JG Chemicals IPO Anchor Allocation at 29.45%

About the JG Chemicals IPO

JG Chemicals IPO will be a combination of a fresh issue of shares and offer for sale (OFS) component. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership. The fresh issue portion of the JG Chemicals IPO comprises the issue of 74,66,063 shares (74.66 lakh shares approximately), which at the upper price band of ₹221 per share will translate into a fresh issue size of ₹165.00 crore. The offer for sale (OFS) portion of the IPO of JG Chemicals Ltd comprises the sale / offer of 39,00,000 shares (39.00 lakh shares), which at the upper price band of ₹221 per share will translate into an OFS size of ₹86.19 crore.

Out of the OFS size of 39 lakh shares, the entire shares will be offered by the promoter group. This will include the sale of 20.29 lakh shares by Vision Projects and Finvest Private Ltd, 12.60 lakh shares by Suresh Kumar Jhunjhunwala, 6.10 lakh shares by Anirudh Jhunjhunwala and a small quantity by Jayant Commercial Ltd. Thus, the total IPO of JG Chemicals Ltd will comprise of a fresh issue and an OFS of 1,13,66,063 shares (113.66 lakh shares approximately) which at the upper end of the price band of ₹221 per share aggregates to total issue size of ₹251.19 crore. The IPO of JG Chemicals Ltd will be listed on the NSE and the BSE on the IPO mainboard.

The fresh funds will be used to invest in its materials subsidiary, BDJ Oxides for funding capex and for repayment of its loans. Part of the fresh funds will also be used for long term working capital. Promoters currently hold 100% in the company, which will get diluted post the IPO to 70.99%. The IPO will be lead managed by Centrum Capital, Emkay Global and Keynote Financial Services, while KFIN Technologies Ltd will be the IPO registrar.

A brief on the anchor allocation of JG Chemicals IPO

The anchor issue of JG Chemicals IPO saw a relatively strong response on 04th March 2024 with 29.45% of the IPO size getting absorbed by the anchors. Out of 1,15,78,532 shares (115.79 lakh shares approximately) on offer, the anchors picked up 34,09,818 shares (34.10 lakh shares approximately) accounting for 29.45% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, 04th March 2024; one working day ahead of the IPO opening on Tuesday, 05th March 2024.

The entire anchor allocation was made at the upper price band of ₹221 per share. This includes the face value of ₹10 per share plus a share premium of ₹211 per share, taking the anchor allocation price to ₹221 per share. Let us focus on the anchor allotment portion ahead of the JG Chemicals Ltd IPO, which saw the anchor bidding opening and also closing on 04th March 2024. Post the anchor allocation, here is how the overall allocation looked.

Data Source: BSE

Here it must be noted that the 34,09,818 shares issued to the anchor investors on 28th February 2024, 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. As a result, the QIB quota available in the IPO has reduced from 49.23% before the anchor allocation to 19.78% after 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 JG Chemicals 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 JG Chemicals Ltd

On 04th March 2024, JG Chemicals 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 34,09,818 shares were allotted to a total of 4 anchor investors. The allocation was done at the upper IPO price band of ₹221 per share (including premium of ₹211 per share) which resulted in an overall anchor allocation of ₹75.36 crore. The anchors have already absorbed 29.45% of the total issue size of ₹255.89 crore, which is indicative of fairly robust institutional demand.

Listed below are the 4 anchor investors who, have been allotted 13% or more of the anchor allocation done ahead of the IPO of JG Chemicals Ltd. The entire anchor allocation of ₹75.36 crore was spread across a total of 4 major anchor investors and all the 4 anchor investors got more than 13% each out of the anchor allocation quota. While there were 4 anchor investors in all, all the 4 anchor investors who got allocated 13% or more each of the anchor quota are listed in the table below. These 4 anchor investors accounted for 100% of the total anchor collection of  ₹75.36 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 includes the full set of 4 anchor investors who got allotted shares of 13% or above each of the anchor portion done ahead of the JG Chemicals Ltd IPO. In fact, there were only 4 anchor investor in all; with all the anchor investors getting more than 13% each of the anchor quota being mentioned in the list above. The detailed and comprehensive report on the anchor allocation with the mutual fund portion separated (if any) can be accessed by clicking on the link below.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240304-20&attachedId=302921e1-9728-4aad-825b-ee681b63e1e2

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 29.45% of the total issue size. The QIB portion in the IPO has already been 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. JG Chemicals Ltd saw a good deal of buying interest from the foreign portfolio investors (FPIs), alternate investment funds (AIFs) and insurance companies, although mutual funds were absent in the subscription. As stated, there was no allocation made to any of the domestic mutual funds registered with SEBI.

Key dates for JG Chemicals IPO and how to apply?

The issue opens for subscription on 05th March 2024 and closes for subscription on 07th March 2024 (both days inclusive). The basis of allotment will be finalized on 11th March 2024 and the refunds will be initiated on 12th March 2024. In addition, the demat credits are expected to also happen on 12th March 2024 and the stock will list on 13th March 2024 on the NSE and the BSE. JG Chemicals Ltd will test the appetite for such specialty chemical plays in India. The credits to the demat account to the extent of shares allotted will happen by the close of 12th March 2024 under ISIN (INE0MB501011).