Anchor investor
Also written Anchor book · Anchor investor portion
A qualified institutional buyer allotted shares a day before a book-built issue opens — at least Rs 10 crore on the main board or Rs 2 crore on the SME exchange — under a discretionary, locked-in allocation.
In plain language
A book-built issue opens on a Monday with no demand visible and nothing to reassure a retail investor that serious money believes the price. The anchor book solves that. A day before the issue opens, the issuer allocates part of the institutional portion to large institutions on a discretionary basis, announces who took how much and at what price, and the market walks into the issue already knowing something.
An anchor investor is defined as a qualified institutional buyer who applies for a value of at least ten crore rupees in a mainboard book-built public issue, or at least two crore rupees in a book-built issue on the SME exchange.
The price of that early certainty is paid by the anchor, in lock-in and in a one-way price adjustment.
How it works
How much of the book. Up to sixty percent of the portion available for allocation to qualified institutional buyers may be allotted as the anchor investor portion.
How many investors — mainboard. The framework is sized in Rs 250 crore blocks. For an anchor portion exceeding Rs 250 crore, the maximum number of anchor investors per Rs 250 crore block was increased from 10 to 15; for every additional Rs 250 crore or part thereof, an additional 15 anchor investors may be allowed. The minimum allotment is Rs 5 crore per anchor investor. The earlier Category I (up to Rs 10 crore) and Category II (above Rs 10 crore and up to Rs 250 crore) sub-categories have been merged into a single category for allocations up to Rs 250 crore.
How many investors — SME exchange. A maximum of 2 for allocation up to Rs 2 crore; a minimum of 2 and maximum of 15 for allocation above Rs 2 crore and up to Rs 25 crore, subject to a minimum allotment of Rs 1 crore each; and above Rs 25 crore, a minimum of 5 and a maximum of 15 for the first Rs 25 crore plus an additional 10 for every further Rs 25 crore or part, again at Rs 1 crore minimum each.
Who is carved out of the anchor book. Forty per cent of the anchor investor portion is reserved — one-third (33%) for domestic mutual funds and seven per cent (7%) for life insurance companies registered with IRDAI and pension funds registered with PFRDA. Any undersubscription in the insurer and pension-fund bucket flows to domestic mutual funds.
The timetable. Bidding for anchor investors opens one day before the issue opening date. Allocation is completed on the day of the anchor bidding. The number of shares allocated and the price are given to the exchanges by the lead manager for dissemination before the issue opens.
The money. Anchors pay on application the same margin as other categories, and the balance within two days of the date of closure of the issue.
The one-way price adjustment. If the book-built price comes out higher than the anchor allocation price, anchors pay the difference. If it comes out lower, the excess is not refunded and the anchor is allotted at the price at which allocation was made. The asymmetry is the point: the anchor is paid for certainty in reputation, not in price.
Lock-in. 90 days on fifty per cent of the shares allotted and 30 days on the remaining fifty per cent, both from the date of allotment.
Who may not be an anchor. Neither the lead manager(s) nor any associate of the lead managers (with carve-outs for mutual funds, insurance companies, AIFs, pension funds and certain FPIs sponsored or promoted by such associates), nor any person related to the promoter or promoter group.
A worked example
A mainboard IPO of Rs 2,000 crore under the profitability route allocates not more than 50% to QIBs — Rs 1,000 crore. The issuer takes the anchor book to the maximum 60%:
Anchor investor portion = 60% × Rs 1,000 crore = Rs 600 crore
How many anchors may be admitted? Rs 600 crore is one Rs 250 crore block plus "every additional Rs 250 crore or part thereof" — a further Rs 250 crore and then Rs 100 crore, which is a part block and counts as one:
3 blocks × 15 = up to 45 anchor investors, each allotted at least Rs 5 crore
The reserved slices:
| Reservation | Share of the anchor portion | Rs crore |
|---|---|---|
| Domestic mutual funds | 33% | 198 |
| IRDAI life insurers + PFRDA pension funds | 7% | 42 |
| Total reserved | 40% | 240 |
| Open to other anchors | 60% | 360 |
If the insurer and pension bucket takes only Rs 26 crore, the unsubscribed Rs 16 crore flows to domestic mutual funds, not into the open pool.
The price asymmetry, in rupees. Allocation is made at Rs 620, so the anchors take Rs 600 crore ÷ 620 ≈ 96.77 lakh shares. The issue then closes and the book discovers Rs 645:
Anchors pay in addition: 96.77 lakh × Rs 25 = Rs 24.19 crore
Had the book instead discovered Rs 590, they would receive nothing back and would be allotted at Rs 620 — a notional Rs 29.03 crore worse off than the public. Same anchors, same shares, and the rule runs only one way.
And they cannot leave. 48.39 lakh shares locked for 90 days from allotment, 48.38 lakh for 30 days.
Why NISM asks about it
Chapter 4 (Issue Management – Important Terms), section 4.1 (17) Categories of Investor is where anchor investors are defined and the entire framework laid out, and Chapter 5 carries the allocation arithmetic it plugs into. The countable facts are examined directly: Rs 10 crore mainboard / Rs 2 crore SME threshold, 60% of the QIB portion, Rs 5 crore minimum allotment, 40% = 33% + 7% reservation, bidding one day before the issue opens, balance within two days of closure, and lock-in of 90 days on half and 30 days on half.
The conceptual question that recurs is the price asymmetry: the anchor pays up when the discovered price is higher and gets no refund when it is lower.
Common exam traps
- The workbook gives two different minimums for the mainboard anchor count. It says "a minimum of two (2) and a maximum of fifteen (15)" for allocations up to Rs 250 crore, and, describing the merged category, "the minimum number of anchor allottees shall be five (5) and the maximum fifteen (15)". The maximum of 15 and the Rs 5 crore minimum allotment are stated consistently; treat the minimum count as the unstable figure and read the question carefully.
- The one-way adjustment is the exam's favourite. Higher discovered price → anchor pays more. Lower discovered price → no refund.
- Sixty per cent is of the QIB portion, not of the issue. On a Rs 2,000 crore issue with a 50% QIB portion, the anchor book maxes out at Rs 600 crore, not Rs 1,200 crore.
- 40% reserved splits 33% + 7%, and the spillover runs only one way — from the insurer/pension bucket to domestic mutual funds.
- The lock-in is split 50/50 at 90 and 30 days from allotment, not a flat 30 days on everything.
- A QIB applying both as an anchor and in the non-anchor category is not making multiple applications. That is expressly permitted.
- The lead manager's own associates are barred, with narrow carve-outs for mutual funds, insurers, AIFs, pension funds and certain FPIs they sponsor or promote.
Where this is taught
- Series XXI-B · Chapter 2: Introduction to Securities Marketsintroduced here
- Series IX · Chapter 4: Issue Management – Important Termsintroduced here
- Series II-A · Chapter 9: Processes related to Public Offering of sharesintroduced here
- Series XV · Chapter 2: Introduction to Securities Marketintroduced here
Related terms
- ASBAThe mandatory payment mechanism for public and rights issues, in which your bank blocks the application money in your own account and debits it only if you actually get an allotment.
- Non-Institutional InvestorThe residual public-issue category for applicants who are neither retail individual investors nor qualified institutional buyers — in practice anyone bidding for more than Rs 2 lakh without being a QIB.
- Primary marketThe market where an issuer sells securities to investors for the first time and receives the money itself — the "new issue market", as against the secondary market where investors trade among themselves.
- Qualified Institutional BuyersThe closed list of institutional investors in the ICDR Regulations — SEBI-registered funds, non-individual FPIs, banks, insurers, large provident and pension funds — with special rights and limits in issues.
- Red Herring ProspectusThe offer document used in a book-built public issue, containing every disclosure a prospectus carries except the final price or number of shares, filed with the Registrar before the issue opens.
- PromoterUnder the ICDR Regulations, a person named as promoter in the offer document or annual return, or who controls the issuer's affairs, or on whose advice the board is accustomed to act.
- SME ExchangeA trading platform of a recognised stock exchange with nationwide terminals, permitted by SEBI to list securities of small and medium enterprises — distinct from the Main Board.
- Net offer to publicThe offer of specified securities to the public excluding reserved portions (such as for employees) and any securities subscribed by the promoter group — the pool that is split among QIBs, NIIs and retail.
- AssociateFor a merchant banker: an entity linked to the issuer by 10% or more of voting rights, by control, or by a common director. An associate may not lead manage the issue, only market it.
- Promoter lock-inThe rule that promoters' shares cannot be sold for a set time after an IPO — 18 months for the minimum 20 percent contribution, or 3 years if most proceeds fund capital expenditure; 6 months or 1 year for the excess.
- Differential pricingPricing an issue differently for different investor categories — in particular, allotting to retail investors at a discount of not more than 10 percent to the price at which other categories are allotted.
- Banker to an issueA scheduled bank or other SEBI-specified banking company that accepts application and allotment monies, refunds application money and pays dividend or interest warrants for an issue.
- Standardised UPI IDsSEBI's framework requiring a verified, validated UPI ID linked to a registered bank account, so an investor paying by UPI for a public issue knows the money is going to a genuine intermediary.
- Mezzanine RoundThe last private round before listing: pre-IPO money that pays for listing formalities, often with anchor investors allotted shares at a discount to the IPO price and ESOP holders selling out.
- Pre-IPO StrategyAn AIF mandate to subscribe to a company's shares before its IPO at a discount to the issue price, accepting the ICDR lock-in that runs from the date of listing.