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Current Affairs

Anchor investors

Date: 05 May 2022 Tags: Miscellaneous

Issue

Domestic mutual funds have invested Rs 4,002.27 crore, accounting for 71.12 per cent of the total anchor book part of the initial public offering (IPO) of Life Insurance Corporation (LIC).

 

Background

The Life Insurance Corporation (LIC) will be going public through IPO. SBI Mutual Fund is currently the largest investor in anchor book quota.

 

Details

  • An anchor investor in an IPO is an entity which invests before the IPO is made available to the public as per Sebi regulations.

  • The investor can be qualified institutional buyer (QIB) like a foreign portfolio investor or mutual fund or insurance company.

 

Functions

  • Their main function is to make IPO process more attractive for investors, and instil confidence in them.

  • Price discovery of an IPO is determined through anchor investors.

 

Lock-in

  • A lock-in of 30 days would continue for 50% of the portion allocated to anchor investors.

  • Lock-in of 90 days will be applicable for anchor investors allotted remaining portion.

 

Allocation to anchor investors

  • Anchor investors getting guaranteed allotment a day before the IPO for the public are normally allocated 60 per cent of the QIB quota. 

  • Companies having profitable track record can allocate 50 per cent of the IPO to QIBs. Demand in anchor category signals success of IPO.

 

LIC IPO

  • The IPO has been in the price range of Rs 902-949 per share. A discount of Rs 60 for policyholders and Rs 45 for retail investors and employees has been offered.

  • The IPO size was cut from Rs 65,000 crore to Rs 21,000 crore due to Russian invasion of Ukraine. Investors can bid for a minimum of 15 shares and thereafter in multiples of 15 shares.