Indegene IPO: Anchor Allocation at 29.8%

About the Indegene IPO

Indegene IPO has a face value of ₹2 per share and the price band for the book building IPO has been set in the range of ₹430 to ₹452 per share. The IPO of Indegene Ltd will be a combination of a fresh issue of shares and offer for sale (OFS). The fresh issue portion of the IPO of Indegene Ltd comprises the issue of 1,68,14,159 shares (168.14 lakh shares approximately), which at the upper price band of ₹452 per share will translate into a fresh issue size of ₹760 crore. The offer for sale (OFS) portion of the IPO of Indegene Ltd comprises the sale / offer of 2,39,32,732 shares (239.33 lakh shares approximately), which at the upper price band of ₹452 per share will translate into an OFS size of ₹1,081.76 crore.

Out of the OFS size of 239.33 lakh shares, 3 individual shareholders (Manish Gupta, Rajesh Nair, and Anita Nair) will offer 55.04 lakh shares in all. In addition, among the investor shareholders; Vida Trustees will offer 36 lakh shares, BPC Genesis Fund-I will offer 26.58 lakh shares, BPC Genesis Fund-IA will offer 13.79 lakh shares and CA Dawn Investments will offer 107.93 lakh shares. All selling will be by investor shareholders, since the company is professionally managed and does not identify with a promoter group. Thus, the total IPO of Indegene Ltd will comprise of a fresh issue and an OFS of 4,07,46,891 shares (407.47 lakh shares approximately) which at the upper end of the price band of ₹452 per share aggregates to total issue size of ₹1,841.76 crore. The IPO of Indegene Ltd will be listed on the NSE and the BSE on the IPO mainboard.

The fresh funds will be used for funding capex of the company and its material subsidiaries, repayment of loans of the group companies and to fund inorganic growth. The company, being a professionally managed company, does not have an identified promoter group. The IPO will be lead managed by Kotak Mahindra Capital, Citigroup Global Markets, JP Morgan India, and Nomura Financial Advisory; while Link Intime India Private Ltd will be IPO registrar.

A brief on the anchor allocation of Indegene IPO

The anchor issue of Indegene IPO saw a relatively strong response on 03rd May 2024 with 29.8% of the IPO size getting absorbed by the anchors. Out of 4,07,46,891  shares (407.47 lakh shares) on offer, the anchors picked up 1,21,41,102 shares (121.41 lakh shares) accounting for 29.8% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, 03rd May 2024; one working day ahead of the IPO opening on Monday, 06th May 2024.

The entire anchor allocation was made at the upper price band of ₹452 per share. This includes the face value of ₹2 per share plus a share premium of ₹450 per share, taking the anchor allocation price to ₹452 per share. Let us focus on the anchor allotment portion ahead of the Indegene Ltd IPO, which saw the anchor bidding opening and also closing on 03rd May 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 1,21,41,102 shares issued to the anchor investors on 03rd May 2024, 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. As a result, the QIB quota has reduced from 49.66% before the anchor allocation to 19.86% after 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 Indegene 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 Indegene Ltd

On 03rd May 2024, Indegene 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 1,21,41,102 shares were allotted to a total of 36 anchor investors. The allocation was done at the upper IPO price band of ₹452 per share (including premium of ₹450 per share) which resulted in an overall anchor allocation of ₹548.78 crore. The anchors have already absorbed 29.80% of the total issue size of ₹1,841.76 crore, which is indicative of fairly robust institutional demand.

Listed below are the 19 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Indegene Ltd. The entire anchor allocation of ₹548.78 crore was spread across a total of 36 major anchor investors, with only 19 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 36 anchor investors in all, only the 19 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 19 anchor investors accounted for 81.49% of the total anchor collection of  ₹548.78 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 19 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Indegene Ltd IPO. In fact, there were 36 anchor investor in all; with only the anchor investors getting more than 2% each of the anchor quota being mentioned in the list above. 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=20240503-48&attachedId=b35fcaea-985d-4686-b990-45c0413e0e9d

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 29.8% of the total issue size. The QIB portion in the IPO has already been 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. Indegene 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 Indegene 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 1,21,41,102 shares allocated to the anchors in the IPO, a total of 48,05,156 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 18 mutual fund schemes belonging to 10 asset management company (AMCs). The mutual fund allocation in the anchor portion amounted to 39.58% of the total anchor size.

Next steps in the Indegene Ltd IPO

The issue opens for subscription on 06th May 2024 and closes for subscription on 08th May 2024 (both days inclusive). The basis of allotment will be finalized on 09th May 2024 and the refunds will be initiated on 10th May 2024. In addition, the demat credits are expected to also happen on 10th May 2024 and the stock will list on 13th May 2024 on the NSE and the BSE. Indegene Ltd will test the appetite for such value added healthcare support stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 10th May 2024 under ISIN (INE065X01017).