Anchor Investors - Misleading the Retail/HNI Investors in IPO Market?

Published on Saturday, May 16, 2015 by Chittorgarh.com Team | Modified on Friday, November 1, 2019

Anchor Investors - Misleading the Retail/HNI Investors in IPO Market?

Anchor investors are qualified institutional buyer investing over Rs 10 Crore in an IPO. The idea of Anchor Investors was introduce by SEBI to boost confidence in IPO for retail and HNI investors.

Although in the past, many Anchor Investors participated in IPOs at the fancy price band and burnt their fingers as more than 60% IPOs fared poorly post listing due to greedy pricing, they did not learn any lesson thereof. Now since December 2014, they once again repeated the mistake and warranted anger among their investor/supporters.

Let us take the review of recent IPOs wherein Anchor Investors participated in a big way and received allotment at the higher price band announced as per original proposals and did not got any relief even when the IPO price bands revised downward as they were not allowed for withdrawal or modify their bids. Further, they had to hold on to their investment for stipulated time by which there has been further erosion in market prices of the said IPOs. Details can be seen from the following table:

List of Anchor Investors participation in IPO

IPO Original Price Band (Rs) Revised Price Band (Rs) Anchor Investors Bids at (Rs) Amount Invested (Cr Rs) Final allotment at (Rs) Listing Price BSE/NSE (Rs) Listing Close BSE/NSE (Rs) CMP 15 May 2015 (Rs)
Monte Carlo 631-645 NA 645 105 645 585/584 566/567 572
Ortel Communications 181-200 NA 181 46 181 181/160 172/162 170
Adlabs Entertainment 221-230 180-215 221 60 180 168/162 191/192 158
MEP Infratech 63-65 NA 65 72 63 63/65 61/58 59
UFO Moviez 615-625 NA 625 180 625 600/600 599/597 610

Bunch of Anchor Investors supported IPO of Monte Carlo included Aditya Birla Private Equity Trust, DB International (Asia) and Birla Sunlife Trustee Company Pvt Ltd, where as for Ortel Communications list of Anchor Investors included Axis Mutual Fund and ICICI Prudential Life Insurance. Anchor Investors that applied in Adlabs Entertainment had Daiwa India, HDFC Infrastructure Fund, Axis Mutual Fund, L&T Mutual Fund and IL&FS in the list. MEP Infratech got bids from Anchor Investors like HDFC Mutual Fund, Tata Offshore India Opportunities Scheme, Prime India Opportunity and EM Resurgent Fund. In UFO Moviez the list of Anchor Investors consisted of Pinebridge Global Funds, Reliance AMC, Amundi Funds, SBI AMC, Jupiter South Asia, and Kotak AMC among others.

On HNI and Retail category front, all these IPOs fared poorly with below expected response mainly due to greedy pricing.

As all the above IPOs fared poorly post listings, these Anchor Investors have now started facing music from their irk investors on their such investment decisions. They are now in dilemma with uproar from their supporters as well as from their counterparts. According to market sources, few top-level officers of ICICI Prudential have been asked to leave on reports of under the table deals in one of the investments recently made by them. According to market sources, MEP Infra, PNC Infra issues scrapped through with planned deals.

This has now raised eyebrows among regulators as well. No fund managers would have dared to invest like this unless some under the table deals would have been planned. Thus, on one hand, we find greedy pricing of IPO continuing unabatedly and on the other, such repeated deals are happening even now that is sure to play a spoil sport for primary market.

Let us hope that not only the Merchant Bankers and Promoters put aside their greedy pricing practice for IPOs, but also the Anchor Investors have to bear in mind the interest of its supporters for not taking such hasty decisions at fancy price and not entertain any under the table deals.

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9. DHARMESH   I Like It. |Report Abuse|  Link|Apr 7, 2017 9:01:27 AMReply
SEBI should introduce safety net for retail IPO investors. For a period promoters must buy back shares if listing price of IPO is less than IPO price. Then only greedy promoters shall mend their ways
8. saket ganeriwal   I Like It. |Report Abuse|  Link|Jun 20, 2015 3:43:57 PMReply
Certainly there had been a flood of highly priced IPO in recent times, even for a small/ medium cap company like Monte carlo.We need more of this type of article before the the opening of IPO''s.
SEBI should look into this & create a process to price an IPO according to it''s true value.
7. ram natraj   I Like It. |Report Abuse|  Link|Jun 6, 2015 10:32:21 PMReply
it is very disturbing that ultimately the retail investors particularly are averse to stock investing becaof the loot mentality and the harshad mehta time is in mind...the stock advisers the big recommendations need to be taken with salt as ultimately the merchant bankers promotors the adviser the mf all laugh us on the way to the bank...BETTER BUY FROM SECONDARY MARKET
6. MONEY HI MONEY   I Like It. |Report Abuse|  Link|May 20, 2015 8:31:52 AMReply
it is good article the modus operandi of the fund managers are like they fixed the price of highly priced ipo in grey and subscribe the issue at high price and get the difference in cash for example monte carlo company issued the shares at 645/ but have deal and fixed the price at 545/ with big mutual funds and returned the difference of rs 100/ in cash to fund managers now with this deal both are happy comany is happy and fund manager is happy both are getting money only retail is loosing money.
5. papu bhai   I Like It. |Report Abuse|  Link|May 19, 2015 2:11:09 PMReply
this article showing the facts of ipo loot. RETAIL INVESTER KO ALART HO JANA PADEGA IS OPEN LOOT KE AGAINST.
4. Thiagarajan Ramasamy   I Like It. |Report Abuse|  Link|May 19, 2015 11:26:12 AMReply
To safeguard the interest of Retail Investors, SEBI must make it mandatory for all Issuers to offer 5 % discount as in the case of PSU Offerings. Also QIB Portion should close one day earlier as was being done earlier.
3. Udaipur IPO mastana   I Like It. |Report Abuse|  Link|May 18, 2015 8:31:17 PMReply
Very nice article showing the facts behind high pricing in the IPO segment.
Even the adviser of stock market also looks involved in this issue as many adviser also promote such IPO. Market regulators should check the fact regarding fair pricing of IPO.
2. Akash, Bombay   I Like It. |Report Abuse|  Link|May 18, 2015 11:09:34 AMReply
While article is correct on facts, and questions greedy pricing, it does not necessarily represent correct view.
While retail investor judge success / failure of IPO by listing day price, same is not the case with institutional investors.
They generally have a long term view and buy in anchor portion as they get confirm allotment for large amount, which they might not get post listing (even though listing is at discount)
While I agree that greedy pricing is killing IPO market, blaming anchor investors for misleading anchor is too much.
1. Pavan   I Like It. |Report Abuse|  Link|May 18, 2015 7:59:07 AMReply
Its nice to have this article. I was also assuming the same mentioned in article. Now my assumption is confirmed it.