Fedbank Financial Services IPO anchors secure 29.73%

About the Fedbank Financial Services IPO

Fedbank Financial Services IPO opens on 22nd November 2023 and closes for subscription on 24th November 2023. The stock has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹133 to ₹140 per share. The final price will be discovered in this band. Fedbank Financial Services IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of Fedbank Financial Services Ltd IPO comprises the issue of 4,28,57,143 shares (428.57 lakh shares approximately), which at the upper price band of ₹140 per share will translate into fresh issue size of ₹600.00 crore. The offer for sale (OFS) portion of the IPO of Fedbank Financial Services Ltd comprises the sale of 3,51,61,723 shares (351.62 lakh shares), which at the upper price band of ₹140 per share will translate into offer for sale (OFS) of ₹492.26 crore.

The OFS selling will be by the promoter shareholders of the company, Federal Bank Ltd, and one investor shareholder, True North Fund. Federal Bank (the promoter) currently holds 73.09% in the company and the promoter stake will get diluted proportionately. Hence, the overall IPO of Fedbank Financial Services Ltd will comprise of the issue and sale of 7,80,18,866 shares (780.19 lakh shares approximately), which at the upper price band of ₹140 per share will translate into total IPO issue size of ₹1,092.26 crore. How would the lot sizes look like? Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In case of Fedbank Financial Services Ltd, minimum lot size is 107 shares with upper band indicative value of ₹14,980.

The net proceeds from the IPO fresh issue portion will be utilized for augmenting the Tier 1 capital base (a necessity for all financial institutions looking to expand their loan books). The OFS portion is being offered by the promoters (Federal Bank Ltd) and True North Fund, an investor shareholder. The IPO will be lead managed by ICICI Securities, BNP Paribas, Equirus Capital and JM Financial. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of Fedbank Financial Services IPO

The anchor issue of Fedbank Financial Services IPO saw a relatively strong response on 21st November 2023 with 29.73% of the IPO size getting absorbed by the anchors. Out of 7,80,18,866 shares (780.19 lakh shares approximately) on offer, the anchors picked up 2,31,91,374 shares (231.91 lakh shares approximately) accounting for 29.73% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, November 21st, 2023; one working day ahead of the IPO opening on Wednesday, 22nd November 2023. The IPO of Fedbank Financial Services Ltd opens on 22nd November 2023 in the price band of ₹133 to ₹140 and will close for subscription on 24th November 2023.

The entire anchor allocation was made at the upper price band of ₹140 per share. This includes the face value of ₹10 per share plus a premium of ₹130 per share, taking the anchor allocation price to ₹140 per share. Let us focus on the anchor allotment portion ahead of the Fedbank Financial Services Ltd IPO, which saw the anchor bidding opening and also closing on 21st November 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 2,31,91,374 shares issued to the anchor investors on 21st November 2023, will be actually reduced from the original QIB quota; and only the residual amount would be available to QIBs in the IPO. That change will be 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 Fedbank Financial Services 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 Fedbank Financial Services Ltd

On 21st November 2023, Fedbank Financial Services 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 2,31,91,374 shares were allotted to a total of 22 anchor investors. The allocation was done at the upper IPO price band of ₹140 per share (including premium of ₹130 per share) which resulted in an overall anchor allocation of ₹324.68 crore. The anchors have already absorbed 29.73% of the total issue size of ₹1,092.26 crore, which is indicative of fairly robust institutional demand.

Listed below are the 21 anchor investors who, have been allotted 2% or more each of the anchor allocation done ahead of the IPO of Fedbank Financial Services Ltd. The entire anchor allocation of ₹324.68 crore was spread across a total of 22 major anchor investors, with 21 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 22 anchor investors in all, only 21 anchor investors who got allocated 2% each or more of the anchor quota are listed in the table below. These 21 anchor investors accounted for 98.15% of the total anchor collection of  ₹324.68 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 21 anchor investors who got allotted shares of 2% each or above of the anchor portion done ahead of the Fedbank Financial Services 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.

bseindia.com-DownloadAttach.aspx

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 29.73% 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. Fedbank Financial Services 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 Fedbank Financial Services 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 2,31,91,374 shares allocated to the anchors in the IPO, a total of 66,42,881 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 5 mutual fund schemes belonging to 4 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 28.64% of the total anchor size.