JNK India IPO: Anchor Allocation at 29.31%

About the JNK India IPO

The stock of JNK India IPO has a face value of ₹2 per share and the price band for the book building IPO has been set in the range of ₹395 to ₹415 per share. The IPO of JNK India Ltd is a combination of fresh issue and an offer for sale. The fresh issue brings in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership, and hence the OFS is neither equity dilutive nor is it EPS dilutive. The fresh issue portion of the IPO of JNK India Ltd comprises the issue of 75,94,936 shares (75.95 lakh shares approximately), which at the upper price band of ₹415 per share will translate into a fresh issue size of ₹315.19 crore.

The offer for sale (OFS) will comprise the sale of 84,21,052 shares (84.21 lakhs shares approximately), which at the upper price band of ₹415 aggregates to OFS size of ₹349.47 crore. The entire OFS of 84.21 lakhs shares is being made by the 3 promoter shareholders and 1 investor shareholder. The 3 promoter shareholders will offer Goutam Rampelli (11.23 lakh shares), JNK Global Company (24.33 lakh shares), and Mascot Capital (43.98 lakh shares. One investor shareholder, Milind Joshi, will offer 4.68 lakh shares in the OFS.

As a result, the overall size of the IPO of JNK IPO

The anchor issue of JNK India Ltd saw a relatively strong response on 22nd April 2024 with 29.31% of the IPO size getting absorbed by the anchors. Out of 1,60,15,988 shares (160.16 lakh shares approximately ) on offer, the anchors picked up 46,64,989 shares (46.65 lakh shares approximately) accounting for 29.31% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, 22nd April 2024; one working day ahead of the IPO opening on Tuesday, 23rd April 2024.

The entire anchor allocation was made at the upper price band of ₹415 per share. This includes the face value of ₹2 per share plus a share premium of ₹413 per share, taking the anchor allocation price to ₹415 per share. Let us focus on the anchor allotment portion ahead of the JNK India Ltd IPO, which saw the anchor bidding opening and also closing on 22nd April 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 46,94,989 shares issued to the anchor investors on 22nd April 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 has reduced from 50% before the anchor allocation to 20.69% 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 JNK India 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 JNK India IPO

On 22nd April 2024, JNK India 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 46,94,989 shares were allotted to a total of 19 anchor investors. The allocation was done at the upper IPO price band of ₹415 per share (including premium of ₹413 per share) which resulted in an overall anchor allocation of ₹194.84 crore. The anchors have already absorbed 29.31% of the total issue size of ₹664.66 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 JNK India Ltd. The entire anchor allocation of ₹194.84 crore was spread across a total of 19 major anchor investors, with all the 19 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 19 anchor investors in all, all the 19 anchor investors got allocated 2% or more each of the anchor quota; and are all listed in the table below. These 19 anchor investors accounted for 100% of the total anchor collection of  ₹194.84 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 each of the anchor portion done ahead of the JNK India Ltd IPO. In fact, there were 19 anchor investor in all; with all the 19 anchor investors getting more than 2% 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 can be accessed by clicking on the link below.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240422-56&attachedId=afeec8e7-8ac2-4c09-8fc8-dd5c5d667bea

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 29.31% 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. JNK India 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 JNK India 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 46,94,989 shares allocated to the anchors in the IPO, a total of 27,93,594 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 11 mutual fund schemes belonging to 7 asset management company (AMCs). The mutual fund allocation in the anchor portion amounted to 59.50% of the total anchor size.

Key dates for JNK India IPO and how to apply?

The issue opens for subscription on 23rd April 2024 and closes for subscription on 25th April 2024 (both days inclusive). The basis of allotment will be finalized on 26th April 2024 and the refunds will be initiated on 29th April 2024. In addition, the demat credits are expected to also happen on 29th April 2024 and the stock will list on 30th April 2024 on the NSE and the BSE. JNK India Ltd will test the appetite for such support stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 29th April 2024 under ISIN (INE0OAF01028).