Cello World IPO Anchor Allocation stands at 29.84%

About the Cello World IPO

Cello world IPO opens on 30th October 2023 and closes for subscription on 01st November 2023; both days inclusive. Cello World Ltd stock has a face value of ₹5 per share while the price band for the book building IPO has been set in the range of ₹617 to ₹648. The final price will be discovered in this band through the process of book building. Incidentally, the IPO of Cello World Ltd is entirely an offer for sale, with no fresh issue component. The offer for sale (OFS) portion of the IPO comprises the sale of 2,93,20,987 shares (293.21 lakh shares approximately), which at the upper price band of ₹648 per share will translate into an offer for sale (OFS) size of ₹1,900 crore.

The offer for sale (OFS is being made by the promoter group; spread across 6 promoter shareholders. Between them, they will account for the entire OFS of Rs1,900 crore. Now, since there is no fresh issue component in the IPO, the overall IPO size will comprise of the OFS. Thus, the total IPO will also entail the sale of 2,93,20,987 shares, which at the upper price band of ₹648 per share will translate into a total IPO size of ₹1,900 crore. The IPO of Cello World Ltd will be lead managed by Kotak Mahindra Capital, ICICI Securities, IIFL Securities, JM Financial and Motilal Oswal Investment Advisors acting as the Book Running Lead Manages (BRLM). Link Intime India Private Ltd will be the registrar to the IPO.

A brief on the anchor allocation of Cello World IPO

The anchor issue of Cello World IPO saw a relatively strong response on 27th October 2023 with 29.84% of the IPO size getting absorbed by the anchors. Out of the 2,93,20,987 shares (293.21 lakh shares approximately) on offer, the anchors picked up 87,49,999 shares (87.50 lakh shares approximately) accounting for 29.84% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, October 27th, 2023; one working day ahead of the IPO opening on Monday. The IPO of Cello World Ltd opens on 30th October 2023 in the price band of ₹617 to ₹648 and will close for subscription on 01st November 2023.

The entire anchor allocation was made at the upper price band of ₹648 per share. This includes the face value of ₹5 per share plus a premium of ₹643 per share, taking the anchor allocation price to ₹648 per share. Let us focus on the anchor allotment portion ahead of the Cello World Ltd IPO, which saw the anchor bidding opening and also closing on 27th October 2023. Prior to the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 87,49,999 shares issued to the anchor investors on 27th October 2023, will be reduced from the QIB quota above of 145.83 lakh shares and only the residual amount would be available to QIBs in the IPO. The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted will be 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. Here are details of the anchor lock-in for the issue of Cello World 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 Cello World Ltd

On 27th October 2023, Cello World 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 87,49,999 shares were allotted to a total of 39 anchor investors. The allocation was done at the upper IPO price band of ₹648 per share (including premium of ₹643 per share) which resulted in an overall anchor allocation of ₹567 crore. The anchors have already absorbed 29.84% of the total issue size of ₹1,900 crore, which is indicative of fairly robust institutional demand.

Listed below are the 18 anchor investors who individually got allotted more than 2% of the shares allocated as part of anchor capital ahead of the IPO of Cello World Ltd. The entire anchor allocation of ₹567 crore was spread across a total of 39 major anchor investors, with the remaining 21 anchor investors putting in less than 2% of the anchor allocation size each. The 18 anchor investors listed below accounted for 68.82% of the anchor allocation.

Data Source: BSE Filings

The above list only includes the top 18 anchor investors who got allotted more than 2% of the anchor portion. There were another 21 anchor investors that were allotted less than 2% of the anchor portion each. The detailed and comprehensive list of 39 anchors is available at the link below, from where the file can be downloaded.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20231027-58&attachedId=4f13e24b-d705-4150-b5b1-2ad26dcb6ee1

Overall, the anchors absorbed 29.84% of the total issue size. The QIB portion in the IPO will be 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. Cello World Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, domestic mutual funds, AIFs, and insurance companies.

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 87,49,999 shares allocated to the anchors in the IPO, a total of 24,42,416 shares were allocated to domestic mutual funds registered by SEBI. This allocation was spread across 11 mutual fund schemes across 8 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 27.91% of the total anchor size.