At over Rs 36,000 cr, India sees record anchor investment in IPOs this year

Amount contributed by MFs nearly half of that invested by FPIs

Foreign portfolio investors (FPIs) and mutual funds (MFs) have put in more money as anchor investors in initial public offerings (IPOs) in 2021 than any other year.

FPIs’ share of investments for the year stood at Rs 24,477 crore, nearly six times that put in last year and more than nine times the amount invested in 2019, the data from Prime Database showed.

MFs have invested Rs 12,264 crore, four times than that invested last year and more than 10 times the investment in 2019.

The total investment by FPIs and MFs put together this year is five times the amount invested last year. The amount contributed by MFs, however, is nearly half of that invested by FPIs.

One 97 Communications, Zomato and FSN E-Commerce Ventures, all new-age digital companies, received the most by way of anchor investment. FPIs pumped in Rs 7,185 crore in payment major Paytm’s IPO, nearly seven times than that invested by MFs. Food delivery firm Zomato’s offering saw FPIs put in Rs 2,759 crore while online beauty retailer Nykaa got Rs 1,570 crore .

The top five FPI anchors this year include Government of Singapore (Rs 1,570 crore), Canada Pension Plan Investment Board (Rs 1,197 crore), BlackRock Global Funds-World Technology Fund (Rs 868 crore), Morgan Stanley Asia (Singapore) PTE-ODI (Rs 648 crore) and Nomura India Investment Fund Mother Fund (Rs 599 crore).

The top five MF anchors include Aditya Birla Sun Life MF (Rs 1,619 crore), HDFC MF (Rs 1,317 crore), SBI MF (Rs 1,201 crore), Axis MF (Rs 1,196 crore) and Mirae Asset MF (Rs 1,178 crore).

Domestic institutional investors (DIIs) have contributed more than foreigners as anchors only twice in the past — in 2018 and 2014.

In 2018, the share of domestic investment stood at Rs 4,045 crore, a 52 per cent share; in 2014, the share was 63 per cent, albeit on a lower scale as the IPO activity was subdued that year, with total anchor book of Rs 265 crore.

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

The trend of a higher DII participation has picked up in the last four years, driven by mutual funds flush with money from monthly inflows into equity schemes.

This year has seen eighth straight months of net inflows in equity schemes, with inflows since March totalling Rs 73,766 crore. Before that, equity-oriented funds witnessed net outflows for eight straight months, from July 2020 to February 2021, totalling Rs 46,791 crore.

According to a study done by domestic brokerage Ventura Securities earlier this year, a sizeable number of mutual fund schemes that invested in IPOs over the past year ended June 30 have not stayed put for the long haul. Of the 1,051 mutual fund schemes that applied for IPOs only 582 schemes are holding on to the shares post listing, the study had stated.

According to experts, IPOs provide an opportunity to be part of companies that are not represented in the market. 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 and the allotment can reduce to the extent the issue is oversubscribed.

Anchors are institutional investors who 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.

The Securities and Exchange Board of India introduced the concept of anchor investors in IPOs in 2009. The companies opting for a public share sale prefer marquee names as anchors, say experts.