Suraj Estate Developers IPO : Anchor Allocation at 30 %

About the Suraj Estate Developers Ltd IPO

The IPO of Suraj Estate Developers Ltd will be open from December 18, 2023 to December 20, 2023. The stock of Suraj Estate Developers Ltd has a face value of ₹5 per share and the price band for the book building IPO has been set in the band of ₹340 to ₹360 per share. The final price will be discovered within this band through the process of book building. It must be noted here that the IPO of Suraj Estate Developers Ltd will be entirely a fresh issue of shares with no offer for sale (OFS) component. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, the OFS is just a transfer of ownership and does not entail dilution of equity or of EPS. The fresh issue portion of the IPO of Suraj Estate Developers Ltd comprises the issue of 1,11,11,111 shares (111.11 lakh shares approximately), which at the upper price band of ₹360 per share translates into a fresh issue size of ₹400.00 crore.

Since there is no offer for sale (OFS) component in the Suraj Estate Developers IPO, the fresh issue portion will also double as the overall size of the IPO. Therefore, the overall IPO of Suraj Estate Developers Ltd will also comprise of the issue of 1,11,11,111 shares (111.11 lakh shares approximately), which at the upper price band of ₹360 per share translates into total IPO size of ₹400.00 crore. The IPO of Suraj Estate Developers Ltd will be listed on the IPO mainboard segment of the NSE and the BSE. Incidentally, the fresh issue portion will be largely utilized for repayment / prepayment of borrowings of the company and also the borrowings of its subsidiaries. The funds will also be used for the acquisition of land and land development rights. Some portion of the fresh funds will also be used for general corporate purposes. The IPO will be lead managed by ITI Capital Ltd and Anand Rathi Securities Ltd. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of Suraj Estate Developers Ltd

The anchor issue of Suraj Estate Developers Ltd saw a relatively strong response on 15th December 2023 with 30% of the IPO size getting absorbed by the anchors. Out of 1,11,11,111 shares (111.11 lakh shares approximately) on offer, the anchors picked up 33,33,333 shares (33.33 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, December 15th, 2023; one working day ahead of the IPO opening on Monday, 18th December 2023. The IPO of Suraj Estate Developers Ltd opens on 18th December 2023 in the price band of ₹340 to ₹360 and will close for subscription on 20th December 2023. 

The entire anchor allocation was made at the upper price band of ₹360 per share. This includes the face value of ₹5 per share plus a premium of ₹355 per share, taking the anchor allocation price to ₹360 per share. Let us focus on the anchor allotment portion ahead of the Suraj Estate Developers Ltd IPO, which saw the anchor bidding opening and also closing on 15th December 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 33,33,333 shares issued to the anchor investors on 15th December 2023, 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. 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 Suraj Estate Developers 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 Suraj Estate Developers Ltd

On 15th December 2023, Suraj Estate Developers Ltd 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 33,33,33 shares were allotted to a total of 11 anchor investors. The allocation was done at the upper IPO price band of ₹360 per share (including premium of ₹355 per share) which resulted in an overall anchor allocation of ₹120 crore. The anchors have already absorbed 30% of the total issue size of ₹400 crore, which is indicative of fairly robust institutional demand. 

Listed below are the 11 anchor investors who, have been allotted shares at the anchor allocation done ahead of the IPO of Suraj Estate Developers Ltd. The entire anchor allocation of ₹120 crore was spread across a total of 11 major anchor investors. The table below captures all the 11 anchor investors who participated in the anchor allocation and this is the complete list of anchor investors and hence this list covers 100% of the funds raised by the government of India. 

Data Source: BSE Filings (Value Allocated in ₹ in Crore)

The above list only includes the set of all 11 anchor investors who got allotted shares in the anchor portion done ahead of the Suraj Estate Developers Ltd IPO. There were just 11 anchor investor in all. 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=20231215-20&attachedId=206db1d7-0e1f-4c33-aa97-f9b6e8465f0d

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 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. Suraj Estate Developers 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 Suraj Estate Developers 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 33,33,333 shares allocated to the anchors in the IPO, a total of 5,55,632 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 2 mutual fund schemes belonging to 2 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 16.67% of the total anchor size.