Sai Silks Kalamandir IPO gets 30% Anchor Allocated

About the Sai Silks Kalamandir IPO

The anchor issue of Sai Silks Kalamandir IPO saw a relatively strong response on 18th September 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 5,40,99,027 shares (540.99 lakh shares approximately) on offer, the anchors picked up 1,62,29,707 shares (162.30 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, September 18th, 2023; one working day ahead of the IPO opening. The IPO of Sai Silks (Kalamandir) Ltd opens on 20th September 2023 in the price band of ₹210 to ₹222 and will close for subscription on 22nd September 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹222. This includes the face value of ₹2 per share plus a premium of ₹220 per share, taking the anchor allocation price to ₹222 per share. Let us focus on the anchor allotment portion ahead of the Sai Silks (Kalamandir) Ltd IPO, which saw the anchor bidding opening and also closing on 18th 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 Sai Silks Kalamandir IPO

On 18th September 2023, Sai Silks Kalamandir 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 1,62,29,707 shares were allotted to a total of 26 anchor investors. The allocation was done at the upper IPO price band of ₹222 (including premium of ₹220 per share) which resulted in an overall allocation of ₹360.30 crore. The anchors have already absorbed 30% of the total issue size of ₹1,201.00 crore, which is indicative of fairly robust institutional demand.

Listed below are the 17 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 Sai Silks (Kalamandir) Ltd. The entire anchor allocation of ₹360.30 crore was spread across these 26 major anchor investors, of which just 2 anchor investors accounted for more than 33% of the anchor allocation quota between them. These 17 anchor investors listed below accounted for 89.86% of the total anchor allocation of Sai Silks (Kalamandir) Ltd and their participation will set the tone for retail participation in the IPO.

Data Source: BSE Filings

While the GMP has been rather moderate at ₹7 per share, it shows a rather moderate premium of 3.15% on listing. This has led to reasonable anchor response with the anchors taking in 30% 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. Sai Silks (Kalamandir) Ltd has witnessed anchor interest from domestic mutual funds, foreign portfolio investors, and even insurance companies.

Sai Silks (Kalamandir) Ltd, in consultation with the book running lead managers (BRLMs) have allocated a total of 1,17,24,694 shares to domestic mutual funds, spread across 16 mutual fund schemes of 8 mutual fund AMCs. The mutual fund allocation alone is 72.24% of the total anchor book of Sai Silks (Kalamandir) Ltd with an investment value of ₹260.29 crore.

Read about Sai Silks Kalamandir IPO

Brief on the Sai Silks Kalamandir Ltd business model

Sai Silks (Kalamandir) Ltd was incorporated in the year 2005 to provide an outlet that provides ethnic apparel and value-fashion products. While the basic inspiration for the offerings of Sai Silks (Kalamandir) Ltd is India’s rich ethnic diversity and its cultural history, it has also packaged its product offerings to have a solution for every possible occasion. Sai Silks (Kalamandir) Ltd currently offers a whole range of ultra-premium and premium sarees that are ideal for weddings, party wear and daily wear. In addition, Sai Silks (Kalamandir) Ltd also offers lehengas, men's ethnic wear, children's ethnic wear as well as semi-western wear with ethnic content for women, men, and children. It sells its apparel products through 4 different format stores that constitute the front end for the company’s marketing. As of July 2023, Sai Silks (Kalamandir) Ltd has more than 54 stores in the 4 south Indian states of Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu. Its stores cover an aggregate area of approximately 603,414 square feet (SFT).

The company’s first store format is the Kalamandir. Here it offers contemporary ethnic fashion for the middle income groups. These include varieties of sarees, such as Tusser, Silk, Kota, Kora, Khadi, Georgette, Cotton etc. The second format store is Vara Mahalakshmi Silks. Under this format stores it offers premium ethnic silk sarees and handlooms for wedding and special occasion wear. These include Banarasi, Patola, Kota, Kanchipuram, Paithani, and Organza. The third format store is the Mandir. Under this format, the company offers very high-end and ultra-premium designer sarees targeting wealthy customers. These include designer sarees such in Banarasi, Patola, Ikat, Kanchipuram, Paithani, and Kuppadam. Finally, the fourth type of format store is the KLM Fashion Mall. This format offers value fashion at affordable prices. These include fusion wear, sarees for daily wear, and western wear for women, men, and children. It has an omnichannel approach and sells its products through physical store formats and through e-commerce channels. It has its dedicated website and also markets through online e-commerce marketplaces.

The fresh funds will be used by the company for opening 25 new stores and for funding the capex for two new warehouses. In addition, it will also use the fresh issue funds for working capital needs. The issue will be lead managed by Motilal Oswal Investment Advisors, HDFC Bank and Nuvama Wealth Management. Bigshare Services Private Ltd will be the registrar to the issue.