Happy Forgings IPO Anchor Allocation at 30%

About Happy Forgings IPO

Happy Forgings IPO will open on December 19, 2023 and close for subscription on December 21, 2023. The stock of Happy Forgings Ltd has a face value of ₹2 per share and the price band for the book building IPO has been set in the range of ₹808 to ₹850 per share. The final price will be discovered within this band. The IPO of Happy Forgings Ltd will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of the IPO of Happy Forgings Ltd comprises the issue of 47,05,882 shares (47.06 lakh shares approximately), which at the upper price band of ₹850 per share will translate into a fresh issue size of ₹400.00 crore. The offer for sale portion of the IPO of Happy Forgings Ltd comprises the sale of 71,59,920 shares (71.60 lakh shares approximately), which at the upper price band of ₹850 per share will translate into a fresh issue size of ₹608.59 crore.

Out of the 71.60 lakh shares offered in the offer for sale (OFS), Paritosh Kumar Garg HUF, a promoter shareholder of the company, will offer 49.22 lakh shares. The balance 22.38 lakh shares will be offered by India Business Excellence Fund III, an investor shareholder of Happy Forgings Ltd. Therefore, total issue size of the IPO of Happy Forgings Ltd will comprise of the issue and sale of 1,18,65,802 shares (118.66 lakh shares approximately), which at the upper price band of ₹850 per share translates into total IPO size of ₹1,008.59 crore. The IPO of Happy Forgings Ltd will be listed on the NSE and the BSE on the IPO mainboard. The fresh issue portion will be utilized for purchase of plant & machinery and to repay outstanding borrowings of the company. The IPO will be lead managed by JM Financial, Axis Capital, Equirus Capital and Motilal Oswal Investment Advisors. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of Happy Forgings IPO

The anchor issue of Happy Forgings Ltd saw a relatively strong response on 18th December 2023 with 30% of the IPO size getting absorbed by the anchors. Out of 1,18,65,802 shares (118.66 lakh shares approximately) on offer, the anchors picked up 35,59,740 shares (35.60 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, December 18th, 2023; one working day ahead of the IPO opening on Tuesday, 19th December 2023. The IPO of Happy Forgings Ltd opens on 19th December 2023 in the price band of ₹808 to ₹850 and will close for subscription on 21st December 2023.

The entire anchor allocation was made at the upper price band of ₹850 per share. This includes the face value of ₹2 per share plus a premium of ₹848 per share, taking the anchor allocation price to ₹850 per share. Let us focus on the anchor allotment portion ahead of the Happy Forgings Ltd IPO, which saw the anchor bidding opening and also closing on 18th December 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 35,59,740 shares issued to the anchor investors on 18th 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 Happy Forgings 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 Happy Forgings IPO

On 18th December 2023, Happy Forgings 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 35,59,740 shares were allotted to a total of 34 anchor investors. The allocation was done at the upper IPO price band of ₹850 per share (including premium of ₹848 per share) which resulted in an overall anchor allocation of ₹302.58 crore. The anchors have already absorbed 30% of the total issue size of ₹1,008.59 crore, which is indicative of fairly robust institutional demand.

Listed below are the 14 anchor investors who, have been allotted 3% or more of the anchor allocation done ahead of the IPO of Happy Forgings Ltd. The entire anchor allocation of ₹302.58 crore was spread across a total of 34 major anchor investors, with 14 anchor investors getting more than 3% each out of the anchor allocation quota. While there were 34 anchor investors in all, only 14 anchor investors who got allocated 3% or more each of the anchor quota are listed in the table below. These 14 anchor investors accounted for 60.87% of the total anchor collection of  ₹302.58 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 14 anchor investors who got allotted shares of 3% or above each of the anchor portion done ahead of the Happy Forgings Ltd IPO. However, there were 34 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=20231218-64&attachedId=6dd07de1-e0c4-4787-ba7c-0562a5854113

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 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. Happy Forgings 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 Happy Forgings 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 35,59,740 shares allocated to the anchors in the IPO, a total of 20,45,766 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 23 mutual fund schemes belonging to 14 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 57.47% of the total anchor size.