Five Star Business Finance Ltd IPO gets 30% anchor allocated

The anchor issue of Five Star Business Finance Ltd saw a robust response on 07th November 2022 with 30% of the IPO size getting absorbed by the anchors. Out of the 4,13,51,266 shares on offer, the anchors picked up 1,24,05,094 shares accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday. Five Star Business Finance IPO opens on 09th November 2022 in the price band of Rs.450 to Rs.474 and will close for subscription on 11th November 2022 (both days inclusive). The entire anchor allocation was made at the upper price band of Rs474. Let us focus on the anchor allotment portion ahead of the Five Star Business Finance 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 Five Star Business Finance Ltd

On 07th November  2022, Five Star Business Finance 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 1,24,05,094 shares were allotted to a total of 21 anchor investors. The allocation was done at the upper IPO price band of Rs.474 which resulted in an overall allocation of Rs.588 crore. The anchors have already absorbed 30% of the total issue size of Rs1,960 crore, which is indicative of the robust institutional demand. 

Listed below are the 12 anchor investors who got allotted at least 1.50% of the total anchor allocation individually. The entire anchor allocation of Rs.588 crore was spread across these 21 major anchor investors. These 12 investors below account for 91.6% of the total funds raised through the anchor route. 

Data Source: BSE Filings

While the GMP has not been too active, it looks more like a par listing around the IPO price of Rs474, but we have to await subscription details before taking this call. However, it must be said that the anchor response has been quite strong with anchors taking up 30% 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. Five Star Business Finance Ltd has been a mix, getting good response from FPIs and domestic mutual funds. The number and spread of the Foreign Portfolio Investors has been quite phenomenal in this case. With strong SIP flows, most equity funds are flush with cash at this point of time and that has helped the MF appetite for anchor allocation in this IPO of Five Star Business Finance Ltd.

Out of the total 1,24,05,094 shares allotted by way of anchor placement, Five Star Business Finance Ltd allotted a total of 13,71,347 shares to 7 domestic mutual fund schemes across 4 AMCs. The mutual fund allocation represents just 11.05% of the overall anchor allocation.