Cyient DLM IPO gets 44% anchor allocated

The anchor issue of Cyient DLM IPO saw a robust response on 26th June 2023 with 44% of the IPO size getting absorbed by the anchors. Out of the 2,23,39,623 shares on offer, the anchors picked up 97,98,113 shares accounting for 44% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday. Cyient DLM IPO opens on 27th June 2023 in the price band of ₹250 to ₹265 and will close for subscription on 30th June 2023 (both days inclusive). The entire anchor allocation was made at the upper price band of ₹265. Let us focus on the anchor allotment portion ahead of the Cyient DLM Ltd IPO.

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.

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 placement story of Cyient DLM Ltd

On 26th June 2023, Cyient DLM Ltd completed the bidding for its anchor allocation. There was an enthusiastic response as the anchor investors participated through the process of book building. A total of 97,98,113 shares were allotted to a total of 20 anchor investors. The allocation was done at the upper IPO price band of ₹265 per share which resulted in an overall allocation of ₹259.65 crore. The anchors have already absorbed almost 44% of the total issue size of ₹592 crore, which is indicative of the robust institutional demand.

Listed below are the 13 anchor investors who got allotted at least 3% of the total anchor allocation individually. The entire anchor allocation of ₹259.65 crore was spread across 20 major anchor investors. These top 13 anchor investors with more than 3% each listed below accounted for 86.88% of the total anchor allocation of Cyient DLM Ltd.

Data Source: BSE Filings

While the GMP has remained stable in the range of ₹9/-100, it shows an attractive and robust grey market premium of 37-38% on listing. This has led to reasonable anchor response with the anchors taking in 44% 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. Cyient DLM Ltd has been a mix, getting good response from FPIs but it has also got extremely strong response from the domestic mutual funds and other institutional players, considering its product positioning in the Indian market. The number and spread of the Foreign Portfolio Investors have been fairly healthy in this case.

With strong SIP flows, most equity funds are flush with cash at this point of time and that has helped the MF appetite for anchor allocation in this IPO of Cyient DLM Ltd. ICICI Prudential MF, HDFC MF, Aditya Birla MF, Nippon India MF, Tata Mutual Fund and LIC MF were some of the prominent mutual funds to get allocations in the anchor portion. Apart from insurers being active in the counter, even foreign portfolio investors (FPIs) like Amansa Holdings, Catamaran EKAM, Vikasa India EKF Fund, Societe Generale and BNP Paribas were some of the prominent FPIs as anchors.

Out of the total 97,98,113 shares allotted by way of anchor placement, Cyient DLM Ltd allotted a total of 47,17,300 shares to 11 domestic mutual fund schemes across 8 AMCs. The mutual fund allocation represents 48.14% of the overall anchor allocation ahead of the IPO of Cyient DLM Ltd.

Here is a quick background on Cyient DLM Ltd. Cyient DLM Ltd is a subsidiary of Cyient Ltd, the Hyderabad based industry-centric technology solutions company. Cyient holds 92.84% if the capital of Cyient DLM Ltd while Amansa Investments of Singapore holds the balance 7.16%. in the anchor allotment also, Amansa has absorbed more than one-fourth of the anchor allocation. Cyient DLM undertakes these EMS services as Built to Print (B2P) or as Built to Specifications (B2S) services. The latter is a more comprehensive version of the former. The issue is being lead managed by JM Financial and Axis Capital.