Vibhor Steel Tubes IPO: Anchor Allocation at 29.81%

About the Vibhor Steel Tubes IPO

The stock of Vibhor Steel Tubes IPO has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹141 to ₹151 per share. The IPO of Vibhor Steel Tubes Ltd will be entirely a fresh issue of shares with no offer for sale (OFS) component. A 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 Vibhor Steel Tubes Ltd comprises the issue of 47,79,470 shares (47.79 lakh shares approximately), which at the upper price band of ₹151 per share will translate into a fresh issue size of ₹72.17 crore.

Since there is no OFS portion, the fresh issue portion will also double up as the overall IPO size. Thus, the total IPO of Vibhor Steel Tubes IPO will also comprise of the issue of 47,79,470 shares (47.79 lakh shares approximately) which at the upper end of the price band of ₹151 per share aggregates to total issue size of ₹72.17 crore. The IPO of Vibhor Steel Tubes Ltd will be listed on the NSE and the BSE on the IPO mainboard. The fresh funds will be used to fund long term working capital needs and for general corporate purposes. Promoters currently hold 98.24% in the company, which will get diluted post the IPO to 73.48%. The IPO will be lead managed by Khambatta Securities Ltd. KFIN Technologies Ltd will be the registrar to the IPO.

A brief on the anchor allocation of Vibhor Steel Tubes IPO

The anchor issue of Vibhor Steel Tubes Ltd saw a relatively strong response on 12th February 2024 with 29.81% of the IPO size getting absorbed by the anchors. Out of 47,79,470 shares (47.79 lakh shares approximately) on offer, the anchors picked up 14,24,907 shares (14.25 lakh shares approximately) accounting for 29.81% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, 12th February 2024; one working day ahead of the IPO opening on Tuesday, 13th February 2024.

The entire anchor allocation was made at the upper price band of ₹151 per share. This includes the face value of ₹10 per share plus a share premium of ₹141 per share, taking the anchor allocation price to ₹151 per share. Let us focus on the anchor allotment portion ahead of the Vibhor Steel Tubes Ltd IPO, which saw the anchor bidding opening and also closing on 12th February 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 14,24,907 shares issued to the anchor investors on 12th February 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 49.69% before the anchor allocation to 19.88% 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 Vibhor Steel Tubes 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 Vibhor Steel Tubes Ltd

On 12th February 2024, Vibhor Steel Tubes Ltd completed the bidding for its anchor allocation. There was a confined response as the anchor investors participated through the process of book building. A total of 14,24,907 shares were allotted to a total of 3 anchor investors. The allocation was done at the upper IPO price band of ₹151 per share (including premium of ₹141 per share) which resulted in an overall anchor allocation of ₹21.52 crore. The anchors have already absorbed 29.81% of the total issue size of ₹72.17 crore, which is indicative of fairly robust institutional demand.

Listed below are the 3 anchor investors who, have been allotted anchor shares done ahead of the IPO of Vibhor Steel Tubes Ltd. The entire anchor allocation of ₹21.52 crore was spread across a total of 3 anchor investors. All the 3 anchor investors who got allotted shares have been listed below in the table. These 3 anchor investors accounted for 100% of the total anchor collection of  ₹21.52 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 3 anchor investors who got allotted shares of the anchor portion done ahead of the Vibhor Steel Tubes Ltd IPO. In fact, there were only 3 anchor investor in all; with all the anchors getting more than 2% each of the anchor quota. 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=20240212-5&attachedId=bf3117dc-4467-4841-9d64-87cf93c96645

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 29.81% 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. Vibhor Steel Tubes Ltd saw a good deal of buying interest only from the AIF category, with other investors largely absent in the anchor book. FPIs and mutual funds were virtually absent in the anchor allocation of Vibhor Steel Tubes Ltd.