IREDA IPO anchor allocation at 29.92%

About the Indian Renewable Energy Development Agency (IREDA) IPO

IREDA IPO opens on 21st November 2023 and closes for subscription on 23rd November 2023. The anchor bidding and allocation was completed a day ahead on 20th November 2023. First, let us take a quick look at the details of the IPO. The stock of IREDA has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹30 to ₹32 per share. The final price will be discovered within this band. The IPO of Indian Renewable Energy Development Agency Ltd (IREDA) will be a combination of fresh issue and an offer for sale (OFS). The fresh issue portion of Indian Renewable Energy Development Agency Ltd (IREDA) IPO comprises the issue of 40,31,64,706 shares (4,031.65 lakh shares approximately), which at the upper price band of ₹32 per share translates into fresh issue size of ₹1,290.13 crore. The offer for sale (OFS) portion of the IPO comprises the sale of 26,87,76,471 shares (2,687.76 lakh shares), which at the upper price band of ₹32 per share will translate into an offer for sale (OFS) size of ₹860.08 crore.

The OFS selling will be by the promoter shareholder of the company, which is the Government of India. IREDA is currently 100% owned by the government of India, and the entire OFS portion of will be offered by the Government of India only. Thus, the overall IPO of Indian Renewable Energy Development Agency Ltd (IREDA) will comprise of the issue and sale of 67,19,41,177 shares (6,719.41 crore shares approximately), which at the upper price band of ₹32 per share will translate into total IPO issue size of ₹2,150.21 crore. The net proceeds from the IPO fresh issue portion will be utilized for augmenting the capital base (a basic necessity for all financial institutions looking to expand their loan books). The OFS portion is being entirely offered by the promoters (government of India). The IPO will be lead managed by IDBI Capital Management Services, BOB Capital Markets and SBI Capital Markets Ltd. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of IREDA IPO

The anchor issue of IREDA IPO saw a relatively strong response on 20th November 2023 with 29.92% of the IPO size getting absorbed by the anchors. Out of 67,19,41,177 shares (6,719.41 lakh shares approximately) on offer, the anchors picked up 20,10,19,726 shares (2,010.20 lakh shares approximately) accounting for 29.92% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, November 20th, 2023; one working day ahead of the IPO opening on Tuesday, 21st November 2023. The IPO of Indian Renewable Energy Development Agency Ltd (IREDA) opens on 21st November 2023 in the price band of ₹30 to ₹32 and will close for subscription on 23rd November 2023.

The entire anchor allocation was made at the upper price band of ₹32 per share. This includes the face value of ₹10 per share plus a premium of ₹22 per share, taking the anchor allocation price to ₹32 per share. Let us focus on the anchor allotment portion ahead of the Indian Renewable Energy Development Agency Ltd (IREDA) IPO, which saw the anchor bidding opening and also closing on 20th November 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 20,10,19,726 shares issued to the anchor investors on 20th 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 Indian Renewable Energy Development Agency Ltd (IREDA).

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 IREDA IPO

On 20th November 2023, Indian Renewable Energy Development Agency Ltd (IREDA) 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 20,10,19,726 shares were allotted to a total of 58 anchor investors. The allocation was done at the upper IPO price band of ₹32 per share (including premium of ₹22 per share) which resulted in an overall anchor allocation of ₹643.26 crore. The anchors have already absorbed 29.92% of the total issue size of ₹2,150.21 crore, which is indicative of fairly robust institutional demand.

Listed below are the 19 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Indian Renewable Energy Development Agency Ltd (IREDA). The entire anchor allocation of ₹643.26 crore was spread across a total of 58 major anchor investors, with 19 anchor investors getting more than 2% out of the anchor allocation quota. While there were 58 anchor investors in all, only 19 anchor investors who got allocated 2% or more of the anchor quota are listed in the table below. These 19 anchor investors accounted for 68.95% of the total anchor collection of  ₹643.26 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 19 anchor investors who got allotted shares of 2% or above of the anchor portion done ahead of the Indian Renewable Energy Development Agency Ltd (IREDA) IPO. 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=20231120-39&attachedId=004312fa-9427-4c5e-bd75-2527e573c3ae

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 29.92% 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. Indian Renewable Energy Development Agency Ltd (IREDA) 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 Indian Renewable Energy Development Agency Ltd (IREDA) 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 20,10,19,726 shares allocated to the anchors in the IPO, a total of 8,51,58,420 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 32 mutual fund schemes belonging to 13 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 42.36% of the total anchor size.