Off Market transaction

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This discussion explores the feasibility of buying shares off-market, particularly for companies in the ESM category where trading is restricted to once a week. It highlights the importance of understanding off-market transactions, the risks associated with low liquidity and price discovery in ESM stocks, and the need for thorough due diligence. Buyers are advised to verify company information, negotiate prices carefully, and ensure compliance with SEBI regulations, with a recommendation to consult a financial advisor if unsure.

Pankaj Jain

Pankaj Jain (Querist)
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27 June 2023 Sebi has recently put a category of shares under ESM category wherein trading is permitted once a week on Monday. We wish to buy some shares from off market of one of the company shares under ESM since their shares are under freez in last 1-2 trading weekly session so need your advice whether we can buy off market at the last traded price

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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09 July 2024 Buying shares off-market, especially when they are in a category like ESM (trade permitted once a week), involves careful consideration due to the restricted trading conditions. Here are some key points to keep in mind:

1. **Off-Market Transactions**: Off-market transactions are conducted directly between buyers and sellers outside the stock exchange platform. They do not impact the market price immediately but should ideally reflect the last traded price or a negotiated price between the parties.

2. **ESM Category**: Securities under the ESM (Extended Settlement) category allow trading only once a week, typically on specific days like Mondays. This restriction is imposed to manage trading risks and liquidity concerns.

3. **Risk Considerations**:
- **Liquidity Risk**: Since trading is limited to once a week, liquidity can be significantly lower compared to regularly traded stocks. This can affect your ability to buy or sell shares at desired prices.
- **Price Discovery**: Off-market prices may not always accurately reflect current market conditions due to infrequent trading. It's important to assess whether the off-market price aligns with the latest market sentiment.

4. **Due Diligence**: Before proceeding with an off-market purchase:
- **Verify Information**: Ensure you have the latest information about the company, including its financial health, market performance, and any regulatory developments.
- **Negotiation**: If the off-market transaction involves negotiating a price, consider factors like the last traded price on the ESM day, recent market trends, and the company's performance.

5. **Legal and Compliance**: Ensure the transaction complies with all legal and regulatory requirements, including any specific guidelines set by SEBI or the stock exchange regarding ESM category securities.

**Consultation**: If uncertain, consider consulting with a financial advisor or broker who can provide insights tailored to your specific situation and risk tolerance.

In summary, while buying shares off-market at the last traded price can be feasible, especially in restricted trading categories like ESM, it's crucial to conduct thorough due diligence and understand the associated risks and regulatory requirements before proceeding.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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