Concord Biotech Ltd IPO gets 30% anchor allocated

The anchor issue of Concord Biotech Ltd saw a robust response on 03rd August 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 2,09,25,652 shares on offer, the anchors picked up 62,74,695 shares accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Thursday. The IPO of Concord Biotech Ltd opens on 04th August 2023 in the price band of ₹705 to ₹741 and will close for subscription on 08th August 2023 (both days inclusive). The entire anchor allocation was made at the upper price band of ₹741. Let us focus on the anchor allotment portion ahead of the Concord Biotech 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 Concord Biotech Ltd

On 03rd August 2023, Concord Biotech 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 62,74,695 shares were allotted to a total of 41 anchor investors. The allocation was done at the upper IPO price band of ₹741 which resulted in an overall allocation of ₹464.95 crore. The anchors have already absorbed 30% of the total issue size of ₹1,551 crore, which is indicative of the robust institutional demand.

Listed below are the 12 anchor investors who got allotted at least 4% of the total anchor allocation individually. The entire anchor allocation of ₹464.95 crore was spread across these 41 major anchor investors. These top 12 anchor investors listed below accounted for 58.61% of the total anchor allocation of Concord Biotech Ltd.

Data Source: BSE Filings

While the GMP has remained stable and robust at ₹185, it shows an attractive premium of 24-25% on listing. This has led to reasonable anchor response with the anchors taking in 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. Concord Biotech Ltd has been a mix, getting good response from FPIs but it has also got extremely strong response from the domestic mutual funds and the domestic insurance companies, considering its product positioning in the Indian market. The number and spread of the Foreign Portfolio Investors has been fairly healthy in this case. With strong SIP flows, most equity funds are flush with cash at this point of time and that has helped the MF appetite for anchor allocation in this IPO of Concord Biotech Ltd. Nippon India AMC, Mirae Asset AMC, UTI AMC, DSP MF, Bandhan MF, Invesco MF were some of the key AMCs to participate in the anchor allotment of Concord Biotech Ltd.

Out of the total 62,74,695 shares allotted by way of anchor placement, Concord Biotech Ltd allotted a total of 24,74,835 shares to 20 domestic mutual fund schemes across 10 AMCs. The mutual fund allocation represents 39.44% of the overall anchor allocation.

Business background of Concord Biotech Ltd

Concord Biotech Ltd, a company backed by the late Rakesh Jhunjhunwala, is a R&D driven biopharma company. The company is into the manufacture of Active Pharmaceutical Ingredients (API) via fermentation and semi-synthetic processes. It is also into the manufacture of finished formulations. The company has gradually transformed from being a single-product company to a wide-spectrum solution provider. It currently offers products and solutions across diversified therapeutic segments. Currently, Concord has an established presence in 70 countries worldwide with distribution set-ups in place in the US, Europe, Japan, Latin America, Africa, and Asia. It also has a significant presence in the domestic market.  The company is currently partnering with leading global pharma giants to meet their product development needs for APIs and formulations.

Concord Biotech Ltd has 3 manufacturing facilities comprising of 2 API manufacturing units and one finished formulation unit. All the units are located in Gujarat. The Unit I at Dholka facility manufactures different classes of APIs. The Unit II at Valthera facility is into formulations manufacturing. It has manufacturing units for oral solids, including tablets and capsules, as well as oral liquids, including oral solutions and oral suspensions. Concord is also developing liquid and lyophilized vials injectable line, a dry powder injectable line and a sterile powder bulk lyophilization line, which will be dedicated to manufacturing of injectables, including injectable liquids, lyophilized injectables and dry powder injectables. Finally, the Unit III, Limbasi facility is also an API manufacturing facility with 24 fermenters.