Plaza Wires IPO Anchor Allocation at 28.06%

About the Plaza Wires IPO

Plaza Wires Ltd IPO opened on 29th September 2023 and closes on 05th October 2023. 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 ₹51 to ₹54 per share. The final price will be discovered in this band through the process of book building. The IPO of Plaza Wires Ltd will be entirely a fresh issue of shares with no offer for sale (OFS) component. The fresh issue portion comprises the issue of 1,32,00,158 shares (1.32 crore shares approximately), which at the upper price band of ₹54 per share will translate into fresh issue size of ₹71.28 crore. Since there is no offer for sale portion in the IPO of Plaza Wires Ltd, the fresh issue of 1,32,00,158 shares (1.32 crore shares approximately), at the upper price band of ₹54 per share worth ₹71.28 crore will also be the overall size of the IPO.

A brief on the anchor allocation of Plaza Wires Ltd

The anchor issue of Plaza Wires Ltd saw a relatively modest response on 27th September 2023 with 28.06% of the IPO size getting absorbed by the anchors. Out of the 1,32,00,158 shares (132.00 lakh shares approximately) on offer, the anchors picked up 37,04,044 shares (37.04 lakh shares approximately) accounting for 28.06% of the total IPO size. The anchor placement reporting was made to the BSE late on Wednesday, September 27th, 2023; one working day ahead of the IPO opening. The IPO of Plaza Wires Ltd opened on 29th September 2023 in the price band of ₹51 to ₹54 and will close for subscription on 05th October 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹54 per share. This includes the face value of ₹10 per share plus a premium of ₹44 per share, taking the anchor allocation price to ₹54 per share. Let us focus on the anchor allotment portion ahead of the Plaza Wires Ltd IPO, which saw the anchor bidding opening and also closing on 28th September 2023. Post the anchor allocation, 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. Here are details of the anchor lock-in for the issue of Plaza Wires 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 Plaza Wires Ltd

On 27th September 2023, Plaza Wires 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 37,04,044 shares were allotted to a total of 2 anchor investors. The allocation was done at the upper IPO price band of ₹54 per share (including premium of ₹44 per share) which resulted in an overall anchor allocation of ₹20 crore. The anchors have already absorbed 28.06% of the total issue size of ₹71.28 crore, which is indicative of fairly robust institutional demand.

Listed below are the 2 anchor investors who got allotted 50% shares each as part of the overall anchor allocation quota for the IPO of Plaza Wires Ltd. The entire anchor allocation of ₹20 crore was spread across just these 2 major anchor investors, with each of them absorbing half of the overall anchor portion.

Data Source: BSE Filings

Overall, the anchors absorbed 28.06% 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. Plaza Wires Ltd did not elicit any anchor interest from domestic mutual funds. Normally, anchor allocation sets the tone for the retail investors to get greater confidence in the IPO.