Domestic institutions lend their weight as anchors in IPOs

Domestic institutional investors, particularly mutual funds, have played an active role as anchor investors in initial public offerings (IPOs) this year.

They have invested nearly 50 per cent of the Rs 9,800 crore of anchor money invested in IPOs this year, data from Prime Database shows. 

The anchor book was driven mainly by foreign players in the last IPO cycle of 2009 and 2010, with domestic players investing a mere 11 per cent of the Rs 1,674-crore anchor book in 2009. 

HDFC MF, Birla Sun Life MF, and Reliance MF have emerged the biggest anchor investors, having put in more than Rs 400 crore each this year. 

These three have also been the biggest investors in the last three years, having put in Rs 1,054 crore, Rs 902 crore, and Rs 834 crore, respectively.

Among foreign investors, the Abu Dhabi Investment Authority (ADIA), FIL Investments, and SmallCap World have invested Rs 356 crore, Rs 272 crore, and Rs 210 crore, respectively this year. 

In the past three years, two sovereign funds — Government of Singapore (Rs 431 crore) and ADIA (Rs 404 crore) — invested the most.  

The top 15 domestic investors have collectively invested Rs 3,869 crore this year compared to Rs 2,429 crore put in by foreign players. Mutual funds predominate among the 15, with only two insurers, SBI Life Insurance and HDFC Standard Life Insurance, figuring on the list.

“IPOs provide an opportunity to be part of companies that are not represented in the market. These offerings are like any other investment in the listed space, except that historical numbers for the former are limited to three years. So, besides routine analysis, we make it a point to do reference checks on the company management and promoters,” said Mahesh Patil, co-chief investment officer, Aditya Birla Sun Life MF.

Anchors are typically institutional investors that subscribe to an issue a day before its public opening. They pay an upfront amount and hold shares for at least a month to boost investor confidence. Sebi introduced the concept of anchor investors in IPOs in 2009. Companies opting for a public share sale prefer marquee names as anchors, say experts.

“Anchor investment allows the buyer to get a fixed allotment at a fixed price without an impact cost. This is not so in the open market, where the allotment can reduce to the extent the issue is oversubscribed,” said Patil.

The amount raised by way of IPOs reached an all-time high this year, surpassing the previous record set in 2007. This has been driven primarily by big offers from insurance companies. Four of the 10 biggest IPOs this year are by insurers.

Three of every five companies listed this year are trading in the green.