Bharat Highways INVIT IPO Anchor Allocation at 45%

About the Bharat Highways Infrastructure Investment Trust INVIT IPO

Bharat Highways Infrastructure Investment Trust INVIT IPO will be open from February 28th, 2024 to March 01st, 2024; both days inclusive. The IPO of Bharat Highways Infrastructure Investment Trust INVIT has a book building price band in the range of ₹98 to ₹100 per share. The IPO of Bharat Highways Infrastructure Investment Trust INVIT IPO will be entirely a fresh issue of shares. The 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 Bharat Highways Infrastructure Investment Trust INVIT comprises the issue of 25,00,00,000 shares (2,500 lakh shares approximately), which at the upper price band of ₹100 per share will translate into a fresh issue size of ₹2,500 crore.

This also doubles up as the overall size of the IPO, since there is no offer for sale component in the IPO. Thus, overall IPO of Bharat Highways Infrastructure Investment Trust INVIT will comprise of the issue of 25,00,00,000 shares (2,500 lakh shares approximately) which at the upper end of the price band of ₹100 per share aggregates to total issue size of ₹2,500 crore. The IPO of Bharat Highways Infrastructure Investment Trust INVIT will be listed on the NSE and the BSE on the IPO mainboard. The fresh funds will be used to provide loans for Project SPVs for repayment and pre-payment of their outstanding loans, including accrued interest. Part of the fund will also be used for general corporate purposes. The IPO will be lead managed by ICICI Securities Ltd, Axis Bank Ltd, HDFC Bank Ltd and IIFL Securities Ltd; while KFIN Technologies Ltd will be the registrar to the IPO.

Brief on the anchor allocation of Bharat Highways Infrastructure Investment Trust INVIT IPO

Before looking at the anchor share of the anchor investors, it is essential to understand that there is one factor unique about the allocation of shares in the INVIT. For instance, all INVITs are required to allocate, at least, 15% of the post diluted equity to the sponsors. In this case, the sponsor is Aadarshila Infratech Private Ltd. The company has already allocated on February 26, 2024, a total of 6,64,50,000 shares (664.50 lakh shares) to the sponsor of the INVIT, Aadarshila Infratech Private Ltd. That leaves residual shares of just 18,35,50,000 shares (1,835.50 lakh shares). Out of these shares, 75% is allocated to the QIBs and 25% to the HNI / NII investors. The anchor investors that we will talk about now, has been carved out of this QIB portion of the net issue of 1,835.50 lakh shares.

Let us now turn to the anchor issue of the IPO of The anchor issue of Bharat Highways Infrastructure Investment Trust INVIT on February 27, 2024. Bharat Highways Infrastructure Investment Trust INVIT saw a relatively strong response on 27th February 2024 with 45% of the net IPO size (net of sponsor allocation) getting absorbed by the anchors. Out of the residual shares (post sponsor allotment) of 18,35,50,000 shares (1,835.50 lakh shares) on offer, the anchors picked up 8,25,97,350 shares (825.97 lakh shares approximately) accounting for 45% of the net IPO size. The anchor placement reporting was made to the BSE late on Tuesday, 27th February 2024; one working day ahead of the IPO opening on Wednesday, 28th February 2024.

The entire anchor allocation was made at the upper price band of ₹100 per share. Let us focus on the anchor allotment portion ahead of the Bharat Highways Infrastructure Investment Trust INVIT IPO, which saw the anchor bidding opening and also closing on 27th February 2024. Post the anchor allocation, here is how the overall allocation looked.

The anchor allocation is slightly more convoluted in an INVIT. Earlier, we had said that the anchor allocation of 8,25,97,350 shares was 45% of the net IPO size (net of sponsor allocation of units). However, as a percentage of the overall IPO size of 2,500 crore shares, the anchor portion is 33.04%, which is captured in the above table. Hence the discrepancy. These 8,25,97,350 shares issued to the anchor investors on 27th 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 55.06% of the overall IPO before the anchor allocation to 22.02% 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. 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 Bharat Highways Infrastructure Investment Trust INVIT IPO

On 27th February 2024, Bharat Highways Infrastructure Investment Trust INVIT 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 8,25,97,350 shares were allotted to a total of 37 anchor investors. The allocation was done at the upper IPO price band of ₹100 per share, which resulted in an overall anchor allocation of ₹825.97 crore. The anchors have already absorbed 45% of the net issue size (net of sponsor allocation) of ₹1,835.50 crore, which is indicative of fairly robust institutional demand.

Listed below are the 15 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Bharat Highways Infrastructure Investment Trust INVIT. The entire anchor allocation of ₹825.97 crore was spread across a total of 37 major anchor investors, with only 15 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 37 anchor investors in all, only the 15 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 15 anchor investors accounted for 72.85% of the total anchor collection of  ₹825.97 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 15 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Bharat Highways Infrastructure Investment Trust INVIT IPO. In fact, there were 37 anchor investor in all; with only the anchor investors getting more than 2% each of the anchor quota being mentioned in the list above. 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=20240227-59&attachedId=cc76da1b-9e72-48cd-9029-aafeb1a5e02e

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 45% of the net issue size (net of sponsor allocation of units). 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. Bharat Highways Infrastructure Investment Trust INVIT 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 Bharat Highways Infrastructure Investment Trust INVIT 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.

Key dates for Bharat Highways Infrastructure Investment Trust INVIT IPO and how to apply?

The issue opens for subscription on 28th February 2024 and closes for subscription on 01st March 2024 (both days inclusive). The basis of allotment will be finalized on 04th March 2024 and the refunds will be initiated on 05th March 2024. In addition, the demat credits are expected to also happen on 05th March 2024 and the stock will list on 06th March 2024 on the NSE and the BSE. Bharat Highways Infrastructure Investment Trust INVIT will test the appetite for such hospitality stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 05th March 2024 under ISIN (INE0NHL23019).