Apeejay Surrendray Hotels IPO Anchor Allocation at 44.51%

About the Apeejay Surrendra Park Hotels IPO

The stock of Apeejay Surrendra Park Hotels Ltd has a face value of ₹1 per share and the price band for the book building IPO has been set in the range of ₹147 to ₹155 per share. The IPO of Apeejay Surrendra Park Hotels Ltd will be a combination of a fresh issue of shares and offer for sale (OFS). The fresh issue brings in fresh funds into the company, but is also EPS and equity dilutive; while the OFS is just a transfer of ownership. The fresh issue portion of the IPO of Apeejay Surrendra Park Hotels Ltd comprises the issue of 3,87,09,677 shares (387.10 lakh shares approximately), which at the upper price band of ₹155 per share will translate into a fresh issue size of ₹600.00 crore. The offer for sale (OFS) portion of the IPO of Apeejay Surrendra Park Hotels Ltd comprises the issue of 2,06,45,161 shares (206.45 lakh shares approximately), which at the upper price band of ₹155 per share will translate into an OFS size of ₹320 crore.

Out of the OFS size of ₹320 crore, the promoter shareholder (Apeejay Private Ltd) will offer shares worth ₹296 crore while investor shareholders (RECP IV Park Hotel Investors Ltd and the RECP IV Park Hotels Co-Investors Ltd) will offer the remaining shares. Therefore, the overall IPO of Apeejay Surrendra Park Hotels Ltd will comprise of a fresh issue and an OFS of 5,93,54,838 shares (593.55 lakh shares approximately) which at the upper end of the price band of ₹155 per share aggregates to overall issue size of ₹920 crore. The IPO of Apeejay Surrendra Park Hotels Ltd will be listed on the NSE and the BSE on the IPO mainboard.

The fresh funds will be used to repay / prepay some of the high-cost borrowings of the business. Promoters currently hold 94.18% in the company, and their stake will get diluted post the IPO to 68.13%. The IPO will be lead managed by JM Financial, Axis Securities and ICICI Securities, while Link Intime India Private Ltd will be the registrar to the IPO.

A brief on the anchor allocation of Apeejay Surrendra Park Hotels Ltd

The anchor issue of Apeejay Surrendra Park Hotels Ltd saw a relatively strong response on 02nd February 2024 with 44.51% of the IPO size getting absorbed by the anchors. Out of 5,93,54,838 shares (593.55 lakh shares approximately) on offer, the anchors picked up 2,64,19,354 shares (264.19 lakh shares approximately) accounting for 44.51% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, 02nd February 2024; one working day ahead of the IPO opening on Monday, 05th February 2024.

The entire anchor allocation was made at the upper price band of ₹155 per share. This includes the face value of ₹1 per share plus a share premium of ₹154 per share, taking the anchor allocation price to ₹155 per share. Let us focus on the anchor allotment portion ahead of the Apeejay Surrendra Park Hotels Ltd IPO, which saw the anchor bidding opening and also closing on 02nd February 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 2,64,19,354 shares issued to the anchor investors on 08th January 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. 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 Apeejay Surrendra Park Hotels 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 Apeejay Surrendra Park Hotels IPO

On 02nd February 2024, Apeejay Surrendra Park Hotels 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 2,64,19,354 shares were allotted to a total of 37 anchor investors. The allocation was done at the upper IPO price band of ₹155 per share (including premium of ₹154 per share) which resulted in an overall anchor allocation of ₹409.50 crore. The anchors have already absorbed 44.51% of the total issue size of ₹920 crore, which is indicative of fairly robust institutional demand.

Listed below are the 16 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Apeejay Surrendra Park Hotels Ltd. The entire anchor allocation of ₹409.50 crore was spread across a total of 37 major anchor investors, with 16 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 37 anchor investors in all, only the 16 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 16 anchor investors accounted for 74.67% of the total anchor collection of  ₹409.50 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 16 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Apeejay Surrendra Park Hotels Ltd IPO. However, there were 37 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=20240202-55&attachedId=075b7c16-abfb-4553-bfb6-455187f36875

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 44.51% 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. Apeejay Surrendra Park Hotels 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 Apeejay Surrendra Park Hotels 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 2,64,19,354 shares allocated to the anchors in the IPO, a total of 1,31,61,600 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 21 mutual fund schemes belonging to 8 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 49.82% of the total anchor size. Clearly, the domestic mutual funds and insurance companies have dominated the anchor allocation.