DOMS Industries IPO: Anchor Allocation at 44.81%

About the DOMS Industries IPO

DOMS Industries IPO opens for subscription on 13th December 2023 and closes on 15th December 2023. The stock of DOMS Industries Ltd has a face value of ₹10 per share and for the book building IPO the price band range is ₹750 to ₹790 per share. The final price will be discovered within this band. The IPO of DOMS Industries Ltd will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of DOMS Industries Ltd IPO comprises the issue of 44,30,380 shares (44.30 lakh shares approximately), which at the upper price band of ₹790 per share will translate into fresh issue size of ₹350 crore. The offer for sale (OFS) portion of the IPO of DOMS Industries Ltd comprises the sale of 1,07,59,493 shares (107.59 lakh shares), which at the upper price band of ₹790 per share will translate into an offer for sale (OFS) size of ₹850 crore. The OFS is offered by the promoter shareholders of the company. Out of the ₹850 crore OFS, the corporate promoter (FILA of Italy) will offer shares worth ₹800 crore while the two promoter shareholders Sanjay Rajani and Ketan Rajani will offer shares worth ₹25 crore each.

How does the overall IPO size up? The overall DOMS Industries IPO will comprise of the issue and sale of 1,51,89,873 shares (151.90 lakh shares approximately), which at the upper price band of ₹790 per share will translate into total IPO issue size of ₹1,200 crore. While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. The entire OFS is being offered by the promoter shareholders of DOMS Industries Ltd. The net proceeds from the IPO fresh issue portion will be utilized for partly financing the establishing of a new manufacturing facility to expand capacity of writing instruments. The IPO will be lead managed by JM Financial, BNP Paribas, ICICI Securities and IIFL Securities. Link Intime India Private Ltd is the registrar to the issue.

A brief on the anchor allocation of DOMS Industries Ltd

The anchor issue of DOMS Industries IPO saw a relatively strong response on 12th December 2023 with 44.81% of the IPO size getting absorbed by the anchors. Out of 1,51,89,873 shares (151.90 lakh shares approximately) on offer, the anchors picked up 68,06,961 shares (68.07 lakh shares approximately) accounting for 44.81% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, December 12th, 2023; one working day ahead of the IPO opening on Wednesday, 13th December 2023. The IPO of DOMS Industries Ltd opens on 13th December 2023 in the price band of ₹750 to ₹790 and will close for subscription on 15th December 2023.

The entire anchor allocation was made at the upper price band of ₹790 per share. This includes the face value of ₹10 per share plus a premium of ₹780 per share, taking the anchor allocation price to ₹790 per share. Let us focus on the anchor allotment portion ahead of the DOMS Industries IPO, which saw the anchor bidding opening and also closing on 12th December 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 68,06,961 shares issued to the anchor investors on 12th December 2023, 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 DOMS Industries 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 DOMS Industries Ltd

On 12th December 2023, DOMS Industries 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 68,06,961 shares were allotted to a total of 55 anchor investors. The allocation was done at the upper IPO price band of ₹790 per share (including premium of ₹780 per share) which resulted in an overall anchor allocation of ₹537.75 crore. The anchors have already absorbed 44.81% of the total issue size of ₹1,200 crore, which is indicative of fairly robust institutional demand.

Listed below are the 17 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of DOMS Industries Ltd. The entire anchor allocation of ₹537.75 crore was spread across a total of 55 major anchor investors, with 17 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 55 anchor investors in all, only 17 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 17 anchor investors accounted for 59.21% of the total anchor collection of  ₹537.75 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 17 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the DOMS Industries Ltd IPO. However, there were 55 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=20231212-51&attachedId=470c43f0-fbb1-4981-acba-756a607cbec8

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 44.81% 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. DOMS Industries 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 DOMS Industries 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 68,06,961 shares allocated to the anchors in the IPO, a total of 25,95,960 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 27 mutual fund schemes belonging to 10 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 38.14% of the total anchor size.