Anchor Investor

An anchor investor is a qualified institutional buyer (QIB) who submits a bid for value of at least Rs. 1 crore or more in a mainboard IPO or Rs. 1 crore or more at SME IPO in the bookbuilding process. Bidding for anchor investors begins one day prior to the start of the issue.

QIB investors in an IPO include public financial institutions, banks, mutual funds and foreign portfolio investors, VCFs, AIFs and NBFCs who invest money on behalf of their clients.

Anchor investors are QIBs that are allotted shares at a fixed price one day before the public issue. Each investor is required to invest a minimum of Rs 10 crore (Mainboard IPO) / Rs 1 Cr (SME IPO).

Pre-IPO investments by anchor investors create buzz among retail investors. This is generally seen as promoting confidence as institutions make well-researched investment decisions.

Anchor Reservation

• The total allocation of anchor investors shall not exceed 60% of the QIB reservation and 30% of the total issue size for IPOs in the bookbuilding process.
• One third of the anchor investors' share may be reserved for domestic investment funds.

Anchor Investor Lock-in Period

Shares purchased by anchor investors in the reserved anchor category are subject to a lock-up period of 30 days for 50% of the shares and 90 days for the remaining 50% of the shares from the grant date.

Anchor Investors Bidding Rules

• Bidding for anchor investors begins one day before the start of the issue.
• Anchor investors cannot withdraw or modify their bids once placed.
• Anchor investors should pay the total bid amount at the time of application.
• Allocation to anchor investors will be completed on the same date of bid submission by anchor investors.
• An Anchor Investor can apply for value of at least Rs. 10 Crores in mainboard IPO and Rs 1 Crore in SME IPO.
• Anchor investors can apply up to the total number of shares offered in the anchor category.
• None of the family members, relatives, merchant banker or promoters can apply for shares under the anchor investor category.

Anchor Investor Allotment

• Company would allocate up to 30.0% of the QIB Portion to Anchor Investors, on a discretionary basis in consultation with the merchant bankers.
• If the price is fixed through the book building process is higher than the price at which shares were allotted to anchor investors, then these anchor investors have to bring in additional money. But if the book-built price is fixed on lower than the price at which the allocation is made to Anchor Investor, the excess amount is not refunded to them.

Answered on 2023-07-21