Utkarsh Small Finance Bank IPO gets 44.55% Anchor Allocated

The anchor issue of Utkarsh Small Finance Bank IPO saw a robust response on 11th July 2023 with 44.55% of the IPO size getting absorbed by the anchors. Out of the 20,00,00,000 (20 crore) shares on offer, the anchors picked up 8,91,00,000 shares accounting for 44.55% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday. Utkarsh Small Finance Bank IPO opens on 12th July 2023 in the price band of ₹23 to ₹25 and will close for subscription on 14th July 2023 (both days inclusive). The entire anchor allocation was made at the upper price band of ₹25. Let us focus on the anchor allotment portion ahead of the Utkarsh Small Finance Bank Ltd IPO.

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 Utkarsh Small Finance Bank Ltd

On 11th July 2023, Utkarsh Small Finance Bank Ltd completed the bidding for its anchor allocation. There was an enthusiastic response as the anchor investors participated through the process of book building. A total of 8,91,00,000 shares were allotted to a total of 20 anchor investors. The allocation was done at the upper IPO price band of ₹25 per share which resulted in an overall allocation of ₹222.75 crore. The anchors have already absorbed 44.55% of the total issue size of ₹500 crore, which is indicative of the robust institutional demand.

Listed below are the 15 anchor investors who got allotted at least 2% of the total anchor allocation individually. The entire anchor allocation of ₹222.75 crore was spread across 20 major anchor investors. The top 15 anchor investors listed below accounted for 95.20% of the total anchor allocation of Utkarsh Small Finance Bank IPO.

Data Source: BSE Filings

The GMP has remained stable at around ₹16, and it shows a very attractive premium of 64% on listing. This has led to reasonable anchor response with the anchors taking in 44.55% 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 from mutual funds. However, in the case of Utkarsh Small Finance Bank Ltd, it has been a mix, getting good response from FPIs but it has also got extremely strong response from the domestic mutual funds and the domestic insurance companies, considering its product positioning in the Indian market. The number and spread of the Foreign Portfolio Investors has been fairly healthy in this case. With strong SIP flows, most equity funds are flush with cash at this point of time and that has helped the MF appetite for anchor allocation in this Utkarsh Small Finance Bank IPO. SBI Mutual Fund, ICICI Prudential Mutual Fund, Kotak MF and Aditya Birla MF were the 4 major AMCs to participate in the anchor allotment of Utkarsh Small Finance Bank Ltd.

Out of the total 8,91,00,000 shares allotted by way of anchor placement, Utkarsh Small Finance Bank Ltd allotted a total of 4,19,99,100 shares to 12 domestic mutual fund schemes across 6 AMCs. The mutual fund allocation represents 47.14% of the overall anchor allocation ahead of the IPO.

Here is a quick background about Utkarsh Small Finance Bank Ltd. Incorporated as an SFB (Small Finance Bank), it has an AUM of ₹5,000 crore and was the fastest growing SFB between FY19 and FY22. Utkarsh Small Finance Bank Ltd  assists individuals and businesses with their financial needs and offers solutions. It offers loans to eligible salaried and self-employed individuals too, even as microfinance remains its core business. Utkarsh SFB offers unsecured retail loans, secured retail loans, short-term wholesale loans, long term wholesale loans, affordable housing loans and loans for CVs and construction equipment; apart from gold loans. ICICI Securities Ltd and Kotak Mahindra Capital Company Ltd are the BRLMs while KFIN Technologies Ltd is the registrar to the issue.