India Shelter Finance Corporation IPO: Anchor Allocation Set at 30%

About the India Shelter Finance Corporation IPO

India Shelter Finance Corporation IPO opens on 13th December 2023 and closes for subscription on 15th December 2023. The stock of India Shelter Finance Corporation Ltd has a face value of ₹5 per share and the price band for the book building IPO has been set in the band of ₹469 to ₹493 per share, with the final price to be discovered in this price band. The IPO of India Shelter Finance Corporation Ltd will be a combination of a fresh issue and an offer for sale (OFS). Here are the details of the fresh issue component of the IPO. The fresh issue portion of India Shelter Finance Corporation IPO entails the issue of 1,62,27,181 shares (162.27 lakh shares approximately), which at the upper price band of ₹493 per share translates into fresh issue size of ₹800 crore. The offer for sale (OFS) portion comprises the sale of 81,13,890 shares (81.14 lakh shares approximately), which at the upper price band of ₹493 per share translates into an offer for sale (OFS) size of ₹400 crore.

The OFS shares will be offered by the investor shareholders (non-promoter shareholders) of India Shelter Finance Corporation Ltd. Among the major investors shareholders offering their shares in the OFS are Madison India Opportunities Fund via Catalyst Trusteeship (₹171.29 crore); Nexus Ventures III Ltd (₹142.50 crore); Madison India Opportunities IV (₹54.43 crore); and MIO Star Rock (₹31.76 crore). Effectively, the overall IPO of India Shelter Finance Corporation Ltd will comprise of the issue and sale of 2,43,40,771 shares (243.41 crore shares approximately), which at the upper price band of ₹493 per share will translate into overall IPO size of ₹1,200 crore. The stock will be listed on the NSE and the BSE on the IPO mainboard. The net proceeds from the fresh issue portion will be used to augment the capital base (a basic necessity for financial institutions to expand their loan books). The IPO will be lead managed by ICICI Securities, Citigroup Global Markets, Kotak Mahindra Capital, and Ambit Private Ltd. KFIN Technologies Ltd will be the registrar to the issue.

A brief on the anchor allocation of India Shelter Finance Corporation IPO

The anchor issue of India Shelter Finance Corporation Ltd saw a relatively strong response on 12th December 2023 with 30% of the IPO size getting absorbed by the anchors. Out of 2,43,40,771 shares (243.41 lakh shares approximately) on offer, the anchors picked up 73,02,229 shares (73.02 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, December 12th, 2023; one working day ahead of the IPO opening on Wednesday, 13th December 2023. The IPO of India Shelter Finance Corporation Ltd opens on 13th December 2023 in the price band of ₹469 to ₹493 and will close for subscription on 15th December 2023.

The entire anchor allocation was made at the upper price band of ₹493 per share. This includes the face value of ₹5 per share plus a premium of ₹488 per share, taking the anchor allocation price to ₹493 per share. Let us focus on the anchor allotment portion ahead of the India Shelter Finance Corporation Ltd IPO, which saw the anchor bidding opening and also closing on 12th December 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 73,02,229 shares issued to the anchor investors on 12th December 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 India Shelter Finance Corporation 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 India Shelter Finance Corporation Ltd

On 12th December 2023, India Shelter Finance Corporation 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 73,02,229 shares were allotted to a total of 38 anchor investors. The allocation was done at the upper IPO price band of ₹493 per share (including premium of ₹488 per share) which resulted in an overall anchor allocation of ₹360.00 crore. The anchors have already absorbed 30% of the total issue size of ₹1,200 crore, which is indicative of fairly robust institutional demand.

Listed below are the 20 anchor investors who, have been allotted 2.50% or more of the anchor allocation done ahead of the IPO of India Shelter Finance Corporation Ltd. The entire anchor allocation of ₹360.00 crore was spread across a total of 38 major anchor investors, with 20 anchor investors getting more than 2.50% each out of the anchor allocation quota. While there were 38 anchor investors in all, only 20 anchor investors who got allocated 2.50% or more each of the anchor quota are listed in the table below. These 20 anchor investors accounted for 77.55% of the total anchor collection of  ₹360.00 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 20 anchor investors who got allotted shares of 2.50% or above each of the anchor portion done ahead of the India Shelter Finance Corporation Ltd IPO. However, there were 38 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.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20231212-48&attachedId=247a1e58-24b5-45de-97bb-8b29337e314c

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. India Shelter Finance Corporation 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 India Shelter Finance Corporation 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 73,02,229 shares allocated to the anchors in the IPO, a total of 41,69,370 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 25 mutual fund schemes belonging to 14 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 57.10% of the total anchor size.