An anchor investor in a public issue refers to a qualified institutional buyer making an application for a value of Rs 10 crore or more through the book-building process.
The process was aimed at improving the Investment opportunity for retail investors with the company.
Securities and Exchange Board of India (Sebi) introduced the concept of “anchor investor” in public issues in July 2009 with a view to create a significant impact on pricing of initial public offers. Since equity markets are volatile, it is believed that companies going for initial public offering (IPO) would benefit from anchor investors.
An anchor investor can attract investors to public offers before they hit the market to infuse confidence. The volume and value of anchor subscriptions will serve as an indicator of the company’s reputation and soundness of the offer.
Finally, the anchor investor sets a benchmark and gives a guideline for issue pricing and interest among Qualified Institutional Buyers (QIBs).