Aadhar Housing Finance IPO: Anchor Allocation at 28.91%

About the Aadhar Housing Finance IPO

The stock of Aadhar Housing Finance IPO has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹300 to ₹315 per share. The IPO of Aadhar Housing Finance Ltd will be a combination of a fresh issue of shares and offer for sale (OFS) component. The fresh issue portion of the IPO of Aadhar Housing Finance Ltd comprises the issue of 3,17,46,032 shares (317.46 lakh shares approximately), which at the upper price band of ₹315 per share will translate into a fresh issue size of ₹1,000 crore. The offer for sale (OFS) portion of the IPO of Aadhar Housing Finance Ltd comprises the sale of 6,34,92,063 shares (634.92 lakh shares approximately), which at the upper price band of ₹315 per share will translate into an OFS size of ₹2,000 crore.

Out of the OFS size of 634.92 lakh shares, the entire selling would be by the promoter shareholder only. BCP Topco VII Pte Ltd, an affiliate of Blackstone Group of the US, which is the promoter owner of Aadhar Housing Finance Ltd, will offer the entire 634.92 lakh shares as part of the IPO. Thus, the overall Aadhar Housing Finance IPO will comprise of a fresh issue and an OFS of 9,52,38,095 shares (952.38 lakh shares approximately) which at the upper end of the price band of ₹315 per share aggregates to issue size of ₹3,000 crore. The IPO of Aadhar Housing Finance Ltd will be listed on NSE and BSE on the IPO mainboard. The final IPO size subject to adjustments may vary by about 3-5%.

The fresh funds will be used for sprucing up the capital base of the company to enable additional onward lending to customers. The promoter of the company is BCP Topco VII Pte Ltd, an affiliate of Blackstone Group of the US. The promoter stake currently stands at 98.72%, which will dilute post the IPO. The IPO will be lead managed by ICICI Securities, Kotak Mahindra Capital, Citigroup Global Markets, SBI Capital Markets, and Nomura Financial Advisory; while KFIN Technologies Ltd will be IPO registrar.

Read more about Aadhar Housing Finance

A brief on the anchor allocation of Aadhar Housing Finance IPO

The anchor issue of Aadhar Housing Finance IPO saw a relatively strong response on 07th May 2024 with 28.91% of the IPO size getting absorbed by the anchors. Out of 9,85,94,134 shares (985.94 lakh shares approximately) on offer, the anchors picked up 2,85,04,761 shares (285.05 lakh shares approximately) accounting for 28.91% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, 07th May 2024; one working day ahead of the IPO opening on Wednesday, 08th May 2024.

The entire anchor allocation was made at the upper end of the price band of ₹315 per share. This includes the face value of ₹10 per share plus a share premium of ₹305 per share, taking the anchor allocation price to ₹315 per share. Let us focus on the anchor allotment portion ahead of the Aadhar Housing Finance Ltd IPO, which saw the anchor bidding opening and also closing on 07th May 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 2,85,04,761 shares issued to the anchor investors on 07th May 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. As a result, the QIB quota has reduced from 49.15% before the anchor allocation to 20.24% after the anchor allocation. 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 Aadhar Housing Finance 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 investors in Aadhar Housing Finance IPO

On 07th May 2024, Aadhar Housing Finance 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 2,85,04,761 shares were allotted to a total of 61 anchor investors. The allocation was done at the upper IPO price band of ₹315 per share (including premium of ₹305 per share) which resulted in an overall anchor allocation of ₹897.90 crore. The anchors have already absorbed 28.91% of the total issue size of ₹3,105.72 crore, which is indicative of fairly robust institutional demand.

Listed below are the 21 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Aadhar Housing Finance Ltd. The entire anchor allocation of ₹897.90 crore was spread across a total of 61 major anchor investors, with only 21 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 61 anchor investors in all, only the 21 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 21 anchor investors accounted for 65.64% of the total anchor collection of  ₹897.90 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 only includes the set of 21 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Aadhar Housing Finance Ltd IPO. In fact, there were 61 anchor investor in all; with only the anchor investors getting more than 2% each of the anchor quota being mentioned in the list above. 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=20240507-50&attachedId=c744ed6c-e94e-4698-bd66-cbf5e38efa1c

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 28.91% 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. Aadhar Housing Finance Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, participatory notes routed through ODIs, domestic mutual funds, AIFs, and insurance companies. Let us finally look at the sub-category of mutual fund participation in the anchor allocation ahead of the Aadhar Housing Finance Ltd IPO.

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 2,85,04,761 shares allocated to the anchors in the IPO, a total of 1,01,58,956 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 28 mutual fund schemes belonging to 11 asset management company (AMCs). The mutual fund allocation in the anchor portion amounted to 35.64% of the total anchor size.

Key dates for Aadhar Housing Finance IPO and how to apply?

The issue opens for subscription on 08th May 2024 and closes for subscription on 10th May 2024 (both days inclusive). The basis of allotment will be finalized on 13th May 2024 and the refunds will be initiated on 14th May 2024. In addition, the demat credits are expected to also happen on 14th May 2024 and the stock will list on 15th May 2024 on the NSE and the BSE. Aadhar Housing Finance Ltd will test the appetite for such microfinance stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 14th May 2024 under ISIN (INE883F01010).