ASK Automotive IPO Anchor Allocation: 30% Share Reserved

About the ASK Automotive IPO

The IPO of ASK Automotive Ltd opens on 07th November 2023 and closes for subscription on 09th November 2023. The anchor allotment was done a day ahead of the IPO opening on 06th November 2023. The company stock has a face value of ₹2 per share and the price band for the book building IPO has been set in the range of ₹268 to ₹282. The IPO of ASK Automotive Ltd will be entirely an offer for sale (OFS) with no fresh issue component in the IPO. The offer for sale (OFS) portion of the IPO of ASK Automotive Ltd comprises the sale of 2,95,71,390 shares (295.71 lakh shares approximately), which at the upper price band of ₹282 per share will translate into an offer for sale (OFS) size of ₹833.91 crore. The OFS selling will be by the promoter shareholders. Out of the 295.71 lakh shares OFS, promoter Kuldip Singh Rathee will offer 207.00 lakh shares while the other promoter, Vijay Rathee will offer the remaining 88.71 lakh shares in the offer for sale (OFS).

Since there is no fresh issue component, the OFS portion will also double up as the overall size of the IPO of ASK Automotive Ltd. Therefore, the overall IPO of ASK Automotive Ltd will comprise the sale of 2,95,71,390 shares (295.71 crore shares approximately), which at the upper price band of ₹282 per share will translate into total IPO issue size of ₹833.91 crore. There will be only 2 promoter shareholders offering shares under the OFS portion. The shares will be listed on the NSE and the BSE. Being a total offer for sale (OFS), there will be no fresh funds coming into the company from the IPO and hence no equity dilution. The IPO will be lead managed by JM Financial, Axis Capital, ICICI Securities, and IIFL Securities. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of ASK Automotive IPO

The anchor issue of ASK Automotive Ltd saw a relatively strong response on 06th November 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 2,95,71,390 shares (295.71 lakh shares) on offer, the anchors picked up 88,71,416 shares (88.71 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, November 06th, 2023; one working day ahead of the IPO opening on Tuesday, 07th November 2023. The IPO of ASK Automotive Ltd opens on 07th November 2023 in the price band of ₹268 to ₹282 and will close for subscription on 09th November 2023.

The entire anchor allocation was made at the upper price band of ₹282 per share. This includes the face value of ₹2 per share plus a premium of ₹280 per share, taking the anchor allocation price to ₹282 per share. Let us focus on the anchor allotment portion ahead of the ASK Automotive Ltd IPO, which saw the anchor bidding opening and also closing on 06th November 2023. Prior to the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 88,71,416 shares issued to the anchor investors on 06th November 2023, will be reduced from the QIB quota above; and only the residual amount would be available to QIBs in the IPO. The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted will be 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. Here are details of the anchor lock-in for the issue of ASK Automotive 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 ASK Automotive IPO

On 06th November 2023, ASK Automotive 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 88,71,416 shares were allotted to a total of 25 anchor investors. The allocation was done at the upper IPO price band of ₹282 per share (including premium of ₹280 per share) which resulted in an overall anchor allocation of ₹250.17 crore. The anchors have already absorbed 30% of the total issue size of ₹833.91 crore, which is indicative of fairly robust institutional demand.

Listed below are the 15 anchor investors who, have been allotted 3% or more of the anchor allocation done ahead of the IPO of ASK Automotive Ltd. The entire anchor allocation of ₹250.17 crore was spread across a total of 25 major anchor investors, with 8 anchor investors getting more than 6% or more allocation of the anchor allocation quota. While there were 25 anchor investors in all, only 15 anchor investors who got allocated 3% or more of the anchor quota are listed in the table below. These 15 anchor investors accounted for 76.64% of the total anchor collection of  ₹250.17 crore. The detailed allocation is captured in the table below, indexed descending on the size of anchor allocation.

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

The above list includes the set of 15 anchor investors who got allotted shares of 3% or above of the anchor portion done ahead of the ASK Automotive Ltd IPO. 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=20231106-50&attachedId=8846e031-7f58-4ceb-8ce9-5d4d4523c37c

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. ASK Automotive Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, 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 ASK Automotive 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 88,71,416 shares allocated to the anchors in the IPO, a total of 23,40,639 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 6 mutual fund schemes belonging to 5 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 26.38% of the total anchor size.