The company, which made its debut on the stock exchanges in the last financial year, has raised over Rs 1,300 crore through pre-IPO offerings.
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This is three times the amount collected through this route in previous years and the highest sweep since 2017, the year for which data is available. This amount is equivalent to 1.93% of the funds mobilized through IPOs in FY24.
According to data from primedatabase.com, a leading market tracker, the previous highest sweep by such offering was in FY21 when a company raised Rs 931 crore, compared to the total amount raised through IPOs in the same year. It accounted for 2.95% of the total.
Companies that earned the most from such placements in FY24 included Rashi Peripherals (₹15 billion), SBFC Finance (₹15 billion), Jupiter Life Line Hospitals (₹12.3 billion), Yatharth Hospital & Trauma Care Services ( ₹12 billion). .
Pre-IPO investing refers to the purchase of shares in a company before the issue actually begins, typically after the draft prospectus has been filed and before the offering begins.
“Companies can obtain a price benchmark for their stock through a pre-IPO offering, and may also have the potential to bring in powerful investors. Investors are guaranteed a certain allocation at a certain price, but This may not be the case when investing through anchor books or qualified institutional buyer books,” said Pranav Haldea, Group Managing Director, PRIME Database.
According to Haldea, pre-IPO offerings can be particularly useful for smaller IPOs, as attracting major investors can increase the credibility of the issue. Last year’s IPO scene was dominated by mid- and small-cap stocks. The average deal size has significantly decreased to Rs 81.5 billion in FY2024 compared to Rs 1,409 billion and Rs 2.15 billion in the previous two years.
The decision to conduct a pre-IPO is made by the company in consultation with its investment bankers. Such introductions are particularly targeted at wealthy investors and family offices.
IPO allocation
From April 1, 2022, the market regulator has changed the rules regarding IPO allocation for high net worth investors. One-third of the shares in the NII category will be allocated to HNIs with application size of ₹20-10 million. The rest is for applications above ₹10 million.
“HNI allocation is currently done through lottery. Earlier, if you placed a bid of Rs 100 crore and the issue was subscribed 100 times, you would get an allocation of Rs 100 crore.
new rules
Under the new rules, there is no guarantee that an HNI will get a higher quota simply by placing a higher bid for a highly reserved issue. This is one of the reasons why wealthy investors prefer investing through pre-IPO funds, he said. Munish Agarwal, Managing Director and Head of Equity, Capital and Markets at Equilus. says.
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Pre-IPO investors must hold shares for six months from the time of the IPO. The anchor investor is subject to his 30-day lock-in from the post and can sell half of his holdings and the rest after 90 days.
Pre-IPO shares can be allocated at any price, but anchor allocations are made within the IPO price range.
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