IKIO Lighting IPO gets 30% Anchor Allocated

The anchor issue of IKIO Lighting IPO saw a robust response on 05th June 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 2,12,80,702 shares on offer, the anchors picked up 63,84,209 shares accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday. IKIO Lighting IPO opens on 06th June 2023 in the price band of ₹270 to ₹285 and will close for subscription on 08th June 2023 (both days inclusive). The entire anchor allocation was made at the upper price band of ₹285. Let us focus on the anchor allotment portion ahead of the IKIO Lighting 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 IKIO Lighting Ltd

On 05th June 2023, IKIO Lighting 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 63,84,209 shares were allotted to a total of 16 anchor investors. The allocation was done at the upper IPO price band of ₹285 per share which resulted in an overall allocation of ₹181.95 crore. The anchors have already absorbed 30% of the total issue size of ₹607 crore, which is indicative of the robust institutional demand.

Listed below is the full list of the 16 anchor investors who got allotted shares in the anchor placement. The lowest allocation has been 2.75% of the anchor portion. The entire anchor allocation of ₹181.95 crore was spread across these 16 major anchor investors. These 16 anchor investors listed below accounted for 100% of the total anchor allocation of IKIO Lighting Ltd.

Data Source: BSE Filings

The GMP has gained sharply to ₹95, nearly doubling in the last 4 days. That shows an attractive and robust premium of 33% on listing. This has led to reasonable anchor response with the anchors taking in 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. IKIO Lighting Ltd has been a mix, getting good response from FPIs but it has also got extremely strong response from the domestic mutual funds and other categories of anchor investors, considering its product positioning in the Indian market.

The number and spread of the Foreign Portfolio Investors have been fairly healthy 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 IKIO Lighting Ltd. HDFC AMC, ICICI Prudential MF, Mirae AMC and Quant Mutual Fund were among the AMCs to participate in the anchor allotment of IKIO Lighting Ltd.

Out of the total 63,84,209 shares allotted by way of anchor placement, IKIO Lighting Ltd allotted a total of 21,38,409 shares to 5 domestic mutual fund schemes across 3 AMCs. The mutual fund allocation represents 33.5% of the overall anchor allocation. Let us have a quick word on the business model of IKIO Lighting Ltd.

IKIO Lighting Ltd manufactures light-emitting diode (LED) lighting solutions. In last few years, government has consciously encouraged the shift to LED lights, which are economical in the long run and leave a lower carbon footprint. IKIO has been a big beneficiary of this trend. Broadly, the product portfolio of IKIO Lighting Ltd comprises of LED lighting, refrigeration lights, ABS (acrylonitrile butadiene styrene) piping and other products.

IKIO Lighting is primarily into the ODM (Original Design Manufacturer) segment. The company designs, develops, manufactures, and supplies products to customers. Most of the first-level customers of IKIO Lighting also further distribute the products under their own brands. Its products are largely in the high-margin premium segment and includes lighting, fittings, fixtures, accessories, and components; which is a good sign for profitability in the long run. The issue is being lead managed by Motilal Oswal Investment Advisors Private Limited. KFIN Technologies (formerly Karvy Computershare Ltd) will be the registrars to the issue.