JSW Infrastructure IPO gets 45% anchor allocated

About the JSW Infrastructure IPO

The anchor issue of JSW Infrastructure IPO saw a very strong response on 22nd September 2023 with 45% of the IPO size getting absorbed by the anchors. Out of the 23,52,94,118 shares (23.53 crore shares approximately) on offer, the anchors picked up 10,58,82,352 shares (10.59 lakh shares approximately) accounting for 45% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, September 22nd, 2023; one working day ahead of the IPO opening. The IPO of JSW Infrastructure Ltd opens on 25th September 2023 in the price band of ₹113 to ₹119 per share and will close for subscription on 27th September 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹119. This includes the face value of ₹2 per share plus a premium of ₹117 per share, taking the anchor allocation price to ₹119 per share. Let us focus on the anchor allotment portion ahead of the JSW Infrastructure Ltd IPO, which saw the anchor bidding opening and also closing on 22nd September 2023. Before that, here is how the overall allocation will look.

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.

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 placement story of JSW Infrastructure IPO

On 22nd September 2023, JSW Infrastructure 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 10,58,82,352 shares were allotted to a total of 65 anchor investors. The allocation was done at the upper IPO price band of ₹119 (including premium of ₹117 per share) which resulted in an overall allocation of ₹1,260 crore. The anchors have already absorbed 45% of the total issue size of ₹2,800 crore, which is indicative of fairly robust institutional demand.

Listed below are the 15 anchor investors who got allotted shares of more than 2% of the anchor portion as part of the overall anchor allocation quota for the IPO of JSW Infrastructure Ltd. The entire anchor allocation of ₹1,260 crore was spread across 65 major anchor investors. These 15 anchor investors listed below accounted for 55.64% of the total anchor allocation of JSW Infrastructure Ltd and their participation will set the tone for retail participation in the IPO.

Data Source: BSE Filings

While the GMP has been rather stable at ₹15 per share, it shows a rather healthy premium of 12.61% on listing. This has led to reasonable anchor response with the anchors taking in 45% 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. JSW Infrastructure Ltd has witnessed anchor interest from domestic mutual funds, foreign portfolio investors, and even insurance companies.

JSW Infrastructure Ltd, in consultation with the book running lead managers (BRLMs) have allocated anchor shares to domestic mutual funds, spread across 28 mutual fund schemes of 11 mutual fund AMCs.

Brief on the JSW Infrastructure Ltd business model

JSW Infrastructure Ltd was incorporated in the year 2006 and the company provides maritime-related services. These include cargo handling, storage solutions and logistics support services. In addition, JSW Infrastructure Ltd  also develops and operates ports and port terminals under Port Concessions. The company is part of the renowned JSW group (an offshoot of the original Jindal group) and this will be the first IPO by the group in more than a decade. JSW Infrastructure Ltd is the second largest commercial port operator in India; measured in terms of cargo handling capacity. It handles dry bulk cargo, break bulk cargo, liquid bulk cargo, gases, and containers. Apart from coal, the other key cargo materials handled by the company include iron ore, sugar, urea, steel products, rock phosphate, molasses, gypsum, barites, edible oil, LNG, and LPG.

Currently the ports operated by JSW Infrastructure Ltd have fairly long concession periods ranging between 30 years to 50 years. This is likely to provide long term sustainable visibility in terms of revenues. JSW Infrastructure Ltd is present across India with non-major ports in Maharashtra as well as port terminals in Goa and Karnataka. On the east coast, it has presence in Odisha and Tamil Nadu, apart from global presence in the UAE. In all, JSW Infrastructure operates 9 Port Concessions in India with an installed cargo handling capacity of 158.43 MTPA. The company's cargo handling capacity in India has grown at an impressive CAGR of 15.27% over the last 3 years.

The proceeds of the fresh issue portion will be used to repay / prepay some of the loans taken by its subsidiaries via parent company investments; specifically, in JSW Jaigarh Port Ltd for upgradation and dredging. Part of the funds will also be used to invest in the subsidiary, JSW Mangalore Container Private Ltd as part of the expansion of the Mangalore port franchise. The issue of JSW Infrastructure Ltd will be lead managed by an impressive line-up of lead managers comprising of JM Financial, Axis Capital, Credit Suisse Securities, DAM Capital (formerly IDFC Securities), HSBC Securities, ICICI Securities, Kotak Mahindra Capital and SBI Capital Markets. KFIN Technologies Ltd will be the registrar to the issue.