SEBI is considering allowing "anchor investors" to purchase 3-8% of shares during IPOs to help discover market prices. Anchor investors would be large strategic investors like private equity funds. This could boost IPO activity by giving investors an opportunity to participate earlier. While it may revive the primary market, the full impact is unclear. Anchor investors would face a 3-month lock-in period for the shares.

1. SEBI mulls 'anchor investors' to boost IPOs
Mon, Jun 15 09:30 PM
The Securities and Exchange Board of India (SEBI) is working towards better way to manage
and issue shares in the primary market. One of the important changes being mulled is
introduction of the concept of an 'anchor investor' under which strategic investor would be
allowed to pick up around 3 to 8 per cent of the shares on sale in initial public offers (IPOs).
The logic is that such an investor can help in price discovery of IPOs. Though SEBI has not
disclosed this publicly, it has been holding discussions with market participants, who told
Hindustan Times that the regulator is likely to present the move in a discussion paper shortly.
This follows a meeting of its primary markets' advisory committee held last month. SEBI
officials could not be reached for their comments.
Market players believe that the move could open an opportunity for private equity and venture
capital investors to participate in the IPO instead of the pre-IPO period. Jagannadham
Thunuguntla, Equity Head at SMC Capitals, said that though this would revive primary
markets, its larger impact was not clear.
"This will help in detailing a price band based on how anchor investors are investing in the IPO,"
he said. The SEBI proposal plans to allow a strategic investor to pick as much as 25 per cent of
the total shares reserved for institutional investors during an IPO, which could be anything
around 3-8 per cent of total shares of the company.
However, the anchor investor would face a lock-in period of three months.