EPACK Durable IPO: Anchor Allocation at 30%

About the EPACK Durable IPO

The stock of EPACK Durable 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 ₹218 to ₹230 per share. The final price will be discovered within this band. EPACK Durable IPO will be a combination of a fresh issue and offer for sale. A fresh issue brings fresh funds into the company, but is also EPS and equity dilutive; while OFS is just a transfer of ownership and does not dilute equity or EPS. The fresh issue portion of the IPO of EPACK Durable Ltd comprises the issue of 1,73,91,304 shares (173.91 lakh shares approximately), which at the upper price band of ₹230 per share will translate into a fresh issue size of ₹400 crore.

The offer for sale (OFS) portion of the IPO of EPACK Durable Ltd comprises the sale of 1,04,37,047 shares (104.37 lakh shares approximately), which at the upper price band of ₹230 per share will translate into an offer for sale (OFS) size of ₹240.05 crore. Out of the 5 members of the promoter group, 4 promoters members will be offering shares in the OFS. In addition, 2 early investors (India Advantage Fund and Dynamic India Fund) will also be offering shares in the OFS. Post IPO, promoter stake will fall from 85.49% to 65.36%. The overall IPO of  EPACK Durable Ltd will, therefore, comprise of a fresh issue and sale of 2,78,28,351 shares (278.28 lakh shares approximately), which at the upper price band of ₹230 per share translates into total IPO size of ₹640.05 crore.

The IPO of EPACK Durable Ltd will be listed on the NSE and BSE on the IPO mainboard. The IPO is a combination of a fresh issue and an offer for sale. The fresh issue proceeds will be used by EPACK Durable Ltd to fund capital expenditure to expand the manufacturing capacity. It will also use part of the proceeds for prepayment or repayment of loans taken. The IPO will be lead managed by Axis Capital, DAM Capital (formerly IDFC Securities), and ICICI Securities. KFIN Technologies Ltd will be the registrar to the issue.

A brief on the anchor allocation of EPACK Durable IPO

The anchor issue of EPACK Durable IPO saw a relatively strong response on 18th January 2024 with 30% of the IPO size getting absorbed by the anchors. Out of 2,78,28,350 shares (278.28 lakh shares approximately) on offer, the anchors picked up 83,48,504 shares (83.49 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Thursday, 18th January 2024; one working day ahead of the IPO opening on Friday, 19th January 2024.

The entire anchor allocation was made at the upper price band of ₹230 per share. This includes the face value of ₹10 per share plus a share premium of ₹220 per share, taking the anchor allocation price to ₹230 per share. Let us focus on the anchor allotment portion ahead of the EPACK Durable IPO, which saw the anchor bidding opening and also closing on 18th January 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 83,48,504 shares issued to the anchor investors on 18th January 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. 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 EPACK Durable 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 EPACK Durable IPO

On 18th January 2024, EPACK Durable IPO 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 83,48,504 shares were allotted to a total of 18 anchor investors. The allocation was done at the upper IPO price band of ₹230 per share (including premium of ₹220 per share) which resulted in an overall anchor allocation of ₹192.02 crore. The anchors have already absorbed 30% of the total issue size of ₹640.05 crore, which is indicative of fairly robust institutional demand.

Listed below are the 18 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of EPACK Durable Ltd. The entire anchor allocation of ₹192.02 crore was spread across a total of these 18 major anchor investors, with all the 18 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 18 anchor investors in all, all the 18 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 18 anchor investors accounted for 100.00% of the total anchor collection of  ₹192.02 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 includes the complete set of 18 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the EPACK Durable Ltd IPO. There were in all only 18 anchor; which means each of the anchors got more than 2% of the anchor allocation portion. 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=20240118-35&attachedId=76aeee2f-e522-43e5-b5c0-3ee0e654abcc

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 30% 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. EPACK Durable 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 EPACK Durable 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 83,48,504 shares allocated to the anchors in the IPO, a total of 15,65,265 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 4 mutual fund schemes belonging to just 1 asset management company (HDFC Asset Management Company), in this case. The mutual fund allocation in the anchor portion amounted to 18.75% of the total anchor size.