Muthoot Microfin IPO : Anchor Allocation at 29.69%

About the Muthoot Microfin Ltd IPO

The IPO of Muthoot Microfin Ltd will open for subscription from December 18, 2023 and close on December 20, 2023. The stock of Muthoot Microfin Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹277 to ₹291 per share. The final price will be discovered within this band. The IPO of Muthoot Microfin Ltd is a combination of fresh issue of shares and an offer for sale (OFS). The fresh issue portion of the IPO of Muthoot Microfin Ltd comprises the issue of 2,61,16,838 shares (261.17 lakh shares approximately), which at the upper price band of ₹291 per share will translate into a fresh issue size of ₹760.00 crore. The offer for sale (OFS) portion of the IPO of Muthoot Microfin Ltd comprises the sale of 68,72,852 shares (68.73 lakh shares approximately), which at the upper price band of ₹291 per share will translate into an Offer for sale (OFS) size of ₹200.00 crore.

Out of the total shares worth ₹200 crore offered in the OFS, shares worth ₹50 crore will be offered by Greater Pacific Capital which is an investor shareholder in Muthoot Microfin Ltd. The balance shares worth ₹150 crore will be offered by the promoter shareholders. The overall IPO of Muthoot Microfin Ltd, therefore, will comprise of the issue and sale of 3,29,89,690 shares (329.90 lakh shares approximately), which at the upper price band of ₹291 per share translates into total IPO size of ₹960.00 crore. The shares of Muthoot Microfin Ltd, post the IPO, will be listed on the NSE and the BSE on the IPO mainboard. The fresh issue portion will be largely utilized to augment its capital base to expand the asset book in future; a standard requirement of most financial asset based companies. The IPO will be lead managed by ICICI Securities, Axis Capital, JM Financial and SBI Capital Markets. KFIN Technologies Ltd will be the registrar to the issue.

A brief on the anchor allocation of Muthoot Microfin Ltd

The anchor issue of Muthoot Microfin Ltd saw a relatively strong response on 15th December 2023 with 29.69% of the IPO size getting absorbed by the anchors. Out of 3,29,89,690 shares (329.90 lakh shares approximately) on offer, the anchors picked up 97,93,812 shares (97.94 lakh shares approximately) accounting for 29.69% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, December 15th, 2023; one working day ahead of the IPO opening on Monday, 18th December 2023. The IPO of Muthoot Microfin Ltd opens on 18th December 2023 in the price band of ₹277 to ₹291 and will close for subscription on 20th December 2023. 

The entire anchor allocation was made at the upper price band of ₹291 per share. This includes the face value of ₹10 per share plus a premium of ₹281 per share, taking the anchor allocation price to ₹291 per share. Let us focus on the anchor allotment portion ahead of the Muthoot Microfin Ltd IPO, which saw the anchor bidding opening and also closing on 15th December 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 97,93,812 shares issued to the anchor investors on 15th 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 Muthoot Microfin 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 Muthoot Microfin Ltd

On 15th December 2023, Muthoot Microfin 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 97,93,812 shares were allotted to a total of 26 anchor investors. The allocation was done at the upper IPO price band of ₹291 per share (including premium of ₹281 per share) which resulted in an overall anchor allocation of ₹285 crore. The anchors have already absorbed 29.69% of the total issue size of ₹960 crore, which is indicative of fairly robust institutional demand. 

Listed below are the 15 anchor investors who, have been allotted 3% or more of the anchor allocation done ahead of the IPO of Muthoot Microfin Ltd. The entire anchor allocation of ₹285 crore was spread across a total of 26 major anchor investors, with 15 anchor investors getting more than 3% each out of the anchor allocation quota. While there were 26 anchor investors in all, only 15 anchor investors who got allocated 3% or more each of the anchor quota are listed in the table below. These 15 anchor investors accounted for 87.72% of the total anchor collection of  ₹285 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 15 anchor investors who got allotted shares of 3% or above each of the anchor portion done ahead of the Muthoot Microfin Ltd IPO. However, there were 26 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=20231215-20&attachedId=206db1d7-0e1f-4c33-aa97-f9b6e8465f0d

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 29.69% of the total issue size. The QIB portion in the IPO has 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. Muthoot Microfin Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, participatory notes routed through ODIs, domestic body corporates, AIFs, and insurance companies. Let us finally look at the sub-category of mutual fund participation in the anchor allocation ahead of the Muthoot Microfin 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 97,93,812 shares allocated to the anchors in the IPO, there were no domestic funds in the fray.