Harsha Engineers IPO gets 29.9% anchor allocated

The anchor issue of Harsha Engineers International Ltd saw a robust response on 13th September 2022 with 29.9% of the IPO size getting absorbed by the anchors. The announcement was made late on Tuesday. The IPO of Harsha Engineers International Ltd opens on 14th September 2022 in the price band of Rs.314 to Rs.330 and will close for subscription on 16th September 2022 (both days inclusive). The entire anchor allocation was made at the upper price band of Rs330. Let us focus on the anchor allotment portion ahead of the Harsha Engineers International 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 Harsha Engineers International Ltd

On 13th September 2022, Harsha Engineers International 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 68,40,855 shares were allotted to a total of 23 anchor investors. The allocation was done at the upper IPO price band of Rs.330 which resulted in an overall allocation of Rs.225.75 crore. The anchors have already absorbed 29.9% of the total issue size, which is indicative of the robust institutional demand.

Listed below are the 13 anchor investors who bought more than 4% of the anchor allocation. Out of the total anchor allocation of Rs.225.75 crore, these 13 major anchor investors accounted for 83.01% of the overall anchor allocation.

Data Source: BSE Filings

While the GMP has remained stable between Rs210 and Rs220, it shows an attractive premium of 64% to 67% on listing. This has led to strong anchor response with the anchors taking in 29.9% 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. Harsha Engineers International Ltd has been a mix, getting good response from FPIs and domestic mutual funds. While FPIs were not too many, the bulk of the anchor interest in the stock actually came from the domestic mutual funds and also the domestic insurance companies. With strong SIP flows, most of the equity funds are flush with cash at this point of time and that has helped the appetite for anchor allocation in this IPO of Harsha Engineers International Ltd.

Out of the total 68.41 lakh shares allotted by way of anchor placement, Harsha Engineers International Ltd allotted a total of 38.91 lakh shares to 17 domestic mutual fund schemes across 9 AMCs. The mutual fund allocation represents 56.87% of the overall anchor allocation.