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Anchor investors show tremendous confidence in LIC IPO

Ahead of any IPO, the enthusiasm of anchor investors makes a lot of difference. After all, these are the large institutions that will make a big difference to the image of the IPO. For the LIC IPO, the investment bankers had indicated that over 25% of the overall IPO size would be reserved for anchors. The actual anchor absorption was eventually higher than that figure.

What exactly is the anchor allotment?

An anchor allotment is normally done through bidding and is completed a day before the IPO opening. In the case of the LIC IPO, since 03-May was a holiday on account of Eid-ul-Fitr, LIC completed its anchor allotment on 02-May itself. But what exactly is an anchor issue and why is it important?

The anchor allotment is undertaken ahead of any IPO/FPO and must view as different from a pre-IPO placement. For instance, 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. Pre-IPO placements have a longer lock-in period. Also, anchor placements cannot be done at below the final discovered price while the pre-IPO allotment can also be done below the IPO discovered price. Anchor allotment is meant to give confidence to investors that the issue is backed by large established institutions.

Key highlights of the anchor allotment of LIC IPO

Here are some of the major highlights of the anchor allotment to institutional investors ahead of the LIC IPO.

  • A total of 5,92,96,853 (592.97 lakh shares approximately) shares were allotted under the anchor allotment program via the book-building process to anchor investors.

  • The anchor allocation was made to a total of 123 anchor investors comprising 99 domestic mutual funds registered with SEBI and 24 foreign portfolio investors (FPIs) and other SEBI registered bodies.

  • The anchor allocation happened at the upper IPO price band of Rs.949 which resulted in an overall anchor allocation of Rs.5,627.27 crore for the 592.97 lakh shares.

  • The top 19 anchor anchors who were allotted more than 1.50% in the IPO accounted for 58.8% of the total anchor allocation, so it was surely dominated by some big names.

  • The anchor response has been 26.79% of the total issue size, i.e. more than one-fourth of the issue size is already committed by the anchors.

  • Out of the total anchor allotment, LIC allotted 421.74 lakh shares to 99 domestic mutual fund schemes across 15 AMCs.

  • The mutual fund allocation represents 71.12% of the overall anchor allocation, showing substantial interest from the domestic fund segment.

Who were the big boys investing in the LIC anchor book?

The table below captures the 15 top anchor investors in the LIC IPO based on the percentage allocation in the anchor portion.

In addition to the above list, other FPIs who participated in the anchor placement included the Monetary Authority of Singapore, Societe Generale, AG Dynamic Fund, Segantii India Mauritius and Saint Capital Fund. In addition, some of the additional domestic investors who also participated as anchors in LIC included Axis Mutual Fund, Nippon India Fund, NPS Trust, Tata Investment Corporation, UTI MF, and PNB MetLife Insurance, Sundaram Mutual Fund, Tata Mutual Fund, Bajaj Allianz and IDFC MF.

It must be remembered that the QIB portion in the IPO will be reduced to the extent of the anchor placement of 592.97 lakh shares allocated as above. The residual number of shares will be available for QIB allocation as part of the regular IPO.

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