Kronox Lab Sciences IPO: Anchor Allocation at 30%

About the Kronox Lab Sciences IPO

The stock of Kronox Lab Sciences has a face value of ₹10 per share and it is a book building issue. The price band for book building is set in the range of ₹129 to ₹136 per share. The IPO of Kronox Lab Sciences will purely be an offer for sale (OFS) with no fresh issue component in the IPO. While a fresh issue tends to bring in fresh funds into the company, it is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership. The offer for sale (OFS) portion of the IPO of Kronox Lab Sciences comprises the sale / offer of 95,70,000 shares (95.70 lakh shares), which at the upper price band of ₹136 per share will translate into an OFS size of ₹130.15 crore. Out of the OFS size of 95.70 lakh shares, 3 promoter shareholders (Joginder Singh Jaswal, Ketan Ramani, and Pritesh Ramani) will offer 31.90 lakh shares each; aggregating to a total OFS size of 95.70 lakh shares. That will constitute the entire IPO size in the case of Kronox Lab Sciences.

Since there is no fresh issue portion in the IPO, the offer for sale (OFS) portion will also double up as the total size of the issue. Thus, the total IPO of Kronox Lab Sciences will comprise of the OFS of 95,70,000 shares (95.70 lakh shares approximately) which at the upper end of the price band of ₹136 per share aggregates to total issue size of ₹130.15 crore. The IPO of Kronox Lab Sciences will be listed on the NSE and the BSE on the IPO mainboard. Being entirely an OFS, no fresh funds come into the company, so the question of utilization of funds does not arise. The company was promoted by Joginder Singh Jaswal, Ketan Ramani, and Pritesh Ramani. The promoter holding prior to the IPO stands at 99.98%, which will get diluted to 74.18% post the IPO, on account of promoters diluting their stake via OFS. The IPO will be lead managed by Pantomath Capital Advisors Private Ltd; while KFIN Technologies IPO will be IPO registrar.

A brief on the Anchor Allocation of Kronox Lab Sciences

The anchor issue of Kronox Lab Sciences saw a relatively strong response on 20th February 2024 with 30% of the IPO size getting absorbed by the anchors. Out of 95,70,000 shares (95.70 lakh shares) on offer, the anchors picked up 28,71,000 shares (28.71 lakh shares) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, 31st May 2024; one working day ahead of the IPO opening on Monday, 03rd June 2024. 

The entire anchor allocation was made at the upper price band of ₹136 per share. This includes the face value of ₹10 per share plus a share premium of ₹126 per share, taking the anchor allocation price to ₹136 per share. Let us focus on the anchor allotment portion ahead of the Kronox Lab Sciences IPO, which saw the anchor bidding opening and also closing on 31st May 2024. Post the anchor allocation, here is how the overall allocation looked.

Data Source: Company RHP

Here it must be noted that the 28,71,000 shares allocated to the anchor investors on 31st May 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 50% before the anchor allocation to 20% 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 Kronox Lab Sciences.

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 Kronox Lab Sciences

On 31st May 2024, Kronox Lab Sciences 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 28,71,000 shares were allotted to a total of 6 anchor investors. The allocation was done at the upper IPO price band of ₹136 per share (including premium of ₹126 per share) which resulted in an overall anchor allocation of ₹39.05 crore. The anchors have already absorbed 30% of the total issue size of ₹130.15 crore, which is indicative of fairly robust institutional demand. 
Listed below are the 6 anchor investors who, have all been allotted 14% or more of the anchor allocation done ahead of the IPO of Kronox Lab Sciences. The entire anchor allocation of ₹39.05 crore was spread across a total of 6 major anchor investors and all the 6 anchor investors got more than 14% each out of the anchor allocation quota. While there were 6 anchor investors in all, all the 6 anchor investors who got allocated 14% or more each of the anchor quota are listed in the table below. These 6 anchor investors accounted for 100% of the total anchor collection of  ₹39.05 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 6 anchor investors who got allotted shares of 14% or above each of the anchor portion done ahead of the Kronox Lab Sciences IPO. In fact, there were only 6 anchor investor in all; with all the anchor investors getting more than 14% 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=20240531-36&attachedId=904cf736-7321-4296-971d-df5478d1f052

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 30% 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. Kronox Lab Sciences saw a good deal of buying interest from the alternate investment funds (AIFs) while the other categories of investors were largely absent in the bidding for the anchor allocation. As stated, there was no allocation made to any of the domestic mutual funds registered with the SEBI or any of the insurance companies registered with the IRDAI.

Key dates for Kronox Lab Sciences IPO and how to apply?

The issue opens for subscription on 03rd June 2024 and closes for subscription on 05th June 2024 (both days inclusive). The basis of allotment will be finalized on 06th June 2024 and the refunds will be initiated on 07th June 2024. In addition, the demat credits are expected to also happen on 07th June 2024 and the stock will list on 10th June 2024 on the NSE and the BSE. Kronox Lab Sciences will test the appetite for such pharma outsourcing stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 07th June 2024 under ISIN (INE0ATZ01017).