EMS IPO gets 30% anchor allocated a day ahead of IPO opening

About the EMS IPO

The anchor issue of EMS IPO saw a relatively strong response on 07th September 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 1,52,24,645 shares (152.25 lakh shares approximately) on offer, the anchors picked up 45,67,476 shares (45.67 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Thursday, 07th September 2023; a day ahead of the IPO opening. The IPO of EMS Ltd opens on 08th September 2023 in the price band of ₹200 to ₹211 and will close for subscription on 12th September 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹211. This includes the face value of ₹10 per share plus a premium of ₹201 per share, taking the anchor allocation price to ₹211 per share. Let us focus on the anchor allotment portion ahead of the EMS Ltd IPO, which saw the anchor bidding opening and also closing on 07th September 2023. Before that, here is how the overall allocation will look.

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.

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 EMS IPO

On 07th September 2023, EMS 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 45,67,476 shares were allotted to a total of 6 anchor investors. The allocation was done at the upper IPO price band of ₹211 (including premium of ₹201 per share) which resulted in an overall allocation of ₹96.37 crore. The anchors have already absorbed 30% of the total issue size of ₹321.24 crore, which is indicative of fairly robust institutional demand.

Listed below are the 6 anchor investors who got allotted shares in all, accounting for 100% of the  anchor allocation quota for the EMS IPO. The entire anchor allocation of ₹96.37 crore was spread across these 6 major anchor investors, who were allotted the entire 100% of the anchor allocation portion. The participation of these anchor investors will set the tone for retail participation in the IPO. Here is a list of the 6 anchor investors who accounted for the entire 100% absorption of the anchor issue of EMS Ltd.

Data Source: BSE Filings

While the GMP has surged to a robust level of ₹125 per share, it shows an attractive premium of 59.24% 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. EMS Ltd has seen anchor support coming largely from FPIs, ODI accounts and from other categories of QIBs, like hedge funds and AIFs. There has not been any allocation made of the anchor portion to the SEBI registered mutual funds in India.

Read more about EMP IPO

Brief on the EMS Ltd business model

EMS Ltd was incorporated in the year 2012. The company was formerly known as EMS Infracon, but later changed its name to EMS Ltd to reflect the very focused business model centred around waste water and sewage treatment. It is engaged in the business of providing water and wastewater collection, treatment, and disposal services. In terms of its business model, EMS Ltd provides Sewerage solutions, Water Supply Systems, Water and Waste Treatment Plants. In addition, EMS Ltd also provides Electrical Transmission and Distribution, Road, and Allied works. Apart from its basic operations, it also earns revenues from the operation and maintenance of Wastewater Scheme Projects (WWSPs) and Water Supply Scheme Projects (WSSPs) for government authorities. WWSPs include Sewage Treatment Plants (STPs) along with Sewage Network Schemes and Common Effluent Treatment Plants (CETPs). It also operates pumping stations and lays pipelines for the supply of water.

EMS Ltd has its own civil construction team and employs a team of skilled engineers, supported by third-party consultants and industry experts. At the current juncture, EMS Ltd is operating and maintaining 13 projects including WWSPs, WSSPs, STPs & HAM. The company has its own team for civil construction works, thereby reducing dependence on third parties and offering one-stop solutions. The scope of EMS Ltd services includes design and engineering of the projects, procurement of raw materials, and execution at the site, with overall project management up to the commissioning of projects.

The fresh funds raised will be used for funding the working capital gaps and also for general corporate purposes. The issue will be lead managed by Khambatta Securities Ltd. KFIN Technologies Ltd (formerly Karvy Computershare Ltd) will be the registrar to the issue.