The Securities and Exchange Board of India (Sebi) proposes to restrict the slabs for anchor investors (AI) to two as per the provisions of current regulations. The regulator also plans to introduce a maximum number of AIs in each slab and also for an anchor tranche upto R10 crore. By this, there will be a maximum two AIs for an allotment tranche upto R10 crore and a minimum two and a maximum of 15 AIs for an allotment tranche above R10 crore and upto R250 crore, subject to minimum allotment of R5 crore per AI. There will be a minimum of five and maximum of 25 AIs for allotment tranche of more than R250 crore subject to minimum allotment of R5 crore per AI.
The concept of Anchor Investors (AIs) was introduced in June 2009. AIs were envisaged as a class of investors who come forward to anchor a transaction and were seen as committed investors who can be relied upon to anchor an issue of capital in all market conditions, adverse or otherwise.
Anchor investors are QIB (qualified institutional buyer) who makes an application for a value of R10 crore or more in a public issue made through the book building process. Another requirement that is relevant to the proposal under consideration is that allocation to AIs shall be on a discretionary basis, subject to a minimum two such investors for an allocation of upto R250 crore and five such investors for allocation of more than R250 crore.
Sebi observed that allotments made to AIs, in many of the public issues that opened since April 2010, revealed that contrary to the concept that envisaged AIs as QIBs, who could be relied upon to anchor the issue in times good or bad, the same is used as a license to give assured allotment to as many QIBs by the book running lead managers.
The result was that even in small issues, there were a number of anchor investors, with a far lower average allotment size when compared to the mandated application size. The market participants, thus, used the discretion given to them for allotting shares to large number of QIBs, which was not the regulatory intent when the concept was envisaged.