Reasonable pricing, good returns lure MFs, but allotment remains a challenge.
Lured by reasonable pricing and good returns, domestic mutual fund houses are aggressively competing with each other to become anchor investors in initial public offerings (IPOs). The aim is to get the desired number of shares.
The recent public issues of Gujarat Pipavav Port, Bajaj Corp, SKS Microfinance and Hindustan Media Ventures saw a number of mutual fund houses come in as anchor investors through their various schemes.
And, of now, their bets have paid off. Since listing, Bajaj Corp has gained 10.38 per cent, SKS Microfinance has risen about 25 per cent and Hindustan Media Ventures is up 9.13 per cent.
In an IPO, the issuer can allot up to 30 per cent of the portion reserved for qualified institutional buyers to anchor investors. Such investors cannot sell shares for 30 days after the allotment, which is called a lock-in period.
Companies allot shares to anchor investors a day before the issue opens, which boosts the confidence of other investors.
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“If you apply as an anchor investor, the chances of getting a decent allotment are higher,” said Anand Shah, head of equities at Canara Robeco Mutual Fund, which bought 444,000 shares in Gujarat Pipavav Port’s IPO as an anchor investor through two schemes. The fund house also bought 241,000 shares in Hindustan Media Venture’s IPO through three schemes. “The issues in which mutual fund houses invest as anchor investors also get credibility,” Shah added.
Among the leading fund houses, Reliance MF, HDFC MF, ICICI Prudential MF and Birla Sunlife MF have been quite active in buying shares as anchor investors in the recent past. “If we have conviction in the story, we invest as an anchor investor to get a particular number of shares,” said an official of Reliance MF who wished not to be named.
| EYEING IPO PIE | |
| Company | Mutual funds as anchor investors |
| Gujarat Pipavav Port | DSP Blackrock MF, HDFC MF, Tata MF, Canara Robeco MF, JM Financial MF, Axis MF |
| Bajaj Corp | Reliance MF, ICICI Prudential MF, Axis MF, Franklin Templeton MF |
| SKS Microfinance | Birla Sunlife MF, Sundaram BNP Paribas MF, Reliance MF |
| Hindustan Media Ventures | Reliance MF, Canara Robeco MF, Birla Sunlife MF |
| Source: Company announcements | |
However, with most mutual fund houses now chasing IPOs, there are fewer opportunities for getting a good allotment, said a fund manager.
In the IPO of Gujarat Pipavav Port, which closed for subscription on August 26, six domestic mutual fund houses got allotment as anchor investors through nine schemes. Out of these schemes, DSP Blackrock Small & Midcap fund and HDFC Infrastructure Fund got the highest allotment of 2.22 million shares each.
In the public issues of SKS Microfinance and Hindustan Media Ventures, three domestic mutual fund houses got shares as anchor investors, while four fund houses were allotted shares as anchor investors in Bajaj Corp’s pubic issue.