Anchor investors stay put after IPO lock-in, but half their bets are gone within a year: Sebi

Anchor investors may not rush for the exit when their IPO lock-in periods end, but their holdings steadily shrink over the following months, according to a recent report by the Securities and Exchange Board of India (SEBI).

The study, co-authored by Laltu Pore, Pampana Hari Nayak and Akshay, examined 242 mainboard IPOs and found that while only a small share of anchor allocations was sold around the first unlock, roughly half of the original anchor allotment value had been disposed of within a year.

Anchor investors are Qualified Institutional Buyers (QIBs) who are allocated shares in a mainboard IPO on a discretionary basis by the issuer, in consultation with the Book Running Lead Managers (BRLMs), one day before the IPO opens for subscription. This pre-IPO allocation is intended to signal institutional endorsement of the offering and help stabilise demand during the subscription period.


FPIs dominate anchor allotments

The anchor investor universe is dominated by foreign portfolio investors (FPIs) and mutual funds (MFs), which accounted for 43.8% and 38.5%, respectively, of allotment value, according to SEBI.

Other QIBs, including insurance companies and banks, contributed 10.5%, while alternative investment funds (AIFs) accounted for 5.3%. Body corporates had a marginal share.

AIFs, Other QIBs and Body Corporates accounted for a significant share of the anchor portion in smaller issues. As issue size increased beyond ₹1,000 crore, the presence of AIFs and Body Corporates shrank sharply.

For larger issues, the anchor allotment became a near-binary split between FPIs, at around 45-47%, and MFs, at around 38-42%, with Other QIBs accounting for the remaining 9-12%.

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Anchor investors sell gradually after lock-in

Anchor exit rates remained low at the aggregate level. The weighted aggregate exit percentage immediately after the first unlock event, around 30 days after allotment, was 3.2%. This rose to around 8% after 60 days and approximately 17.3% after 90 days.

This indicates that while selling is gradual and cumulatively significant, anchor investors retain a majority of their anchor portion even beyond the prescribed lock-in windows, according to the study.

SEBI also found an inverse relationship between issue size and exit rates. The smallest issues, with an issue size of ₹0-250 crore, recorded the highest selling: 9.1% after 30 days, 20.3% after 60 days and 32.4% after 90 days.

These rates were substantially higher than those recorded across other issue-size categories.

FPIs record higher anchor exits

At the aggregate level, FPIs exited 3% of their anchor allotment during the first exit window, according to SEBI. Their cumulative exit rose to 9% after 60 days and 20% after the second exit window.

MFs, on the other hand, recorded cumulative exits of 3% at the first exit window, 7% after 60 days and 15% after the second exit window.

AIFs and Body Corporates recorded exit rates comparable to FPIs despite their smaller allotment sizes, while Other QIBs tended towards lower exit rates comparable to MFs.

SEBI's analysis also found that FPIs had a higher median exit percentage than MFs at every stage, along with a wider range of exit percentages.

Half of anchor holdings sold within a year

The extended analysis, which covered 167 IPOs listed through the end of 2024, showed that the aggregate weighted exit rose from approximately 4% after 30 days to 9% after 60 days, 19% after 90 days, 34% after 180 days and 51% after one year.

By one year from allotment, approximately half of the aggregate anchor allotment value had been disposed of across the anchor investors' portfolio, indicating that the prescribed exit windows capture only a fraction of eventual anchor selling, according to the study.

By one year, FPIs had exited approximately 60% of their aggregate anchor allotment, the highest among all categories. Body Corporates exited 58%, AIFs 55% and Other QIBs 46%, while MFs recorded the lowest exit at 38%.

The FPI-MF exit divergence visible after 90 days, at approximately 21% for FPIs versus 15% for MFs, widened substantially by one year, when the corresponding figures were approximately 60% and 38%.

Price impact at exit windows

The analysis indicated a directionally negative relationship between anchor exit intensity, particularly at higher exit rates of more than 10%, and price performance during the first unlock window.

For stocks with more than 10% exit during the first unlock window, FPIs were the largest contributor, with an average exit of 24.5%, while MFs recorded an average exit of 11.5%.

Price impact during the 90-day unlock window was generally more muted than at the 30-day window.

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