Vraj Iron and Steel IPO: Anchor Allocation at 28.76%

About the Vraj Iron and Steel IPO

The stock of Vraj Iron and Steel has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹195 to ₹207 per share. The IPO of Vraj Iron and Steel will be entirely a fresh issue of shares with no offer for sale (OFS) component. The fresh issue portion of the IPO of Vraj Iron and Steel comprises the issue of 82,60,870 shares (82.61 lakh shares approximately), which at the upper price band of ₹207 per share will translate into a fresh issue size of ₹171.00 crore.

Since there is no offer for sale component in the IPO, the fresh issue size will double up as the overall IPO size too. Therefore, the total IPO of Vraj Iron and Steel will also comprise of a fresh issue of 82,60,870 shares (82.61 lakh shares approximately) which at the upper end of the price band of ₹207 per share aggregates to total issue size of ₹171.00 crore. The IPO of Vraj Iron and Steel will be listed on the NSE and the BSE on the IPO mainboard.

Vraj Iron and Steel IPO is entirely a fresh issue, and the funds will be used funding capex at Bilaspur plant, repayment of borrowings and for general corporate expenses. The promoters of the company are Gopal Sponge and Power Private Ltd, VA Transport Private Ltd and Vijay Anand Jhawar. The promoters hold 99.99% stake in the company, which will get diluted post the IPO to 74.95%. The IPO will be lead managed by Aryaman Financial Services Ltd; while Bigshare Services Ltd will be the IPO registrar.

Read more about Vraj Iron and Steel IPO

A brief on the Anchor Allocation of Vraj Iron and Steel IPO

The anchor issue of Vraj Iron and Steel saw a relatively strong response on 25th June 2024 with 28.76% of the IPO size getting absorbed by the anchors. Out of 86,16,721 shares (86.17 lakh shares approximately) on offer, the anchors picked up 24,78,259 shares (24.78 lakh shares approximately) accounting for 28.76% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, 25th June 2024; one working day ahead of the IPO opening on Wednesday, 26th June 2024.

The entire anchor allocation was made at the upper price band of ₹207 per share. This includes the face value of ₹10 per share plus a share premium of ₹197 per share, taking the anchor allocation price to ₹207 per share. Let us focus on the anchor allotment portion ahead of the Vraj Iron and Steel IPO, which saw the anchor bidding opening and also closing on 25th June 2024. Post the anchor allocation, here is how the overall allocation looked.

Data Source: Company RHP

Here it must be noted that the 24,78,259 shares allocated to the anchor investors on 25th June 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 available in the IPO has reduced from 49.11% before the anchor allocation to 20.35% 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 Vraj Iron and Steel.

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 Vraj Iron and Steel IPO

On 25th June 2024, Vraj Iron and Steel 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 24,78,259 shares were allotted to a total of 6 anchor investors. The allocation was done at the upper IPO price band of ₹207 per share (including premium of ₹197 per share) which resulted in an overall anchor allocation of ₹51.30 crore. The anchors have already absorbed 28.76% of the total issue size of ₹178.37 crore, which is indicative of fairly robust institutional demand. 

Listed below are the 6 anchor investors who, have all been allotted 9% or more of the anchor allocation done ahead of the IPO of Vraj Iron and Steel. The entire anchor allocation of ₹51.30 crore was spread across a total of 6 major anchor investors and all the 6 anchor investors got more than 9% each out of the anchor allocation quota. While there were 6 anchor investors in all, all the 6 anchor investors who got allocated 9% or more each of the anchor quota are listed in the table below. These 6 anchor investors accounted for 100% of the total anchor collection of  ₹51.30 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 includes the full set of 6 anchor investors who got allotted shares of 9% or above each of the anchor portion done ahead of the Vraj Iron and Steel IPO. In fact, there were only 6 anchor investor in all; with all the anchor investors getting more than 9% each of the anchor quota being mentioned in the list above. The detailed and comprehensive report on the anchor allocation with the mutual fund portion separated (if any) can be accessed by clicking on the link below.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240625-27&attachedId=26fd9692-06a8-472a-8cb3-14f8d073e1b6

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 28.76% 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. Vraj Iron and Steel saw a good deal of buying interest from the alternate investment funds (AIFs) while the other categories of investors were largely absent in the bidding for the anchor allocation. As stated, there was no allocation made to any of the domestic mutual funds registered with the SEBI or any of the insurance companies registered with the IRDAI.

Key dates for Vraj Iron and Steel IPO and How to Apply?

The issue opens for subscription on 26th June 2024 and closes for subscription on 28th June 2024 (both days inclusive). The basis of allotment will be finalized on 01st July 2024 and the refunds will be initiated on 02nd July 2024. In addition, the demat credits are expected to also happen on 02nd July 2024 and the stock will list on 03rd July 2024 on the NSE and the BSE. The credits to the demat account to the extent of shares allotted will happen by the close of 02nd July 2024 under ISIN (INE0S2V01010).