1. Who Are Anchor Investors?
Anchor investors are large, qualified institutional buyers (QIBs) such as mutual funds, insurance companies, pension funds, banks, and foreign institutional investors. They are invited to invest in an IPO a day before it opens to the public, subscribing to a significant portion of shares at a fixed price within the IPO price band.
SEBI introduced the anchor investor concept in 2009 to strengthen IPOs and boost market confidence. In mainboard IPOs, anchor investors must invest at least ₹10 crore, while in SME IPOs, the minimum is ₹1 crore.
Sources: [1][4][5][7]
2. Key Roles and Benefits of Anchor Investors
- Enhance Credibility and Confidence: Their early, large investments signal trust in the company, boosting confidence among retail and other institutional investors.
- Price Discovery: Demand from anchor investors helps companies and bankers determine the right price range for IPO shares.
- Boost Subscription and Demand: By subscribing to a major portion, anchor investors help ensure the IPO is well-received and fully subscribed.
- Price Stability: Their participation creates a price floor and reduces the risk of extreme volatility on listing.
- Attract Retail Investors: The involvement of reputed institutions encourages retail and HNI investors to participate.
- Reduce Underwriting Risk: Pre-allocating shares to anchors lowers the risk of unsold shares, making the IPO process more efficient.
- Long-Term Commitment: Anchor investors are subject to a lock-in period, ensuring a portion of shares remains with stable hands post-listing.
- Support for SME IPOs: Anchor investors also play a vital role in boosting confidence in the SME sector, encouraging broader participation.
Sources: [4][6][7][8]
3. Anchor Investor Lock-in Period
To prevent immediate selling and price volatility, anchor investors face a lock-in period after allotment:
- 50% of allotted shares are locked for 30 days.
- The remaining 50% are locked for 90 days.
This staged lock-in, introduced by SEBI, ensures price stability and reduces panic selling immediately after listing.
Sources: [2][3][4][5]
4. How Are Anchor Investors Selected?
- The company and its investment bankers choose anchor investors based on their financial strength, reputation, and track record.
- Each anchor investor must apply for at least ₹10 crore in a mainboard IPO.
- Up to 60% of the QIB portion of shares can be allocated to anchors.
- For issues less than ₹250 crore, there must be at least 15 anchor investors; for larger issues, at least 25.
Sources: [4][5][6]
5. Real-World Impact and Notable Anchor Investors
Anchor investors include major mutual funds, sovereign funds, insurance companies, and global financial institutions. Their participation is closely watched by the market as a signal of IPO quality.
Example: In recent years, names like Rajasthan Global Securities, Saint Capital Fund, and Nav Capital VCC have been frequent anchor investors in Indian IPOs.
Sources: [5][6]
6. Summary Table: Anchor Investors at a Glance
| Aspect | Details |
|---|---|
| Who can be an Anchor Investor? | Qualified Institutional Buyers (QIBs) investing ₹10 crore+ (mainboard), ₹1 crore+ (SME) |
| When do they invest? | One day before IPO opens to public |
| Allocation Limit | Up to 60% of QIB quota |
| Lock-in Period | 50% shares: 30 days; 50% shares: 90 days |
| Benefits | Credibility, price stability, demand boost, retail interest |