Ratnaveer Precision IPO gets 30% Anchor Allocated

About the Ratnaveer Precision Engineering IPO

The anchor issue of Ratnaveer Precision IPO saw a relatively strong response on 01st September 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 1,68,40,000 shares (168.40 lakh shares) on offer, the anchors picked up 50,52,000 shares (50.52 lakh shares) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, September 01st, 2023; one working day ahead of the IPO opening. The IPO of Ratnaveer Precision Engineering Works Ltd opens on 04th September 2023 in the price band of ₹93 to ₹98 per share and will close for subscription on 06th September 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹98. This includes the face value of ₹10 per share plus a premium of ₹88 per share, taking the anchor allocation price to ₹98 per share. Let us focus on the anchor allotment portion ahead of the Ratnaveer Precision Engineering Works Ltd IPO, which saw the anchor bidding opening and also closing on 01st September 2023. Before that, here is how the overall allocation will look.

The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted will be deducted from the QIB quota for the purpose of the public issue. With 30% of the QIB quota going out to anchors, the QIBs will be left with just 20% residual quota in the main IPO opening on 04th September 2023.

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.

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 placement story of Ratnaveer Precision IPO

On 1-Sept-2023, Ratnaveer Precision Engineering Works 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 50,52,000 shares were allotted to a total of 6 anchor investors. The allocation was done at the upper IPO price band of ₹98 (including premium of ₹88 per share) which resulted in an overall allocation of ₹49.51 crore. The anchors have already absorbed 30% of the total issue size of ₹165.03 crore, which is indicative of fairly robust institutional demand.

Listed below are the 6 anchor investors who got allotted shares as part of the overall anchor allocation quota for the IPO of Ratnaveer Precision Engineering Works Ltd. The entire anchor allocation of ₹49.51 crore was spread across these 6 major anchor investors, of which each of them got allotted more than 10% of the overall anchor quota. These 6 anchor investors listed below accounted for 100% of the total anchor allocation of Ratnaveer Precision IPO and their participation will set the tone for retail participation in the IPO.

Data Source: BSE Filings

While the GMP has surged to a robust level of ₹50, it shows an attractive premium of 51.02% on listing. This has led to reasonable anchor response with the anchors taking in 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. Ratnaveer Precision Engineering Works Ltd has witnessed anchor interest largely from the global portfolio investors and other classified anchor investors with mutual funds not participating in the IPO anchor placement bidding of Ratnaveer Precision Engineering Works Ltd. Here there is no allocation of any anchor portion to the SEBI registered mutual funds in India.

Brief on the Ratnaveer Precision Engineering Works Ltd business model

Ratnaveer Precision Engineering Ltd was incorporated in 2002 and the company currently manufactures stainless steel finished sheets, washers, solar roofing hooks, pipes, and tubes. Most of its specialized products are stainless based products. It customizes such stainless products for applications in industries like automobiles, solar power, wind energy, power plants, hydrocarbons, pharmaceuticals, plumbing, instrumentation, electromechanics, architecture, building & construction etc. Some of its new product launches include circlip, spring washers, retaining rings, toothed lock washers, serrated lock washers etc. The company produces more than 2,500 washers in different sizes and adhering to international standards. The company is also a star rated export house, recognized by government of India. In the last 5 years, the company has achieved CAGR growth of 75%, which is amazing, even if on a small base.

Ratnaveer Precision Engineering has 4 manufacturing units. Out of these,  two manufacturing units i.e., Unit-I and Unit-II are located at the Gujarat Industrial Development Corporation (GIDC), Vadodara, Gujarat. The third unit; Unit-III is located at Waghodia, which is also in Vadodara, Gujarat. The fourth unit, Unit-IV, is located at GIDC, Vatva near to Gujarat state’s commercial capital of Ahmedabad. Broadly, Ratnaveer Precision Engineering Ltd manufacturers SS finishing sheets, SS washers and SS solar mounting hooks at Unit I, while it manufactures SS pipes & tubes at Unit II. The remaining two units viz. Unit III and Unit IV are dedicated to the backward integration process, which actually supply inputs to Unit 1 and 2. Unit III is the melting unit where melted steel scrap is turned into steel ingots, and Unit IV is the rolling unit where flat ingots are further processed into SS sheets; the principal raw materials for SS washers.

The IPO of Ratnaveer Precision Engineering Ltd will be lead managed by Unistone Capital Private ltd. For managing the shareholder records, Link Intime India Private Ltd will be the registrars to the issue.