The Securities and Exchange Board of India has recommended reservation for domestic mutual funds within the quota allocated for "anchor investors" in initial public offers.
The concept of anchor investors was introduced after a Sebi board meeting on Thursday. This allows for 30 per cent of the quota for qualified institutional buyers to be allocated to anchor investors.
For domestic mutual funds, Sebi said the quota should be one-third of the anchor investor portion or 10 per cent of the QIB portion.
Anchor investors will have to invest a minimum of Rs 10 crore (Rs 100 million) and bring in 25 per cent of the margin money on application and the remaining 75 per cent within two days of the issue closing.
The new concept has generated interest because it is expected to shore up IPOs when markets are doing badly and reduce volatility on listing day, since such anchor investor allocations carry a one-month lock-in.
Sebi has also said if the anchor investor allocation is less than 30 per cent of the QIB quota, the remainder can be allocated to other investors.
Those allotted shares under the anchor investor quota can also apply for the same IPO under the general QIB quota.
Sebi has also said the anchor investor would be required to bring in the additional amount if the price at which it is allotted shares is lower than the price derived through the book-building route that QIBs have.
The anchor investor will not, however, be refunded money if the book-built price is lower than the price at which the anchor investor is allotted shares.
Merchant bankers, therefore, see possibilities of allocating shares to anchor investors at a price that may be higher than the issue price derived through the book-building route.
Bidding for the anchor investor category will open a day before the bidding for other investors opens. Merchant bankers will have to disclose the number of shares allotted to the anchor investor and the price before opening the issue for other investors.
Meanwhile, Sebi has also clarified that any change in margin requirements for QIBs will apply to anchor investors as well. QIBs currently pay only 10 per cent of the application money upfront, but Sebi is considering a proposal to make them pay the entire amount with their applications.