Inox India IPO: Anchor Allocation at 30%

About the Inox India Ltd (INOXCVA) IPO

Inox India IPO (INOXCVA) opens on 14th December 2023 and closes for subscription on 18th December 2023.  The stock of Inox India Ltd (INOXCVA) has a face value of ₹2 per share and the price band for the book building IPO has been set in the band of ₹627 to ₹660 per share. The final price will be discovered within this band through the process of book building. The IPO of Inox India Ltd (INOXCVA) will be entirely an offer for sale (OFS) with no fresh issue portion. While a fresh issue brings in fresh funds into the company, it is also EPS and equity dilutive. However, OFS is just a transfer of ownership and does not entail dilution of equity or of EPS. The offer for sale (OFS) portion of the Inox India IPO (INOXCVA) comprises the sale of 2,21,10,955 shares (221.11 lakh shares approximately), which at the upper price band of ₹660 per share will translate into an offer for sale (OFS) size of ₹1,459.32 crore.

The OFS selling will be by the promoter shareholders and investor shareholders. Among the promoter shareholders offering shares in the OFS are Siddharth Jain (104.37 lakh shares); Pavan Kumar Jain (50 lakh shares); Nayantara Jain (50 lakh shares); and Ishita Jain (12 lakh shares). The remaining shares will be offered by the investor shareholders in OFS. Since there is no fresh issue component in the IPO, the OFS portion will also be the overall size of the IPO. Therefore, the overall IPO of Inox India Ltd (INOXCVA) will comprise of the sale of 2,21,10,955 shares (221.11 lakh shares approximately), which at the upper price band of ₹660 per share translates into total IPO size of ₹1,459.32 crore. The IPO of Inox India Ltd (INOXCVA) will be listed on the NSE and the BSE on the IPO mainboard. Being entirely an offer for sale (OFS), there will be no fresh funds coming into the company from the IPO. The IPO will be lead managed by ICICI Securities, and Axis Capital. KFIN Technologies Ltd will be the registrar to the issue.

A brief on the anchor allocation of Inox India Ltd (INOXCVA)

The anchor issue of Inox India Ltd (INOXCVA) saw a relatively strong response on 13th December 2023 with 30% of the IPO size getting absorbed by the anchors. Out of 2,21,10,955 shares (221.11 lakh shares approximately) on offer, the anchors picked up 66,33,285 shares (66.33 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Wednesday, December 13th, 2023; one working day ahead of the IPO opening on Thursday, 14th December 2023. The IPO of Inox India Ltd (INOXCVA) opens on 14th December 2023 in the price band of ₹627 to ₹660 and will close for subscription on 18th December 2023.

The entire anchor allocation was made at the upper price band of ₹660 per share. This includes the face value of ₹2 per share plus a premium of ₹658 per share, taking the anchor allocation price to ₹660 per share. Let us focus on the anchor allotment portion ahead of the Inox India Ltd (INOXCVA) IPO, which saw the anchor bidding opening and also closing on 13th December 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 66,33,285 shares issued to the anchor investors on 13th 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 Inox India Ltd (INOXCVA).

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 Inox India Ltd (INOXCVA)

On 13th December 2023, Inox India Ltd (INOXCVA) 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 66,33,285 shares were allotted to a total of 41 anchor investors. The allocation was done at the upper IPO price band of ₹660 per share (including premium of ₹658 per share) which resulted in an overall anchor allocation of ₹437.80 crore. The anchors have already absorbed 30% of the total issue size of ₹1,459.32 crore, which is indicative of fairly robust institutional demand.

Listed below are the 20 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Inox India Ltd (INOXCVA). The entire anchor allocation of ₹437.80 crore was spread across a total of 41 major anchor investors, with 20 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 41 anchor investors in all, only 20 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 20 anchor investors accounted for 74.09% of the total anchor collection of  ₹437.80 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 20 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Inox India Ltd (INOXCVA) IPO. However, there were 41 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=20231213-42&attachedId=fd5c1f1a-7be4-4954-9e52-bc2309f69201

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. Inox India Ltd (INOXCVA) 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 Inox India Ltd (INOXCVA) 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 66,33,285 shares allocated to the anchors in the IPO, a total of 33,73,446 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 28 mutual fund schemes belonging to 12 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 50.86% of the total anchor size.