Jana Small Finance Bank IPO: Anchor Allocation at 29.29%

About the Jana Small Finance Bank Ltd IPO

The stock of Jana Small Finance Bank IPO has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹393 to ₹414 per share. The IPO of Jana Small Finance Bank IPO will be a combination of a fresh issue of shares and offer for sale (OFS). While the fresh issue tends to bring in fresh funds into the company, it is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership. The fresh issue portion of the IPO of Jana Small Finance Bank Ltd comprises the issue of 1,11,59,420 shares (111.59 lakh shares approximately), which at the upper price band of ₹414 per share will translate into a fresh issue size of ₹462 crore. The offer for sale (OFS) portion of the IPO of Jana Small Finance Bank Ltd comprises the sale of 26,08,629 shares (26.09 lakh shares approximately), which at the upper price band of ₹414 per share will translate into an OFS size of ₹108 crore.

The OFS size of ₹26.09 lakh shares will be entirely offered by investor shareholders. Among the investor shareholders offering shares in the OFS are Client Rosehill Ltd, CVCIGP II Employee Rosehill Ltd, Global Financial Inclusion Fund, Growth Partnership II, Hero Enterprise Partner Ventures. Thus, the total IPO of Jana Small Finance Bank Ltd will comprise of a fresh issue and an OFS of 1,37,68,049 shares (137.68 lakh shares approximately) which at the upper end of the price band of ₹414 per share aggregates to total issue size of ₹570 crore. Jana Small Finance Bank IPO will be listed on the NSE and the BSE on the IPO mainboard. The promoters currently hold 25.20% in Jana Small Finance Bank Ltd, which will get diluted post the IPO. The IPO will be lead managed by Axis Capital, ICICI Securities and SBI Capital Markets. KFIN Technologies Ltd will be the registrar to the IPO.

A brief on the anchor allocation of Jana Small Finance Bank Ltd

The anchor issue of Jana Small Finance Bank Ltd saw a relatively strong response on 06th February 2024 with 29.29% of the IPO size getting absorbed by the anchors. Out of 1,37,68,049 shares (137.68 lakh shares approximately) on offer, the anchors picked up 40,32,588 shares (40.33 lakh shares approximately) accounting for 29.29% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, 06th February 2024; one working day ahead of the IPO opening on Wednesday, 07th February 2024.

The entire anchor allocation was made at the upper price band of ₹414 per share. This includes the face value of ₹10 per share plus a share premium of ₹404 per share, taking the anchor allocation price to ₹414 per share. Let us focus on the anchor allotment portion ahead of the Jana Small Finance Bank IPO, which saw the anchor bidding opening and also closing on 06th February 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 40,32,588 shares issued to the anchor investors on 06th February 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 50% before the anchor allocation to 20.71% 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 Jana Small Finance Bank 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 Jana Small Finance Bank Ltd

On 06th February 2024, Jana Small Finance Bank 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 40,32,588 shares were allotted to a total of 17 anchor investors. The allocation was done at the upper IPO price band of ₹414 per share (including premium of ₹404 per share) which resulted in an overall anchor allocation of ₹166.95 crore. The anchors have already absorbed 29.29% of the total issue size of ₹570 crore, which is indicative of fairly robust institutional demand.

Listed below are the 17 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Jana Small Finance Bank Ltd. The entire anchor allocation of ₹166.95 crore was spread across a total of 17 major anchor investors, with all the 17 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 17 anchor investors in all, all the 17 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 17 anchor investors accounted for 100% of the total anchor collection of  ₹166.95 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 17 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Jana Small Finance Bank Ltd IPO. In fact, there were only 17 anchor investor in all; with all the anchors getting more than 2% each of the anchor quota. 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=20240206-49&attachedId=9fab4c29-f415-4728-880a-9a4af4f81646

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 29.29% 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. Jana Small Finance Bank 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 Jana Small Finance Bank 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 40,32,588 shares allocated to the anchors in the IPO, a total of 2,41,560 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 2 mutual fund schemes belonging to 1 asset management company (AMCs). The mutual fund allocation in the anchor portion amounted to 5.99% of the total anchor size.