IRM Energy IPO Anchor Allocated at 29.40%

About the IRM Energy IPO

IRM Energy IPO opens on 18th October 2023 and closes on 20th October 2023; both days inclusive. The stock has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹480 to ₹505 per share. The final price will be discovered in this band through the process of book building. The IPO of IRM Energy Ltd will be entirely a fresh issue of shares with no offer for sale (OFS) component.

The fresh issue portion comprises the issue of 1,08,00,000 shares (1.08 crore shares), which at the upper price band of ₹505 per share will translate into fresh issue size of ₹545.40 crore. Since there is no offer for sale portion in the IPO of IRM Energy Ltd, the fresh issue of 1,08,00,000 shares (1.08 crore shares), at the upper price band of ₹505 per share worth ₹545.40 crore will also be the overall size of the IPO.

A brief on the anchor allocation of IRM Energy IPO

The anchor issue of IRM Energy IPO saw a relatively strong response on 17th October 2023 with 29.40% of the IPO size getting absorbed by the anchors. Out of the 1,08,00,000 shares (108.00 lakh shares) on offer, the anchors picked up 31,75,200 shares (31.75 lakh shares approximately) accounting for 29.40% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, October 17th, 2023; one working day ahead of the IPO opening. The IPO of IRM Energy Ltd opens on 18th October 2023 in the price band of ₹480 to ₹505 and will close for subscription on 20th October 2023.

The entire anchor allocation was made at the upper price band of ₹505 per share. This includes the face value of ₹10 per share plus a premium of ₹495 per share, taking the anchor allocation price to ₹505 per share. Let us focus on the anchor allotment portion ahead of the IRM Energy Ltd IPO, which saw the anchor bidding opening and also closing on 17th October 2023. Prior to the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 31,75,200 shares issued to the anchor investors on 17th October 2023, will be reduced from the QIB quota above of 52.92 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 IRM Energy IPO.

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 IRM Energy IPO

On 17th October 2023, IRM Energy IPO 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 31,75,200 shares were allotted to a total of 12 anchor investors. The allocation was done at the upper IPO price band of ₹505 per share (including premium of ₹495 per share) which resulted in an overall anchor allocation of ₹160.35 crore. The anchors have already absorbed 29.40% of the total issue size of ₹545.40 crore, which is indicative of fairly robust institutional demand.

Listed below are the 12 anchor investors who got allotted the entire 100% shares between them as the anchor allocation ahead of the IPO of IRM Energy Ltd. The entire anchor allocation of ₹160.35 crore was spread across just these 12 major anchor investors, with each of them absorbing the 100% of the anchor allocation jointly between them.

Data Source: BSE Filings

Overall, the anchors absorbed 29.40% 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. IRM Energy Ltd did not elicit any anchor interest from the FPIs, although the domestic mutual funds and insurance companies were relatively more active in this particular anchor placement.

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 31,75,200 shares allocated to the anchors in the IPO, a total of 17,29,656 shares were allocated to domestic mutual funds registered by SEBI. This allocation was spread across 8 mutual fund schemes across 4 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 54.47% of the total anchor size.