Dreamfolks Services IPO gets 45% anchor allocated

The anchor issue of Dreamfolks Services Ltd saw a robust response on 23rd August 2022 with 45% of the IPO size getting absorbed by the anchors. The announcement was made late on Tuesday. The IPO of Dreamfolks Services Ltd opens on 24th August 2022 in the price band of Rs.308 to Rs.326 and will close for subscription on 26th August 2022 due to a slew of holidays in between. Let us focus on the anchor allotment portion ahead of the Dreamfolks Services 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 Dreamfolks Services Ltd.

On 23rd August 2022, Dreamfolks Services 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 77,59,066 shares were allotted to a total of 18 anchor investors. The allocation was done at the upper IPO price band of Rs.326 which resulted in an overall allocation of Rs.252.95 crore. The anchors have already absorbed 45% of the total issue size, which is indicative of the robust institutional demand.

Listed below are the 12 anchor investors based on the percentage of anchor allocation each in the IPO. Out of the total anchor allocation of Rs.252.95 crore, these 12 major anchor investors accounted for 88.12% of the overall anchor allocation.

Data Source: BSE Filings

While the GMP has fallen from Rs85 on Monday to Rs65 on Tuesday, the GMP still shows a 19-20% premium on listing. This has led to strong anchor response with the anchors taking in 45% 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. Dreamfolks Services Ltd has been a mix, getting good response from FPIs and domestic mutual funds. Mutual funds accounted for one third of the anchor book response while FPIs accounted for the balance two-third. More than quarter of the anchor allocation was absorbed by just one FPI (Small Cap World Fund, belonging to the Capital Group of the US).

Out of the total 77.59 lakh shares allotted by way of anchor placement, Dreamfolks Services Ltd allotted a total of 26.97 lakh shares to 5 domestic mutual fund schemes across 4 AMCs. The mutual fund allocation represents 34.76% of the overall anchor allocation.