Flair Writing IPO: 30% Anchor Allocation

About the Flair Writing Industries IPO

Flair Writing Industries IPO opens on 22nd November 2023 and closes for subscription on 24th November 2023. The stock of the company has a face value of ₹5 per share and the price band for the book building IPO has been set in the range of ₹288 to ₹304 per share. The final price will be discovered within this band. Flair Writing Industries IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of Flair Writing Industries Ltd IPO comprises the issue of 96,05,263 shares (96.05 lakh shares approximately), which at the upper price band of ₹304 per share will translate into fresh issue size of ₹292 crore. The offer for sale (OFS) portion of the IPO of Flair Writing Industries Ltd comprises the sale of 99,01,316 shares (99.01 lakh shares), which at the upper price band of ₹304 per share will translate into an offer for sale (OFS) size of ₹301 crore.

The OFS selling will be by the promoter shareholders of the company, with 5 members of the promoter group offering the total of 99.01 lakh shares. Dur to promoters (Rathod family) selling shares in the OFS, the promoter stake in the company will get diluted post IPO from 100% to 81.06%. Therefore, the overall IPO of Flair Writing Industries Ltd will comprise of the issue and sale of 1,95,06,579 shares (195.07 crore shares approximately), which at the upper price band of ₹304 per share will translate into total IPO issue size of ₹593 crore. Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 share; being a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Flair Writing Industries Ltd, the minimum lot size is 49 shares with upper band indicative value of ₹14,896.

The fresh funds raised in the IPO will be used for setting up  new manufacturing facility in Valsad in Gujarat, funding capex of its subsidiary FWEPL, repayment and prepayment of loans and for working capital needs. The offer for sale is entirely by the promoter shareholders of the company. The IPO will be lead managed by Nuvama Wealth Management and Axis Capital. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of Flair Writing Industries IPO

The anchor issue of Flair Writing Industries Ltd saw a relatively strong response on 21st November 2023 with 30% of the IPO size getting absorbed by the anchors. Out of 1,95,06,579 shares (195.07 lakh shares approximately) on offer, the anchors picked up 58,51,972 shares (58.52 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, November 21st, 2023; one working day ahead of the IPO opening on Wednesday, 22nd November 2023. The IPO of Flair Writing Industries Ltd opens on 22nd November 2023 in the price band of ₹288 to ₹304 and will close for subscription on 24th November 2023.

The entire anchor allocation was made at the upper price band of ₹304 per share. This includes the face value of ₹5 per share plus a premium of ₹299 per share, taking the anchor allocation price to ₹304 per share. Let us focus on the anchor allotment portion ahead of the Flair Writing Industries Ltd IPO, which saw the anchor bidding opening and also closing on 21st November 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 58,51,972 shares issued to the anchor investors on 21st November 2023, 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 Flair Writing Industries 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 Flair Writing Industries IPO

On 21st November 2023, Flair Writing Industries 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 58,51,972 shares were allotted to a total of 23 anchor investors. The allocation was done at the upper IPO price band of ₹304 per share (including premium of ₹299 per share) which resulted in an overall anchor allocation of ₹177.90 crore. The anchors have already absorbed 30% of the total issue size of ₹593 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 Flair Writing Industries Ltd. The entire anchor allocation of ₹177.90 crore was spread across a total of 23 major anchor investors, with 18 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 23 anchor investors in all, only 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 95.77% of the total anchor collection of  ₹177.90 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 18 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Flair Writing Industries Ltd IPO. However, there were 23 anchor investor in all. The detailed and comprehensive report on the anchor allocation with the mutual fund portion separated can be accessed by clicking on the link below.

bseindia.com DownloadAttach.aspx

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 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. Flair Writing Industries 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 Flair Writing Industries 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 58,51,972 shares allocated to the anchors in the IPO, a total of 27,70,264 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 14 mutual fund schemes belonging to 6 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 47.34% of the total anchor size.