rs. 2 lakh or less, will get 5% discount, whatever be the allotment price.
2. Retail investor will get shares allotted at Rs. 317 – 5% discount (and not Rs. 316 – 5% discount).


Viki April 8, 2015 at 1:24 PM

Hi Shiv,

1. Can i modify my bid?
2. What will happen if i bid at 325 and price is decided 320. At what price, i will get? (answer to this question may increase the bids at higher prices because of your followers like me. But please tell..)



Shiv Kukreja April 8, 2015 at 1:41 PM

Hi Viki,
1. You need to check it with your broker.
2. If you bid at Rs. 325 and the clearing price is set at Rs. 320, then you’ll get these shares allotted at Rs. 325 – 5% discount.


SHUBH April 8, 2015 at 1:28 PM

Currently REC (at 1.15 am) is traded @Rs.326.85 and the indicative price under OFS (Non retail) is Rs.315.46. We can predict the allotment under the category at around 317. Why should anybody buy from market @Rs.327? I see good volume too.


Shiv Kukreja April 8, 2015 at 1:48 PM

I think it is because of intraday trading activities and also because its fair value is more than Rs. 325.


Viki April 8, 2015 at 1:42 PM

Hi Shiv,

One more question, non retail section is at 315.7 and floor price is going to be same for all investor (retial and non retial) then how this difference will be tackle?


Viki April 8, 2015 at 1:54 PM

i want to know it because retialer wants to get it at 319 also but non retialier is at 315.7. and now if floor price is fixed at 317 then how non retial inverstor will get the share?


Shiv Kukreja April 8, 2015 at 1:56 PM

I think it could be different allotment price for different categories of investors.


Amit April 8, 2015 at 2:43 PM

On the NSE OFS page, if you click details link, you will see that ppl have placed bids even at 625 (doesn’t make any sense to me). Most of the bids(20,000+) are at 315. I feel 320 is the reasonable bid price.


Shiv Kukreja April 8, 2015 at 3:04 PM

This is getting very dicey. I think even Rs. 320 bid is not assured of an allotment.


SHUBH April 8, 2015 at 3:14 PM

Amit, Try to click similar link at BSE. You will be more surprised.


krishnakiriti April 8, 2015 at 3:14 PM


I have a query related to the bids placed. If you can access the bids placed on the website(link below), you can see bids of values higher than 340 ( ranging from 340 – 625).
My question is why will someone bid starting at 340 and above when he/she can purchase it from the market directly at a cheaper price.

Thanks in advance 🙂


Viki April 8, 2015 at 3:17 PM

Because they don’t know the concept of OFS clearly and taking it as IPO because same felling i was having.


ketki April 8, 2015 at 3:43 PM

or are there people trying to push the indicative price up by putting orders at 625 which they are planning on cancelling at 2 pm ? only intent on pushing prices up, never intend to buy at 625 ? wondering..


Shiv Kukreja April 8, 2015 at 3:40 PM

Many do it unknowingly, some do it for fun as well.


Viki April 8, 2015 at 3:24 PM

i think issue price will be around 325 but i think tomorrow we can buy from market at 312-315 range.


Shiv Kukreja April 8, 2015 at 3:32 PM

With this kind of demand, I don’t think it should fall below Rs. 315-320 now.


nitesh patel April 8, 2015 at 3:30 PM

my broker is saying bidding will not accepted after 2.30pm is he correct because I want to place bid now after following the indicative price on nse website


Shiv Kukreja April 8, 2015 at 3:35 PM

Bidding remains open till 3:30 p.m., but most of the brokers do not accept orders beyond 2:30 or 3 p.m. due to huge order punching pressure.


Viki April 8, 2015 at 3:35 PM

Hi all,
For Fun, What you think will be issue price for retail.
i think 323.


Shiv Kukreja April 8, 2015 at 3:37 PM

🙂 only a single price is to be guessed or a price band will also do, like between Rs. 315 & Rs. 330 ?? 😉


priyanka April 8, 2015 at 3:46 PM

Hi Shiv
Wat does it mean by 8.81 times on NSE and BSE.

Does DAT mean 8 times on both?

I dint get dis as the bids are placed on Bse and NSE both.
How does d allotment happen??


Shiv Kukreja April 8, 2015 at 3:58 PM

Hi Priyanka,
Yes, it is the cumulative quantity for both the exchanges, NSE & BSE. Also, it is not possible for me to explain the allotment process here on this forum. You may however check this link for some of its details –


pradeep April 8, 2015 at 3:49 PM

when will we know allotment price. I applied at 315 🙁


Shiv Kukreja April 8, 2015 at 3:59 PM

Most likely today evening or tomorrow morning.


rukmesh April 8, 2015 at 3:51 PM

i am expecting the price in retail to be around 333.35


Shiv Kukreja April 8, 2015 at 4:00 PM

Rs. 333.35 or 323.35? I think Rs. 333.35 is too high.


rukmesh April 8, 2015 at 4:24 PM

333.35 and with 5% discount it will cost 316.68


Shiv Kukreja April 8, 2015 at 4:30 PM

Ok, let’s see, how it goes.


Shiv Kukreja April 8, 2015 at 11:44 PM

Hi Rukmesh,
You calculated the clearing price near to perfection, thanks! Do you have any method of doing it?


Neel April 8, 2015 at 11:59 PM


I monitor the details pages on BSE and NSE. Start from the bottom of both the tables and keep adding the cumulative quantities for bids(starting from the highest) and stop once you reach the number of shares for retail. Links below.

I have no clue how the indicative price is calculated – heck it does not even seem to be a useful metric.


Shiv Kukreja April 9, 2015 at 12:31 AM

That’s great man !! 🙂


rukmesh April 9, 2015 at 11:22 AM

Clearing price is the sum of the highest cummulative bids on NSE & BSE where it first touches the issue size.
Where as Indicative price is just the weighted arithmetic mean of the bids and is as useless as the color of the shirt you wear while bidding i.e., totally useless.


Shiv Kukreja April 9, 2015 at 1:00 PM

🙂 Good One, thanks!


nitesh patel April 8, 2015 at 3:59 PM

I want to know weather I can bid at 3.15pm on an any ofs day


Shiv Kukreja April 8, 2015 at 4:01 PM

Yes, you can do that till the market gets closed at 3:30 p.m.


nitesh patel April 8, 2015 at 4:20 PM

then why my broker is dining & telling me bids are accepted upto 2.30pm because I want to increase my chances of getting allotment by following the indicative price till 3.15pm &tell me weather is it a right staergy to get full allotment


Shiv Kukreja April 8, 2015 at 4:25 PM

Yes, your strategy is not wrong. But, you need to ask your broker why he is denying you to modify your existing bid or put in a fresh bid.


nirav April 8, 2015 at 4:42 PM

I think I’ll miss this offer.. I bid at Rs 323.50. I want to increase it before last 5 mins but my broker said that NSE server is not working!!!!

Is something like this is possible?? And if yes then who is responsible? Because I missed good opportunity because of someone else..


Shiv Kukreja April 8, 2015 at 5:11 PM

Hi Nirav,
Your broker is wrong to say that NSE server was not working. But, I think it was too late for him to modify, cancel or put a fresh order on your behalf. They have order punching pressure in the last few minutes, so they stop accepting fresh orders. I think you cannot hold anybody responsible for this as they are also humans. Rather you should have done it yourself if you have online account.


Shiv Kukreja April 8, 2015 at 5:18 PM

Indicative Price in the Retail category is Rs. 325.10, higher than the indicative price in the non-retail category. I don’t know whether there is any chance or not for the investors who placed their bids below this price. I think the investors who placed their bids between Rs. 315 and Rs. 320 will not get any allotment for sure. It got subscribed by 9.02 times in the retail category.


Shashwat April 8, 2015 at 6:32 PM

There were 1 crore+ bids over rs. 333.3 so i don’t think anyone who bid less than that will get allotment


Shiv Kukreja April 8, 2015 at 6:47 PM

Thanks for this info Shashwat!


nitesh patel April 8, 2015 at 6:43 PM

no broker is ready to accept that bidding on an ofs day is continue till 3.30pm so my strategy will not work of getting allotment so even idbi capital have not accepted any bid after 2.30pm so what should I do now because I want to apply bid at 3.15pm by checking indicative price of upcoming pfc ofs


Shiv Kukreja April 8, 2015 at 6:48 PM

I placed one of my bids at 15:29:56 and it went through.


Neel April 9, 2015 at 12:03 AM

Not as good as you. 08-Apr-2015 15:29:38 at 333.35 🙂

Too bad, did not have enough time for other bids…


Shiv Kukreja April 9, 2015 at 12:32 AM

🙂 Oh that’s too close man!


SB April 8, 2015 at 6:56 PM

For unsuccessful retail applicants, when will they get the refund?


Shiv Kukreja April 8, 2015 at 6:57 PM

I think by tomorrow itself.


Jay jain April 8, 2015 at 7:38 PM

Is allotment out? At what price?


Shiv Kukreja April 8, 2015 at 7:45 PM

Not yet, at least I don’t have the info as yet.


Neel April 9, 2015 at 12:07 AM

333.30 for retail.


Kaveesh thakker April 8, 2015 at 7:47 PM

I have applied for 625 shares at 332. This was after I revised my bid up from 320.
While revising my bid I didn’t realise I might cross the threshold of 2 lacs.

However if I consider the discount of 5% the price works out to 317 and I dont cross the limit.

As per rules, will I get the allotment. My understanding is that in retail segments all bids at and above 331.2 will get allotment


Shiv Kukreja April 8, 2015 at 8:28 PM

Hi Kaveesh,
Most likely, you’ll get the allotment. I think your bid price is high enough for you to get the shares allotted.


nitesh patel April 8, 2015 at 9:00 PM

will mr kaveesh can get 5% discount as the bid amount is above 2 lacs


Shiv Kukreja April 8, 2015 at 9:14 PM

Not sure under which category the application will get processed by the broker and the merchant bankers. If the rules of IPOs/FPOs get followed in this case also, I think he should get 5% discount.


Ramprakash April 8, 2015 at 9:01 PM

I beleive the 2 lac limit has to be before 5%


SHUBH April 8, 2015 at 10:38 PM

I just knew that the clearing price (Retail) is Rs.333,30. Is this correct? How such wide gape between indicative price (at 3.30 pm) and clearing price can be explained?


Shiv Kukreja April 9, 2015 at 12:00 AM

Yes Shubh, Rs. 333.30 is the clearing price for the retail category. This wide gap is due to 9.02 times subscription figure and a large number of bids getting placed below the indicative price. Almost all the small retail investors thought the price to be set between Rs. 315 and 325, so they placed their bids between this price band. Whereas there was enough demand above Rs. 330 levels as well. So, people who placed their bids at higher prices will now get these shares allotted.


Neel April 9, 2015 at 12:11 AM

The grey market from the IPO/FPO has shifted to OFS. The constant refreshing of demand graphs and repetitive bidding in sync with demand and hedging it by selling futures is beyond most retail investors.


Shiv Kukreja April 9, 2015 at 12:26 AM

Yes, you are right Neel. Now, it will become more difficult for the retail investors to get shares allotted in these OFS as well. Too bad !!


SB April 8, 2015 at 11:41 PM

Just now saw the refund deposit into my bank account.


Shiv Kukreja April 9, 2015 at 12:07 AM

Quick refunds!


Gs April 8, 2015 at 11:43 PM

Yea 333.30 is the allotment price.


Shiv Kukreja April 9, 2015 at 12:27 AM

Thanks Gs!


J K Rao April 16, 2015 at 7:53 PM

I applied @315 n cud not get allotment. Where i can see the indicative price n can revise my bid (i use kotak securities online).
So next time it will b useful.

And y these bloody rascals dont give the option “cut off price”

For retail investors it seems ofs is very messy.


J K Rao April 16, 2015 at 8:08 PM

By the comments, i somewhat underdtood this ofs. (REC was my 1st). This OFS is very much favour for promoters. I dont private companies also sell the shares through ofs (instead of fpo). If it is so, they can manipulate by making bidding at high prices so that indicative price increases, there by normal people also bid at high price, and on the last minute they cancel their bids.

Isnt it?


Shiv Kukreja April 17, 2015 at 1:04 PM

Bad managements can do anything. So, good investors should invest based on fundamentals only.


J K Rao April 18, 2015 at 6:50 AM

Yeah. Rightly said


Shiv Kukreja April 28, 2015 at 8:40 PM
anonymous July 29, 2015 at 10:42 PM

can the promoters cancel their bids even after 2:30?


Shiv Kukreja August 4, 2015 at 7:11 PM

Yes, the promoters can do so.


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