Who is an anchor investor?

Anchor investors are invited to subscribe for shares ahead of IPO to boost popularity of the issue

InterGlobe Aviation, the company that operates the country's most-profitable airline, IndiGo, raised Rs 832 crore on Monday from 43 anchor investors, ahead of its Initial Public Offering (IPO). So who are anchor investors?

• Anchor investors or cornerstone investors (as they are called globally) are marquee institutional investors like sovereign wealth funds, mutual funds and pension funds that are invited to subscribe for shares ahead of the IPO to boost the popularity of the issue and provide confidence to potential IPO investors. 

• The benefit for institutional investors applying in anchor quota is that they get guaranteed allotment. Allotment to investors applying in an IPO depends on the number of times the issue gets subscribed. Anchor investors, however, cannot sell their shares for a period of 30 days from the date of allotment as against IPO investors who are allowed to sell on listing day.

• Capital market regulator Sebi over the last two years has made number of changes to the rules related to anchor investors. Last year, the market regulator doubled the quota reserved for anchor investors, while earlier this year it removed the restrictions on the maximum number of anchor investors. An issuer can now allot up to 60% of shares reserved for qualified institutional buyers (QIBs) to anchor investors. As typically, the QIB portion in an IPO is 50%, anchor investors can buy up to 30% of an IPO. 

• Anchor allotment is done a day before an IPO opens. Roping in anchor investors gives a lot of comfort to the issuer and banker, as nearly a third of the IPO gets covered even before the opening day. A healthy anchor book also gives lot of comfort to small investors as it indicates the faith shown by institutional investors, say experts.

• In a notification in September, Sebi removed the maximum 25 anchor investor cap for IPOs above Rs 250 crore. Investment bankers can now rope in as many anchor investors as they want. The allotment to anchor investors is done on a discretionary basis, unlike an IPO, where the allotment has to be made on a proportionate basis. 

Anchor support	Top IPOs  by amount alloted to anchor investors
in Rs crore	IPO opening date	IPO size	Anchor allocation	Anchor as % of issue size
InterGloble Aviation	27-Oct-15	To be filled
Bharti Infratel	10-Dec-12	4172.76	651.71	15.6
Adani Power	27-Jul-09	3016.52	528.57	17.5
Jsw Energy	4-Dec-09	2700	464.87	17.2
Inox Wind	17-Mar-15	1020.53	306.33	30
Sks Microfinance	27-Jul-10	1628.78	297.71	18.3
Indiabulls Power	9-Oct-09	1758.15	275.24	15.7
D B Realty	28-Jan-10	1500	259.99	17.3
Prestige Estates Projects	11-Oct-10	1200	215.46	18
Sadbhav Infra	28-Aug-15	491.66	210	42.7
Just Dial	17-May-13	919.14	208.66	22.7
Source: Prime Database; Note: IPOs post April 2009 considered