Honasa Consumer IPO allocates 44.97% to anchor investors

About the Honasa Consumer IPO

Honasa Consumer IPO opens for subscription on 31st October 2023 and closes on 02nd November 2023. Honasa Consumer Ltd has a face value of ₹10 per share while the price band for the book building IPO has been set in the band of ₹308 to ₹324. The final price will be discovered within this band through the process of book building. The IPO of Honasa Consumer Ltd will be a combination of a fresh issue and an offer for sale (OFS). Let us start with the fresh issue portion first. The fresh issue portion of Honasa Consumer Ltd IPO comprises the issue of 1,12,65,432 shares (112.65 lakh shares approximately), which at the upper price band of ₹324 per share will translate into fresh issue size of ₹365 crore. In addition, the offer for sale (OFS) portion of the IPO of Honasa Consumer Ltd comprises the sale of 4,12,48,162 shares (412.48 lakh shares approximately), which at the upper price band of ₹324 per share will translate into an offer for sale (OFS) size of ₹1,336.44 crore.

The promoter selling shareholders in the IPO include Varun Alagh and Ghazal Alagh. The non-promoter selling shareholders in the offer for sale (OFS) include Fireside Ventures, Sofina, Stellaris, Kunal Bahl, Rishabh Mariwala, Rohit Bansal, and Shilpa Shetty Kundra. As a result, the overall IPO of Honasa Products Ltd will comprise of the issue and sale of 5,25,13,594 shares (525.14 crore shares approximately), which at the upper price band of ₹324 per share will translate into total IPO issue size of ₹1,701.44 crore. The issue will be lead managed by Kotak Mahindra Capital, Citigroup Global Markets, JM Financial and JP Morgan India. KFIN Technologies Ltd will be the registrar to the issue.

A brief on the anchor allocation of Honasa Consumer IPO

The anchor issue of Honasa Consumer IPO saw a relatively strong response on 30th October 2023 with 44.97% of the IPO size getting absorbed by the anchors. Out of the 5,25,13,594 shares (525.14 lakh shares approximately) on offer, the anchors picked up 2,36,17,228 shares (236.17 lakh shares approximately) accounting for 44.97% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, October 30th, 2023; one working day ahead of the IPO opening on Tuesday 31st October 2023. The IPO of Honasa Consumer Ltd opens on 31st October 2023 in the price band of ₹308 to ₹324 and will close for subscription on 02nd November 2023.

The entire anchor allocation was made at the upper price band of ₹324 per share. This includes the face value of ₹10 per share plus a premium of ₹314 per share, taking the anchor allocation price to ₹324 per share. Let us focus on the anchor allotment portion ahead of the Honasa Consumer Ltd IPO, which saw the anchor bidding opening and also closing on 30th October 2023. Prior to the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 2,36,17,228 shares issued to the anchor investors on 30th October 2023, will be reduced from the QIB quota above of 393.85 lakh shares and only the residual amount would be available to QIBs in the IPO. The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted will be 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. Here are details of the anchor lock-in for the issue of Honasa Consumer 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 Honasa Consumer IPO

On 30th October 2023, Honasa Consumer 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 2,36,17,228 shares were allotted to a total of 49 anchor investors. The allocation was done at the upper IPO price band of ₹324 per share (including premium of ₹314 per share) which resulted in an overall anchor allocation of ₹765.20 crore. The anchors have already absorbed 44.97% of the total issue size of ₹1,701.44 crore, which is indicative of fairly robust institutional demand.

Listed below are the 19 anchor investors who individually got allotted more than 2% of the shares allocated as part of anchor capital ahead of the IPO of Honasa Consumer Ltd. The entire anchor allocation of ₹765.20 crore was spread across a total of 49 major anchor investors, with a total of 19 anchor investors getting allocation of more than 2% of the anchor portion and 30 anchor investors getting less than 2%. The 19 anchor investors listed in the table below got more than 2% each and accounted for 68.03% of anchor allocation.

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

The above list only includes the top 19 anchor investors who got allotted more than 2% of the anchor portion. There were another 30 anchor investors that were allotted less than 2% of the anchor portion each. The detailed and comprehensive list of 49 anchors is available at the link below, from where the file can be downloaded.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20231030-43&attachedId=dfaa1652-134f-4de6-987d-49d2bd89d8ca

Overall, the anchors absorbed 44.97% 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. Honasa Consumer Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, domestic mutual funds, AIFs, and insurance companies.

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 2,36,17,228 shares allocated to the anchors in the IPO, a total of 78,27,544 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 19 mutual fund schemes belonging to 7 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 33.14% of the total anchor size.