Tata Technologies IPO Anchor Allocation at 26%

About the Tata Technologies IPO

Tata Technologies IPO opens on 22nd November 2023 and closes for subscription on 24th November 2023. The stock of Tata Technologies Ltd has a face value of ₹2 per share and the price band for the book building IPO has been set in the band of ₹475 to ₹500 per share. The final price will be discovered within this band, although the band is much lower than what the markets were anticipating. Tata Technologies IPO will be purely an offer for sale (OFS), with no fresh issue component to it. The offer for sale (OFS) portion of the IPO of Tata Technologies Ltd comprises the sale of 6,08,50,278 shares (608.50 lakh shares), which at the upper price band of ₹500 per share will translate into an offer for sale (OFS) size of ₹3,042.51 crore.

The OFS selling will be by the promoter shareholders of the company and the investor shareholders. Out of the 608.50 lakh shares offered in the OFS, the promoter shareholder (Tata Motors) will offer 462.75 lakh shares while the investor shareholders comprising of Alpha TC Holdings (97.17 lakh shares) and Tata Capital Growth Fund I (48.58 lakh shares), will offer the balance shares in the OFS. There are only 3 sellers in the OFS. Since there is no fresh issue component, the overall IPO of Tata Technologies Ltd will comprise of the issue and sale of 6,08,50,278 shares (608.50 lakh shares approximately), which at the upper price band of ₹500 per share will translate into total IPO issue size of ₹3,042.51 crore.

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Tata Technologies Ltd, the minimum lot size is 30 shares with upper band indicative value of ₹15,000. The entire IPO of Tata Technologies Ltd is an offer for sale (OFS), so there would be no fresh funds coming into the company as a result of this IOP. The OFS portion is being entirely offered by the promoter shareholders and the investor shareholders. The IPO will be lead managed by JM Financial, Citigroup Global Markets and BOFA Securities. Link Intime India Private Ltd will be the registrar to the issue.

A brief on the anchor allocation of Tata Technologies IPO

The anchor issue of Tata Technologies IPO saw a relatively strong response on 21st November 2023 with 26% of the IPO size getting absorbed by the anchors. Out of 6,08,50,278 shares (608.50 lakh shares approximately) on offer, the anchors picked up 1,58,21,071 shares (158.21 lakh shares approximately) accounting for 26% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, November 21st, 2023; one working day ahead of the IPO opening on Wednesday, 22nd November 2023. The IPO of Tata Technologies Ltd opens on 22nd November 2023 in the price band of ₹475 to ₹500 and will close for subscription on 24th November 2023.

The entire anchor allocation was made at the upper price band of ₹500 per share. This includes the face value of ₹2 per share plus a premium of ₹498 per share, taking the anchor allocation price to ₹500 per share. Let us focus on the anchor allotment portion ahead of the Tata Technologies Ltd IPO, which saw the anchor bidding opening and also closing on 21st November 2023. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 1,58,21,071 shares issued to the anchor investors on 21st November 2023, were actually reduced from the original QIB quota; and only the residual amount would be available to QIBs in the IPO. That change has been reflected in the table above, with the QIB IPO portion reduced to the extent of the anchor allocation. The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted has been deducted from the QIB quota for the purpose of the public issue.

Finer points of anchor allocation process

Before we go into the details of the actual anchor allotment, a quick word on the process of anchor placement. The anchor placement ahead of an IPO/FPO is different from a pre-IPO placement in that the anchor allocation has a lock-in period of just one month, although under the new rules, part of the anchor portion will be locked in for 3 months. It is just to give confidence to investors that the issue is backed by large established institutions. It is the presence of institutional investors like mutual funds and foreign portfolio investors (FPIs) that gives confidence to the retail investors. Here are details of the anchor lock-in for the issue of Tata Technologies Ltd.

However, the anchor investors cannot be allotted shares at a discount to the IPO price. This is explicitly stated in the SEBI revised regulations as under, “As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulations, 2018, as amended, in case the Offer Price discovered through book building process is higher than the Anchor Investor Allocation Price, then the Anchor investors will be required to pay the difference by the pay-in as specified in the revised CAN.

An anchor investor in an IPO is normally a qualified institutional buyer (QIB) like a foreign portfolio investor or mutual fund or insurance company or a sovereign fund which invests before the IPO is made available to the public as per SEBI regulations. Anchor portion is part of the public issue, so the IPO portion to the public (QIB portion) is reduced to that extent. As initial investors, these anchors make the IPO process more attractive for investors, and instil confidence in them. Anchor investors also largely aid in price discovery of the IPO

Anchor allocation investors in Tata Technologies IPO

On 21st November 2023, Tata Technologies Ltd completed the bidding for its anchor allocation. There was a strong and robust response as the anchor investors participated through the process of book building. A total of 1,58,21,071 shares were allotted to a total of 67 anchor investors. The allocation was done at the upper IPO price band of ₹500 per share (including premium of ₹498 per share) which resulted in an overall anchor allocation of ₹791.05 crore. The anchors have already absorbed 26% of the total issue size of ₹3,042.51 crore, which is indicative of fairly robust institutional demand.

Listed below are the 16 anchor investors who, have been allotted 2% or more of the anchor allocation done ahead of the IPO of Tata Technologies Ltd. The entire anchor allocation of ₹791.05 crore was spread across a total of 67 major anchor investors, with 16 anchor investors getting more than 2% each out of the anchor allocation quota. While there were 67 anchor investors in all, only 16 anchor investors who got allocated 2% or more of the anchor quota are listed in the table below. These 16 anchor investors accounted for 51.74% of the total anchor collection of  ₹791.05 crore. The detailed allocation is captured in the table below, indexed descending on size of anchor allocation.

Data Source: BSE Filings (Value Allocated in ₹ in Crore)

The above list only includes the set of 16 anchor investors who got allotted shares of 2% or above each, of the anchor portion done ahead of the Tata Technologies Ltd IPO. However, in all there were 67 anchor investors for the Tata Technologies anchor placement. The detailed and comprehensive report on the anchor allocation with the mutual fund portion separated can be accessed by clicking on the link below.

bseindia.com-DownloadAttach.aspx

The detailed report is available in PDF format and can be downloaded by clicking on the link above. Alternatively, readers can also opt to cut this link and paste in their browser, in case the link is not directly clickable. The details of the anchor allocation can also be accessed in the Notices section of the BSE on its website www.bseindia.com.

Overall, the anchors absorbed 26% of the total issue size. The QIB portion in the IPO will be reduced to the extent of the anchor placement done above. Only the balance amount will be available for QIB allocation as part of the regular IPO. The general norm is that, in anchor placements, smaller issues find it hard to get FPIs interested while larger issues do not interest mutual funds. Tata Technologies Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, participatory notes routed through ODIs, domestic mutual funds, AIFs, and insurance companies. Let us finally look at the sub-category of mutual fund participation in the anchor allocation ahead of the Tata Technologies Ltd IPO.

The anchor response normally sets the tone for the retail participation in the IPO and the anchor response has been fairly steady this time around. Out of the 1,58,21,071 shares allocated to the anchors in the IPO, a total of 70,99,980 shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 39 mutual fund schemes belonging to 17 asset management companies (AMCs). The mutual fund allocation in the anchor portion amounted to 44.88% of the total anchor size.