Entero Healthcare Solutions IPO Anchor Allocation at 44.77%

About the Entero Healthcare Solutions IPO

Entero Healthcare Solutions IPO has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹1,195 to ₹1,258 per share. Entero Healthcare Solutions IPO will be a combination of a fresh issue of shares and offer for sale (OFS). A fresh issue brings in fresh funds into the company, but is also EPS and equity dilutive; while OFS is just a transfer of ownership. The fresh issue portion of the Entero Healthcare Solutions IPO comprises the issue of 79,49,125 shares (79.49 lakh shares approximately), which at the upper price band of ₹1,258 per share will translate into a fresh issue size of ₹1,000 crore. The offer for sale (OFS) comprises the sale of 47,69,475 shares (47.69 lakh shares approximately) at ₹1,258 per share totalling to ₹600 crore.

Out of the OFS size of ₹600 crore, the promoter shareholders (Prabhat Agarwal, Prem Sethi, and OrbiMed Asia III Mauritius Ltd will offer the bulk of the shares in the OFS. Other investor shareholders will offer much smaller quantities. Thus, the total IPO of Entero Healthcare Solutions Ltd will comprise of a fresh issue and an OFS of 1,27,18,600 shares (127.19 lakh shares approximately) which at the upper end of the price band of ₹1,258 per share aggregates to total issue size of ₹1,600 crore. The IPO of Entero Healthcare Solutions Ltd will be listed on the NSE and the BSE on the IPO mainboard.

The fresh funds will be used to repay / prepay some of the high-cost borrowings of the company and its subsidiaries, as well as to fund long term working capital needs and pursue inorganic growth. Promoters currently hold 76.54% in the company, which will get diluted post the IPO. The IPO will be lead managed by ICICI Securities, DAM Capital (formerly IDFC Securities, Jefferies India, JM Financial, and SBI Capital Markets. Link Intime India Private Ltd will be the registrar to the IPO.

A brief on the anchor allocation of Entero Healthcare Solutions Ltd

The anchor issue of Entero Healthcare Solutions Ltd saw a relatively strong response on 08th February 2024 with 44.77% of the IPO size getting absorbed by the anchors. Out of 1,27,18,600 shares (127.19 lakh shares approximately) on offer, the anchors picked up 56,94,753 shares (56.95 lakh shares approximately) accounting for 44.77% of the total IPO size. The anchor placement reporting was made to the BSE late on Thursday, 08th February 2024; one working day ahead of the IPO opening on Friday, 09th February 2024.

The entire anchor allocation was made at the upper price band of ₹1,258 per share. This includes the face value of ₹10 per share plus a share premium of ₹1,248 per share, taking the anchor allocation price to ₹1,258 per share. Let us focus on the anchor allotment portion ahead of the Entero Healthcare Solutions Ltd IPO, which saw the anchor bidding opening and also closing on 08th February 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 56,94,753 shares issued to the anchor investors on 08th February 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 74.62% before the anchor allocation to 29.85% 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 Entero Healthcare Solutions 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 to investors in Entero Healthcare Solutions Ltd

On 08th February 2024, Entero Healthcare Solutions 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 56,94,753 shares were allotted to a total of 25 anchor investors. The allocation was done at the upper IPO price band of ₹1,258 per share (including premium of ₹1,248 per share) which resulted in an overall anchor allocation of ₹716.40 crore. The anchors have already absorbed 44.77% of the total issue size of ₹1,600 crore, which is indicative of fairly robust institutional demand.

Listed below are the 14 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Entero Healthcare Solutions Ltd. The entire anchor allocation of ₹716.40 crore was spread across a total of 25 major anchor investors, with a total of 14 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 25 anchor investors in all, only the 14 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 14 anchor investors accounted for 86.91% of the total anchor collection of  ₹716.40 crore. The detailed allocation is captured in the table below, indexed descending on size of anchor allocation.

Data Source: BSE Filings (Value Allocated in ₹ in Crore)

The above list only includes the set of 14 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Entero Healthcare Solutions Ltd IPO. In fact, there were 25 anchor investor in all; with only 14 anchors getting more than 2% each of the anchor quota. The detailed and comprehensive report on the anchor allocation for all the 25 anchor investors with the mutual fund portion separated (if applicable) can be accessed by clicking on the link below.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240208-43&attachedId=d9e0c156-4e24-4bf6-905d-b2240a3077a4

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 44.77% 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. Entero Healthcare Solutions Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, participatory notes routed through ODIs, AIFs, and insurance companies.

However, mutual funds were absent from the list and no mutual fund participated in the anchor portion of Entero Healthcare Solutions Ltd. 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 56,94,753 shares allocated to the anchors in the IPO, NIL shares were allocated to domestic mutual funds registered with SEBI. The entire anchor investment portion was spread across institutional investors like FPIs, domestic insurance companies, AIFs, and participatory notes only.