Gala Precision Engineering IPO: Anchor Allocation at 29.95%

About Gala Precision Engineering IPO 

The Gala Precision Engineering IPO is a book-built issue of Rs 167.93 crores. The issue is a combination of a fresh issue of 2,558,416 shares aggregating to Rs 135.34 crores and an offer for sale of 616,000 shares aggregating to Rs 32.59 crores. The price band is set at ₹503 to ₹529 per share, with a face value of ₹10 per share. This includes the face value of ₹10 per share plus a share premium of ₹519 per share, taking the anchor allocation price to ₹529 per share. Let us focus on the anchor allotment portion ahead of the Gala Precision Engineering IPO, which saw the anchor bidding opening and closing on 30th August 2024.

A brief on the Anchor Allocation of Gala Precision Engineering IPO 

The anchor issue of Gala Precision Engineering IPO saw a strong response on 30th August 2024, with 29.95% of the IPO size getting absorbed by the anchors. Out of 3,174,416 shares on offer, the anchors picked up 950,586 shares, accounting for 29.95% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, 30th August 2024, one working day ahead of the IPO opening on Monday, 2nd September 2024.

The entire anchor allocation was made at the upper end of the price band of ₹529 per share. This includes the face value of ₹10 per share plus a share premium of ₹519 per share, taking the anchor allocation price to ₹529 per share. Let us focus on the anchor allotment portion ahead of the Gala Precision Engineering IPO, which saw the anchor bidding open and close on 30th August 2024. After the anchor allocation, here is how the overall allocation looked:

Here, it must be noted that the 9,50,586 shares allocated to the anchor investors on 30th August 2024 were 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 quota reduced to the extent of the anchor allocation. As a result, the QIB quota has been reduced from 50% before the anchor allocation to 20.04% after the anchor allocation. The overall allocation to QIBs includes the anchor portion, so the allotted anchor shares have been deducted from the QIB quota for the public issue.

Finer points of the 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 differs from a pre-IPO placement in that the anchor allocation has a lock-in period, although, under the new rules, part of the anchor portion will be locked in for 3 months. It just gives investors confidence that large, established institutions back the issue. The presence of institutional investors like mutual funds and foreign portfolio investors (FPIs) gives confidence to retail investors. Here are details of the anchor lock-in for the Gala Precision Engineering issue:

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 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 the 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 mutual fund, insurance company, or sovereign fund, which invests before the IPO is made available to the public as per SEBI regulations. The 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 the price discovery of the IPO.

Anchor Allocation investors in Gala Precision Engineering IPO 

On 30th August 2024, Gala Precision Engineering completed the bidding for its anchor allocation. There was a robust response as the anchor investors participated in the book-building process. A total of 9,50,586 shares were allotted to 8 anchor investors. The allocation was done at the upper IPO price band of ₹529 per share, resulting in an overall anchor allocation of ₹50.29 crore. The anchors have already absorbed 29.95% of the total issue size of ₹167.93 crore, indicating strong institutional demand.

The entire anchor allocation of ₹50.29 crore was spread across these 8 major anchor investors. The detailed and comprehensive report on the anchor allocation can be accessed on the BSE website.

Overall, the anchors absorbed 29.95% 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. Gala Precision Engineering saw a lot of buying interest from various categories of anchors, including FPIs and AIFs.

Key dates for Gala Precision Engineering IPO and How to Apply? 

The issue opens for subscription on 2nd September 2024 and closes for subscription on 4th September 2024 (both days inclusive). The basis of allotment will be finalized on 5th September 2024 and the refunds will be initiated on 6th September 2024. In addition, the demat credits are expected to happen on 6th September 2024, and the stock will be listed on 9th September 2024 on the NSE and the BSE. Gala Precision Engineering will test the appetite for precision engineering stocks in India. The credits to the Demat account to the extent of shares allotted will happen by the close of 6th September 2024.

The issue is a combination of fresh issue of 2,558,416 shares aggregating to Rs 135.34 crores and an offer for sale of 616,000 shares aggregating to Rs 32.59 crores. The price band is set at ₹503 to ₹529 per share. The minimum lot size for an application is 28 Shares. The minimum amount of investment required by retail investors is ₹14,812. The minimum lot size investment for small NIIs is 14 lots (392 shares), amounting to ₹207,368, and for big NIIs, it is 68 lots (1,904 shares), amounting to ₹1,007,216.

PL Capital Markets Private Limited is the book running lead manager of the Gala Precision Engineering IPO, while Link Intime India Private Ltd is the registrar for the issue.

To Open a DEMAT Account for free with 5paisa: 

- Enter your mobile number and email
- Enter your PAN and bank details
- Enter your Aadhar and link it via Digilocker
- Take a selfie
- Fill e-sign form
- Start trading

Open Demat Account Online for Free

To apply for IPO through 5paisa, you can follow these steps:

1. Log in to your 5paisa  account 
2. Go to the IPO section and select the IPO you want to invest in 
3. Enter the number of lots and price you want to apply for 
4. Enter your UPI ID 
5. Review your details and click Submit 
6. Approve the UPI notification on your phone 

After you submit your bid, the exchange will approve it and you'll receive a notification to block funds in your UPI app. Once you approve the block request, the required amount will be deducted from your bank account. If your application is successful, shares will be credited to your Demat account on the allotment date.