Anchor investors


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Anchor investors or cornerstone investors (as they are called globally) are marquee institutional investors like sovereign wealth funds, mutual funds and pension funds that are invited to subscribe for shares ahead of the IPO to boost the popularity of the issue and provide confidence to potential IPO investors. 

The benefit for institutional investors applying in anchor quota is that they get guaranteed allotment. Allotment to investors applying in an IPO depends on the number of times the issue gets subscribed. Anchor investors, however, cannot sell their shares for a period of 30 days from the date of allotment as against IPO investors who are allowed to sell on listing day.

SEBI introduced the concept of anchor investors in IPOs in 2009. Book built IPOs are supposed to have a 50 per cent reservation for qualified institutional buyers (QIBs). Up to 30 per cent of the total issue size can be allotted to anchor investors. No merchant banker, promoter or their relatives can apply for shares under the anchor investor category. In offers of size less than ₹250 crore, there can be a maximum of 15 anchor investors, but in those over ₹250 crore, SEBI recently removed the cap on number of anchor investors. Now, there could be 10 additional investors for every extra ₹250 crore allocation, subject to minimum allotment of ₹5 crore per anchor investor.

The anchor investor can’t sell his shares for at least 30 days after the allotment. This rule ensures that investors who want to flip shares on listing, do not use the ‘anchor’ route. Anchor investors can bid for shares at anywhere within the price band declared by the company. If the price discovered through the book building process is higher than the price at which shares were allotted to anchor investors, then these investors have to bring in additional funds to make good the shortfall. But if the book built price is lower, the excess amount is not refunded to them.

Why is it important?

An anchor investor can attract investors to public offers before they hit the market to infuse confidence. The volume and value of anchor subscriptions will serve as an indicator of the company's reputation and soundness of the offer. Finally, the anchor investor sets a benchmark and gives a guideline for issue pricing and interest among Qualified Institutional Buyers (QIBs).
 
Ministry of Corporate Affairs’ notification
(a) An Anchor Investor shall make an application of a value of at least Rs. 10 crore in the public issue.

(b) Allocation to Anchor Investors shall be on a discretionary basis and subject to the following:-

(i) Maximum of 2 such investors shall be permitted for allocation upto Rs. 10 crore;

(ii) Minimum of 2 and maximum of 15 such investors shall be permitted for allocation above Rs, 10 crore and upto Rs. 250 crore, subject to minimum allotment of Rs. 5 crore per such investor;

(iii) Minimum of 5 and maximum of 25 such investors shall be permitted for allocation above Rs. 250 crore, subject to minimum allotment of Rs. 5 crore per such investor.

(c) Upto thirty per cent of the portion available for allocation to qualified institutional buyers shall be available to anchor investor(s) for allocation/allotment (“anchor investor portion”).

(d) One-third of the anchor investor portion shall be reserved for domestic mutual funds.

(e) The bidding for Anchor Investors shall open one day before the issue opening date.
(f) Anchor Investors shall pay on application the same margin which is payable by other categories of investors the balance, if any, shall be paid within two days of the date of closure of the issue.

(g) Allocation to Anchor Investors shall be completed on the day of bidding by Anchor Investors.

(h) If the price fixed as a result of book building is higher than the price at which the allocation is made to Anchor Investor, the Anchor Investor shall bring in the additional amount. However, if the price fixed as a result of book building is lower than the price at which the allocation is made to Anchor Investor, the excess amount shall not be refunded to the Anchor Investor and the Anchor Investor shall take allotment at the price at which allocation was made to it.

(i) The number of shares allocated to Anchor Investors and the price at which the allocation is made, shall be made available in public domain by the merchant banker before opening of the issue.

(j) There shall be a lock-in of 30 days on the shares allotted to the Anchor Investor from the date of allotment in the public issue.

(k) Neither the merchant bankers nor any person related to the promoter/promoter group/merchant bankers in the concerned public issue can apply under Anchor Investor category. The parameters for selection of Anchor Investor shall be clearly identified by the merchant banker and shall be available as part of records of the merchant banker for inspection by SEBI.]

(l) The applications made by qualified institutional buyers under the Anchor Investor category and under the Non Anchor Investor category may not be considered as multiple applications


Sunday, 18th Sep 2016, 11:11:54 AM

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