BLS E-Services IPO Anchor Allocation at 40.50%

About the BLS E-Services IPO

The stock of BLS E-Services Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹129 to ₹135 per share. The final price will be discovered within this band. The IPO of BLS E-Services Ltd will be purely a fresh issue of shares with no offer for sale (OFS) component. The fresh issue portion of the IPO of BLS E-Services Ltd comprises the issue of 2,30,30,000 shares (230.30 lakh shares), which at the upper price band of ₹135 per share will translate into a fresh issue size of ₹310.91 crore. Since there is no OFS component, the fresh issue will also double up as the overall issue size. The overall IPO of BLS E-Services, therefore, will comprise of the issue of 2,30,30,000 shares (230.30 lakh shares), which at the upper price band of ₹135 per share will translate into overall issue size of ₹310.91 crore.

The company will be using the fresh fund proceeds for strengthening the Technology infrastructure, develop new capabilities and consolidate their existing platforms. BLS E-Services Ltd will also be using the funds for bankrolling its organic and inorganic growth and expansion plans; apart from using some portion for general corporate expenses. The IPO of BLS E-Services Ltd will be listed on the NSE and the BSE on the IPO mainboard. Post-IPO, the promoter stake gets diluted from 93.80% to 68.90%. The IPO will be lead managed by Unistone Capital Private Ltd, while KFIN Technologies Ltd will be the registrar to the IPO.

A brief on the anchor allocation of BLS E-Services Ltd

The anchor issue of BLS E-Services IPO saw a relatively strong response on 29th January 2024 with 40.50% of the IPO size getting absorbed by the anchors. Out of 2,30,30,000 shares (230.30 lakh shares approximately) on offer, the anchors picked up 93,27,096 shares (93.27 lakh shares approximately) accounting for 40.50% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, 29th January 2024; one working day ahead of the IPO opening on Tuesday, 30th January 2024.

The entire anchor allocation was made at the upper price band of ₹135 per share. This includes the face value of ₹10 per share plus a share premium of ₹125 per share, taking the anchor allocation price to ₹135 per share. Let us focus on the anchor allotment portion ahead of the BLS E-Services Ltd IPO, which saw the anchor bidding opening and also closing on 29th January 2024. Post the anchor allocation, here is how the overall allocation looked.

Data Source: Company RHP

Here it must be noted that the 93,27,096 shares issued to the anchor investors on 29th January 2024, were actually reduced from the original QIB quota; and only the residual amount would be available to QIBs in the IPO. That change has been reflected in the table above, with the QIB IPO portion reduced to the extent of the anchor allocation. Consequently, the percentage available to QIBs in the public issue has been reduced from 67.50% to 27.50%, with 40.50% already allocated to the anchor investors. The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted has been deducted from the QIB quota for the purpose of the public issue.

Finer points of anchor allocation process

Before we go into the details of the actual anchor allotment, a quick word on the process of anchor placement. The anchor placement ahead of an IPO/FPO is different from a pre-IPO placement in that the anchor allocation has a lock-in period of just one month, although under the new rules, part of the anchor portion will be locked in for 3 months. It is just to give confidence to investors that the issue is backed by large established institutions. It is the presence of institutional investors like mutual funds and foreign portfolio investors (FPIs) that gives confidence to the retail investors. Here are details of the anchor lock-in for the issue of BLS E-Services Ltd.

However, the anchor investors cannot be allotted shares at a discount to the IPO price. This is explicitly stated in the SEBI revised regulations as under, “As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulations, 2018, as amended, in case the Offer Price discovered through book building process is higher than the Anchor Investor Allocation Price, then the Anchor investors will be required to pay the difference by the pay-in as specified in the revised CAN.

An anchor investor in an IPO is normally a qualified institutional buyer (QIB) like a foreign portfolio investor or mutual fund or insurance company or a sovereign fund which invests before the IPO is made available to the public as per SEBI regulations. Anchor portion is part of the public issue, so the IPO portion to the public (QIB portion) is reduced to that extent. As initial investors, these anchors make the IPO process more attractive for investors, and instil confidence in them. Anchor investors also largely aid in price discovery of the IPO

Anchor allocation to investors in BLS E-Services Ltd

On 29th January 2024, BLS E-Services Ltd completed the bidding for its anchor allocation. There was a strong and robust response as the anchor investors participated through the process of book building. A total of 93,27,096 shares were allotted to a total of 10 anchor investors. The allocation was done at the upper IPO price band of ₹135 per share (including premium of ₹125 per share) which resulted in an overall anchor allocation of ₹125.92 crore. The anchors have already absorbed 40.50% of the total issue size of ₹310.91 crore, which is indicative of fairly robust institutional demand.

Listed below are the 10 anchor investors who, have been allotted 3% or more of the anchor allocation done ahead of the IPO of BLS E-Services Ltd. The entire anchor allocation of ₹125.92 crore was spread across a total of 10 major anchor investors, with all the anchor investors getting more than 3% each out of the anchor allocation quota. While there were 10 anchor investors in all, all the 10 anchor investors got allocated 3% or more each of the anchor quota and have been listed in the table below. These 10 anchor investors accounted for 100% of the total anchor collection of  ₹125.92 crore. The detailed allocation is captured in the table below, indexed descending on size of anchor allocation.

Data Source: BSE Filings (Value Allocated in ₹ in Crore)

The above list includes the set of 10 anchor investors who got allotted shares of 3% or above each of the anchor portion done ahead of the BLS E-Services Ltd IPO. There are 10 anchor investors in all and the details of all these investors are captured in the table above. However, the detailed and comprehensive report on the anchor allocation with the mutual fund portion separated can be accessed by clicking on the link below.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240129-42&attachedId=56a1dd86-2d82-41a7-8f43-d5b8445e3af0

The detailed report is available in PDF format and can be downloaded by clicking on the link above. Alternatively, readers can also opt to cut this link and paste in their browser, in case the link is not directly clickable. The details of the anchor allocation can also be accessed in the Notices section of the BSE on its website www.bseindia.com.

Overall, the anchors absorbed 40.50% of the total issue size. The QIB portion in the IPO has already been reduced to the extent of the anchor placement done above. Only the balance amount will be available for QIB allocation as part of the regular IPO. The general norm is that, in anchor placements, smaller issues find it hard to get FPIs interested while larger issues do not interest mutual funds. BLS E-Services Ltd saw a good deal of buying interest from FPIs, participatory notes routed through ODIs, and AIFs. However, domestic mutual funds and domestic insurance companies did not participate in the anchor allocation.

The anchor response normally sets the tone for the retail participation in the IPO and the anchor response has been fairly steady this time around. Out of the 93,27,096 shares allocated to the anchors in the IPO, there is no allocation made to the domestic mutual funds registered with SEBI or any of the domestic insurance companies registered with the IRDAI (Insurance Regulatory Development Authority of India).

Next Steps in the IPO process

The IPO of BLS E-Services Ltd opens for subscription on 30th January 2024 and closes for subscription on 01st February 2024 (both days inclusive). The basis of allotment will be finalized on 02nd February 2024 and the refunds will be initiated on 05th February 2024. In addition, the demat credits are also expected to happen on 05th February 2024 and the stock is scheduled to list on 06th February 2024 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated. The credits to the demat account to the extent of allotment will happen by the close of 05th February 2024 under ISIN Number (INE0NLT01010).