The five anchor investors in the theme park operator Adlabs Entertainment offerings have been caught on the wrong foot as they subscribed for the shares of the company at over 20% premium to the issue price.
Anchor, or cornerstone investors are financial institutions who apply in an initial public offering (IPO) ahead of its opening. As these investors are the initial participants they provide certain degree of confidence to other investors to participate in the IPO.
Daiwa India, HDFC Infrastructure Fund, Axis Mutual Fund, L&T Mutual Fund and IL&FS were the anchor investors in the Adlabs IPO. These investors were allotted shares at Rs 221 per share, around 22% more than Rs 180, the issue price discovered through the book building process. The allotment to anchor investors had happened at the lower end of the prevailing price band of Rs 221 and Rs 230 per share.
However, as the Adlabs IPO had failed to garner full subscription on its earlier scheduled close, the company was forced to lower the price band to Rs 180 to Rs 215 share.
The company, in an advertisement on Wednesday, said it has fixed the issue price at Rs 180 per share and the issue price for anchor investors will remain Rs 221 per share.
Investment bankers said the allotment to anchor investors had to be made at a higher price as Sebi rules don't permit revision in price once allotment is made to anchor investors.
Anchor investors are allotted shares on a discretionary basis unlike other IPO investors who are given shares on a proportionate basis.
"Anchor investors are given allotment on a discretionary basis therefore the book building price doesn't apply to them. If the IPO is good it usually works in their favour," said Arun Kejriwal, founder & CEO, Kris Research.
The Adlabs offering, which closed on March 17, was marginally oversubscribed. The company raised around Rs 350 crore from the IPO, less than earlier proposed issue size of around Rs 440 crore.
"Anchor investing has its pros and cons. In an issue like Inox Wind, where the institutional category was subscribed 36 times, these investors have the advantage of getting guaranteed allotment. While sometime the bets could go wrong as it happened in Adlabs," said an investment banker who didn't want to be quoted.
Adlabs raised about Rs 60 crore by anchor investors by allotting them a total of 2.72 million shares. These investors have a lock-in of 30 days from the date of allotment.
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