Jyoti CNC IPO: Anchor Allocation at 44.77%

About the Jyoti CNC Automation IPO

Jyoti CNC Automation IPO has a face value of ₹2 per share and the price band has been set in the range of ₹315 to ₹331 per share. The final price will be discovered within this band. The IPO of Jyoti CNC Automation Ltd will be entirely a fresh issue of with no offer for sale (OFS) component in the issue. The fresh issue portion of Jyoti CNC Automation IPO comprises the issue of 3,02,11,480 shares (302.11 lakh shares approximately), which at the upper price band of ₹331 per share will translate into a fresh issue size of ₹1,000 crore. Since there is no offer for sale (OFS), the fresh issue portion will also double up as the overall issue size.

Hence, the overall IPO of Jyoti CNC Automation Ltd will also comprise of the issue of 3,02,11,480 shares (302.11 lakh shares approximately), which at the upper price band of ₹331 per share translates into total IPO size of ₹1,000 crore. The IPO of Jyoti CNC Automation Ltd will be listed on the NSE and the BSE on the IPO mainboard. The fresh issue portion will be largely utilized to repay or prepay some of its loans availed by the company. In addition, the company is also looking to use the funds for financing long term capital requirement and for general corporate purposes. The IPO will be lead managed by Equirus Capital Private Ltd, ICICI Securities Ltd, and SBI Capital markets. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of Jyoti CNC Automation IPO

The anchor issue of Jyoti CNC Automation Ltd saw a relatively strong response on 08th January 2024 with 44.77% of the IPO size getting absorbed by the anchors. Out of 3,02,11,480 shares (302.11 lakh shares approximately) on offer, the anchors picked up 1,35,27,190 shares (135.27 lakh shares approximately) accounting for 44.77% of the total IPO size. The anchor placement reporting was made to the BSE late on Monday, 08th January 2024; one working day ahead of the IPO opening on Tuesday, 09th January 2024.

The entire anchor allocation was made at the upper price band of ₹331 per share. This includes the face value of ₹2 per share plus a share premium of ₹329 per share, taking the anchor allocation price to ₹331 per share. Let us focus on the anchor allotment portion ahead of the Jyoti CNC Automation Ltd IPO, which saw the anchor bidding opening and also closing on 08th January 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 1,35,27,190 shares issued to the anchor investors on 08th January 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. 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 Jyoti CNC Automation 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 Jyoti CNC Automation IPO

On 08th January 2024, Jyoti CNC Automation 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 1,35,27,190 shares were allotted to a total of 37 anchor investors. The allocation was done at the upper IPO price band of ₹331 per share (including premium of ₹329 per share) which resulted in an overall anchor allocation of ₹447.75 crore. The anchors have already absorbed 44.77% of the total issue size of ₹1,000 crore, which is indicative of fairly robust institutional demand.

Listed below are the 22 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Jyoti CNC Automation Ltd. The entire anchor allocation of ₹447.75 crore was spread across a total of 37 major anchor investors, with 22 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 37 anchor investors in all, only the 22 anchor investors who got allocated 2% or more each of the anchor quota are listed in the table below. These 22 anchor investors accounted for 79.83% of the total anchor collection of  ₹447.75 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 22 anchor investors who got allotted shares of 2% or above each of the anchor portion done ahead of the Jyoti CNC Automation Ltd IPO. However, there were 37 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=20240108-32&attachedId=88eb9894-5d07-42f7-b6a7-cc60a216a958

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 44.77% 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. Jyoti CNC Automation 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 Jyoti CNC Automation 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 1,35,27,190 shares allocated to the anchors in the IPO, a total of 52,90,650 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 21 mutual fund schemes belonging to 9 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 39.11% of the total anchor size.