Emcure Pharmaceuticals IPO: Anchor Allocation at 29.67%

About the Emcure Pharmaceuticals IPO

The IPO of Emcure Pharmaceuticals Ltd will be open from July 03rd, 2024 to July 05th, 2024; both days inclusive. The stock of Emcure Pharmaceuticals Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹960 to ₹1,008 per share. The IPO of Emcure Pharmaceuticals Ltd will be a combination of a fresh issue of shares and offer for sale (OFS). The fresh issue brings in fresh funds into the company, but is also EPS and equity dilutive. The OFS is just a transfer of ownership; and hence neither EPS nor equity dilutive. The fresh issue portion of the IPO of Emcure Pharmaceuticals Ltd comprises the issue of 79,36,507 shares (79.37 lakh shares approximately), which at the upper price band of ₹1,008 per share will translate into a fresh issue size of ₹800.00 crore. 

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The offer for sale (OFS) portion of the IPO of Emcure Pharmaceuticals Ltd comprises the sale / offer of 1,14,28,839 shares (114.29 lakh shares approximately), which at the upper price band of ₹1,008 per share will translate into an OFS size of ₹1,152.03 crore. The 114.29 lakh shares in the OFS is being offered by a mix of promoter shareholders and investor shareholders. Out of the 114.29 lakh shares offered in the OFS, 17.39 lakh shares will be offered by the promoter shareholders; 10.46 lakh shares will be offered by the promoter group shareholders; 72.34 lakh shares by BC Investments IV Ltd; and the balance by other individual shareholders. Therefore, the total IPO of Emcure Pharmaceuticals Ltd will comprise of a fresh issue and an OFS of 1,93,65,346 shares (193.65 lakh shares approximately) which at the upper end of the price band of ₹1,008 per share aggregates to total issue size of ₹1,952.03 crore. The IPO of Emcure Pharmaceuticals Ltd will be listed on the NSE and the BSE on the IPO mainboard. The final issue figures could differ marginally.

The fresh funds will be used for repaying / prepaying some of its outstanding debts and partially for general corporate purposes. The promoters of the company are Satish Ramanlal Mehta, Sunil Rajnikant Mehta, Namita Thapar, and Samit Satish Mehta. The promoters currently have 98.90% stake in the company, which will get diluted post the IPO. The IPO will be lead managed by Kotak Mahindra Capital, Axis Capital, Jefferies India, and JP Morgan India; while Link Intime India Private Ltd will be the IPO registrar.

A brief on the anchor allocation of Emcure Pharmaceuticals Ltd IPO

The anchor issue of Emcure Pharmaceuticals IPO saw a relatively strong response on 02nd July 2024 with 29.67% of the IPO size getting absorbed by the anchors. Out of 1,94,83,388 shares (194.83 lakh shares approximately) on offer, the anchors picked up 57,79,850 shares (57.80 lakh shares approximately) accounting for 29.67% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, 02nd July 2024; one working day ahead of the IPO opening on Wednesday, 03rd July 2024. 

The entire anchor allocation was made at the upper end of the price band of ₹1,008 per share. This includes the face value of ₹10 per share plus a share premium of ₹998 per share, taking the anchor allocation price to ₹1,008 per share. Let us focus on the anchor allotment portion ahead of the Emcure Pharmaceuticals Ltd IPO, which saw the anchor bidding opening and also closing on 02nd July 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 57,79,850 shares allocated to the anchor investors on 02nd July 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 48.98% before the anchor allocation to 19.31% 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 Emcure Pharmaceuticals 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 Emcure Pharmaceuticals Ltd IPO

On 02nd July 2024, Emcure Pharmaceuticals 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 57,79,850 shares were allotted to a total of 48 anchor investors. The allocation was done at the upper IPO price band of ₹1,008 per share (including premium of ₹998 per share) which resulted in an overall anchor allocation of ₹582.61 crore. The anchors have already absorbed 29.67% of the total issue size of ₹1,963.93 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 Emcure Pharmaceuticals Ltd. The entire anchor allocation of ₹582.61 crore was spread across a total of 48 major anchor investors, with only 21 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 48 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 68.30% of the total anchor allocation of  ₹582.61 crore. The detailed allocation is captured in the table below. The table below is indexed descending on the size of anchor allocation in terms of number of shares.

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 Emcure Pharmaceuticals Ltd IPO. In fact, there were 48 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=20240702-56&attachedId=ed42eef3-9932-4a3c-bfe7-a7ee8005d4c5

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 29.67% 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. Emcure Pharmaceuticals 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 Emcure Pharmaceuticals 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 57,79,850 shares allocated to the anchors in the IPO, a total of 28,15,962 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 29 mutual fund schemes belonging to 16 asset management company (AMCs) in India. The mutual fund allocation in the anchor portion amounted to 48.72% of the total anchor size.

Key dates for Emcure Pharmaceuticals IPO and how to apply?

The issue opens for subscription on 03rd July 2024 and closes for subscription on 05th July 2024 (both days inclusive). The basis of allotment will be finalized on 08th July 2024 and the refunds will be initiated on 09th July 2024. In addition, the demat credits are expected to also happen on 09th July 2024 and the stock will list on 10th July 2024 on the NSE and the BSE. Emcure Pharmaceuticals Ltd will test the appetite for private sector new age pharma stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 09th July 2024 under ISIN (INE168P01015).

Check Emcure Pharma IPO Allotment Status