ANCHOR INVESTORS

[Mr. M. GOVINDARAJAN]

 

Anchor investor is the new concept introduced in the capital market. Anchor investor is the first investor in an initial public offering. The anchor investor invests in an IPO before the offer opens to the public. These investors belong to the QIB (Qualified Institutional Buyers).QIB includes mutual funds, foreign institutional investors (FII), banks, venture capitals, provident funds, pension funds etc.,QIB is the third category of investor following the retail investors and non institutional investors.Since anchor investors are the first investors, there will be hope on the public to invest in the public offer of a company. The investors are got attracted to public offers before they hit the market to infuse a measure of confidence.The volume and value of the anchor subscriptions may serve as an indicator of the company’s reputation and soundness of the offer.

Regulation 2© of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (‘ICDR Regulations’ for short) defines the term ‘anchor investor’ which means a qualified institutional buyer who makes an application for a value of Rs.10 crores or more in a public issue made through the book building process in accordance with these regulations.Clause 10 of Schedule XI of ICDR Regulations lays down the following conditions for investment by anchor investors:

•             An anchor investor shall make an application of a value of at least Rs.10 crores to the public issue;

•             Allocation to anchor investors shall be on a discretionary basis and subject to a minimum of 2 such investors for allocation of up to  Rs.250 crores and 5 such investors for allocation of more than Rs.250 crores;

•             Up to 30% of the portion available for allocation to qualified institutional buyers shall be available to anchor investor(s) for allocation/allotment (anchor investor portion);

•             One third of anchor investor portion shall be reserved for domestic mutual funds;

•             The bidding for anchor investors shall open one day before the issue opening date;

•             Anchor investors shall pay on application the same margin which is payable by other categories of investors the balance, if any, shall be paid within two days of the date of closure of the issue;

•             Allocation to anchor investors shall be completed on the day of bidding by anchor investors;

•             If the price fixed as a result of book building is higher than the price at which the allocation is made to anchor investor, the anchor investor shall bring in the additional amount. However, if the price fixed as a result of book building is lower than the price at which the allocation is made to anchor investor, the excess amount shall not be refunded to the anchor investor and the anchor investor shall take allotment at the price at which allocation was made to it;

•             The number of shares allocated to anchor investors and the price at which the allocation is made, shall be made available in public domain by the merchant banker before opening of the issue;

•             There shall be a lock in of 30 days on the shares allotted to the Anchor investor from the date of allotment in the public issue;

•             Neither the merchant bankers nor any person related to the promoter/promoter group/merchant bankers in the concerned public issue can apply under anchor investor category. The parameters for selection of anchor investor shall be clearly identified by the merchant banker and shall be available as part of records of the merchant banker for inspection by the Board;

•             The applications made by qualified institutional buyers under the anchor investor category and under the non anchor investor category may not be considered as multiple applications.

Anchor investor is different to the angel investor, who is a person with deep pockets and capacity to play a role of a venture capitalist. Anchor investor is a bridge between the company and the public in the public offer. After introduction of anchor investor concept the pre-IPO placement will take a back seat because it comes with one year lock in, restrictive clauses and uncertainty in term of timing of the issue opening as well as pricing.Entities that belong to the promoter group of the issuing company or to the book running or lead managers to the issue are, however, barred from being anchor investors. The anchor investors are not allowed to sell their investments for 30 days after listing. This could mean that there may be fewer investors cashing in on listing gains. taxmanagementindia.com

Bharti Infotel Limited allotted 28,335,000 mn equity shares to 18 anchor investors @ Rs.230 per share aggregating to Rs.6517 mn.The anchor investment is 15% of the total public offer of the company. The anchor investors include Alliance Bernstein,Battery March,Clough capital, Columbia Wagner, Morgan Stanley, Route One Capital, Sundaram MF, Wellington among others.The issue comprising 18.89 crore equity shares will open for retail investors on 11.12.2012 in the price band of Rs 210-240 per share. The issue will close on December 14.The anchor investor bid/offer period was one working day prior to the bid/offer opening date i.e, 10.12.2012.