With an aim to boost fund raising through primary markets, capital markets regulator the Securities and Exchange Board of India (SEBI) has notified relaxed norms for public offers by removing restriction on maximum number of anchor investors.
The present regulation limit the number of anchor investors at 15, if the public issue size is under Rs.250 crore and this can increased to 25 if the issue size is over Rs.250 crore.
In a notification, SEBI said it had removed the present restriction on the maximum number of anchor investors (currently 25) for anchor allocation of public issue worth over Rs.250 crore.
The requirement for the number of anchor investors for allocation of up to Rs.250 crore will remain the same but for issues above that size there could be 10 additional investors for every additional allocation of Rs.250 crore, subject to minimum allotment of Rs.5 crore per anchor investor.
“In case of allocation above Rs.250 crore, a minimum of 5 such investors and a maximum of 15 such investors for allocation up to Rs.250 crore and an additional 10 such investors for every additional Rs.250 crore or part thereof, shall be permitted, subject to a minimum allotment of Rs.5 crore per such investors,” SEBI said. An anchor investor in market parlance refers to a qualified institutional buyer (QIB) making an application for a value of Rs.10 crore or more through the book-building process.
SEBI, in 2009, introduced the concept of anchor investor in public issues in order to create a significant impact on pricing of initial public offers (IPOs).
Since equity markets are volatile, experts say that companies going for IPOs benefit from anchor investors.
Anchor investors attract investors to public offers before they hit the capital markets to infuse confidence, they say. The volume and value of anchor subscriptions serve as an indicator of the firm’s soundness of the offer. It also sets a benchmark and gives a guideline for issue pricing and interest among QIBs.
