RK Swamy IPO Anchor Allocation at 44.12%

About R K Swamy IPO

The stock of R K Swamy IPO has a face value of ₹5 per share and the price band for the book building IPO has been set in the range of ₹270 to ₹288 per share. The IPO of R K Swamy Ltd will be a combination of a fresh issue of shares and offer for sale (OFS) component. The 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 IPO of R K Swamy Ltd comprises the issue of 60,06,944 shares (60.07 lakh shares approximately), which at the upper price band of ₹288 per share will translate into a fresh issue size of ₹173.00 crore. The offer for sale (OFS) portion of the IPO of R K Swamy Ltd comprises the sale / offer of 87,00,000 shares (87.00 lakh shares), which at the upper price band of ₹288 per share will translate into an OFS size of ₹250.56 crore.

Out of the OFS size of 87.00 lakh shares, two promoter shareholders (Srinivasan K Swamy and Narasimhan Krishnaswamy) will offer 17,88,093 shares each. In addition, among the investor shareholders; Evanston Pioneer Fund will offer 44,45,714 shares while Prem Marketing Ventures LLP will offer 6,78,100 shares. Thus, the total IPO of R K Swamy Ltd will comprise of a fresh issue and an OFS of 1,47,06,944 shares (147.07 lakh shares approximately) which at the upper end of the price band of ₹288 per share aggregates to total issue size of ₹423.56 crore. The IPO of R K Swamy Ltd will be listed on the NSE and the BSE on the IPO mainboard. The total shares are subject to change later on finalization.

The fresh funds will be used for capex for the digital video content studio, working capital needs, funding IT infrastructure investments, and funding the setting up of new customer experience centres. Promoters currently hold 83.03% in the company, which will get diluted post the IPO. The IPO will be lead managed by SBI Capital Markets, IIFL Securities and Motilal Oswal Investment Advisors, while KFIN Technologies Ltd will be the IPO registrar.

A Brief on the anchor allocation of R K Swamy IPO

The anchor issue of R K Swamy Ltd saw a relatively strong response on 20th February 2024 with 44.12% of the IPO size getting absorbed by the anchors. Out of 1,47,33,883 shares (147.34 lakh shares approximately) on offer, the anchors picked up 65,00,937 shares (65.01 lakh shares approximately) accounting for 44.12% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, 01st March 2024; one working day ahead of the IPO opening on Monday, 04th March 2024.

The entire anchor allocation was made at the upper price band of ₹288 per share. This includes the face value of ₹5 per share plus a share premium of ₹283 per share, taking the anchor allocation price to ₹288 per share. Let us focus on the anchor allotment portion ahead of the R K Swamy IPO, which saw the anchor bidding opening and also closing on 01st March 2024. Post the anchor allocation, here is how the overall allocation looked.

Data Source: BSE

Here it must be noted that the 65,00,937 shares issued to the anchor investors on 01st March 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 73.53% before the anchor allocation to 29.41% 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 R K Swamy 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 R K Swamy IPO

On 01st March 2024, R K Swamy 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 65,00,937 shares were allotted to a total of 18 anchor investors. The allocation was done at the upper IPO price band of ₹288 per share (including premium of ₹283 per share) which resulted in an overall anchor allocation of ₹187.23 crore. The anchors have already absorbed 44.12% of the total issue size of ₹424.36 crore, which is indicative of fairly robust institutional demand.

Listed below are the 15 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of R K Swamy Ltd. The entire anchor allocation of ₹187.23 crore was spread across a total of 18 major anchor investors, with only 15 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 18 anchor investors in all, only the 15 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 15 anchor investors listed below accounted for 96.26% of the total anchor collection of  ₹187.23 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 15 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the R K Swamy Ltd IPO. In fact, there were 18 anchor investor in all; with only the 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=20240301-39&attachedId=d090209e-e4c5-490c-a70f-51e60ce5c096

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 44.12% 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. R K Swamy 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 R K Swamy 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 65,00,937 shares allocated to the anchors in the IPO, a total of 28,48,500 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 7 mutual fund schemes belonging to 3 asset management company (AMCs). The mutual fund allocation in the anchor portion amounted to 43.82% of the total anchor size.

Key dates for R K Swamy IPO and how to apply?

The issue opens for subscription on 04th March 2024 and closes for subscription on 06th March 2024 (both days inclusive). The basis of allotment will be finalized on 07th March 2024 and the refunds will be initiated on 11th March 2024. In addition, the demat credits are expected to also happen on 11th March 2024 and the stock will list on 12th March 2024 on the NSE and the BSE. R K Swamy Ltd will test the appetite for such digital marketing stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 11th March 2024 under ISIN (INE0NQ801033).