Dharmaj Crop Guard Ltd IPO gets 29.84% anchor allocated

The anchor issue of Dharmaj Crop Guard Ltd saw a stable response on 25th November 2022 with 29.84% of the IPO size getting absorbed by the anchors. Out of the 1,05,96,924 shares on offer, the anchors picked up 31,62,450 shares accounting for 29.84% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday. Dharmaj Crop Guard IPO opens on 28th November 2022 in the price band of Rs.216 to Rs.237 and will close for subscription on 30th November 2022 (both days inclusive).

The basis of allotment of the IPO is likely to be finalized on 05th December 2022, while the refunding initiation and the demat credits will be completed on 06th December 2022. The stock of Dharmaj Crop Guard is slated to list on the bourses on 08th December 2022. At the IPO, the QIB portion will be reduced to the extent of the anchor placement done on 25th November 2022. The entire anchor allocation was made at the upper price band of Rs. 237. Let us focus on the anchor allotment portion ahead of the Dharmaj Crop Guard 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 Dharmaj Crop Guard Ltd IPO

On 25th November 2022, Dharmaj Crop Guard Ltd completed the bidding for its anchor allocation. There was stable response as the anchor investors participated through the process of book building. A total of 31,62,540 shares were allotted to a total of just 3 anchor investors. The allocation was done at the upper IPO price band of Rs. 237 which resulted in an overall allocation of Rs. 74.95 crore. The anchors have already absorbed 29.84% of the total issue size of Rs. 251.15 crore, which is indicative of the robust institutional demand.

Listed below are the 3 anchor investors who got allotted shares in the anchor allocation individually. The entire anchor allocation of Rs. 74.95 crore was spread across just these 3 major anchor investors. List below are the 3 anchor investors who accounted for 100% of the anchor allocation between them.

Data Source: BSE Filings

While the Dharmaj Crop Guard GMP has remained stable at around Rs. 55, it shows an attractive but relatively subdued premium of 23-25% on listing. This has led to reasonable anchor response with the anchors taking in 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. Dharmaj Crop Guard Ltd has got anchor flows from just 3 investors overall.

Out of the total 31,62,540 shares allotted by way of anchor placement, Dharmaj Crop Guard Ltd did not allocate any shares to the domestic mutual funds.