What Is An Anchor Investor?

Of late, there’s been a deluge of initial public offerings (IPOs), with many companies tapping the primary market. As investors look for news around IPOs, another term is generating interest—anchor investors. Their names make a buzz even before an issue opens to retail investors.

Recently, the Securities and Exchange Board of India (Sebi) analysed 242 mainboard IPOs listed between April 2022 and October 2025. It found anchor investors had gradually reduced their holdings after the mandatory lock-in periods. About 51 per cent of original anchor allocation was sold in a year with foreign portfolio investors (FPIs) exiting 60 per cent of their holdings. Smaller IPOs saw even faster exits.

Who are anchor investors?

• Anchor investors are large institutional investors, such as mutual funds, insurance companies, pension funds, banks, and FPIs.

• They are called so as they commit to buy a large number of shares and in a sense, act like anchors for the issue.

• Mutual funds play an important role as anchor investors in the Indian IPO market. One-third of the anchor portion is reserved for domestic mutual funds, subject to valid bias.

• Sebi introduced anchor investor guidelines in 2009 to raise investor confidence in the IPO process and lend their credibility to the issue.

• In 2025-26, Sebi revised the anchor allocation framework, cutting the minimum allotment from Rs 10 crore to Rs 5 crore.

Why are they important?

• A strong anchor book can reassure investors that professional institutions have studied the company and are willing to commit their capital.

• Participation by anchor investors gives the IPO issuer and merchant bankers an early indication of institutional demand for the shares.

• For a company entering the stock market for the first time, marquee institutional names can create confidence among retail investors.

• Institutional participation improves the demand for shares and helps create a more diversified shareholder base at the time of listing.

• Mandatory lock-ins for allocated shares prevent immediate dumping, thus keeping share prices steady in the short term.

How does the anchor process work?

• Anchor bidding takes place one working day before the issue opens for public subscription by other investors.

• The names of the anchor investors along with their allocation are disclosed before the public issue opens.

• The company, in consultation with its book-running lead managers, can allocate up to 60 per cent of the qualified institutional buyer (QIB) portion to anchor investors.

• Shares allotted to anchor investors have a lock-in period, with 50 per cent of the shares locked in for 30 days and the rest for 90 days from IPO allotment.

• Anchor investors can sell their shares in the open market after the lock-in period is over.