Summary of this article
FPIs sell IPO anchor holdings faster than mutual funds, Sebi study finds
Anchor selling rises gradually, with half holdings sold within one year
Heavy anchor selling can put pressure on IPO stock prices
Foreign portfolio investors (FPIs) sell their IPO anchor holdings faster than mutual funds. Their selling increases after the 30-day and 90-day lock-ins and continues to rise over the following months, according to a research paper published by Securities and Exchange Board of India (Sebi).
They sold around 3 per cent of their anchor holdings after the first unlock, 9 per cent by 60 days and 20 per cent after the second unlock. For mutual funds, the exit was lower at 3 per cent, 7 per cent and 15 per cent, respectively.
"Distribution plots of ISIN-level exit percentages by FPIs and MFs reveal that at every exit stage, FPIs have a higher median exit percentage, wider IQR (inter quartile range), and heavier upper tail than that of MFs, suggesting that FPIs exit more as compared to MFs," the report said.
The difference becomes much wider over a year. FPIs had exited around 60 per cent of their anchor allocation by 365 days, compared with 38 per cent for mutual funds. Body corporates exited 58 per cent, AIFs 55 per cent and other qualified institutional buyers (QIBs) 46 per cent.
The study also found that FPIs were the largest anchor investor category, accounting for 43.8 per cent of total anchor allotment value. Mutual funds followed with 38.5 per cent. Other QIBs, including insurance companies and banks, accounted for 10.5 per cent, while AIFs made up 5.3 per cent.
FPIs Are The Biggest Source Of Selling
FPIs also accounted for the largest absolute value of shares sold. They exited around Rs 1,750 crore at the first exit window, Rs 4,800 crore by 60 days and Rs 10,400 crore by the 90-day mark.
"FPIs not only exit a higher percentage of their anchor holdings, but also generate the largest quantum of secondary market supply by a wide margin, given their larger allotment base," the report said.
Mutual funds were the second-largest source of supply, selling around Rs 1,300 crore at the first exit, Rs 3,200 crore by 60 days and Rs 6,800 crore by 90 days.
The study found that anchor selling is spread across the entire 90-day period rather than concentrated immediately after a lock-in expires. At the first exit, 192 of the 242 IPOs recorded an exit of less than 25 per cent of their anchor portion, while 43 IPOs saw no exit. By the 90-day mark, only one IPO recorded zero exit, although most issues still had less than 25 per cent of their anchor portion sold.
Smaller IPOs See Higher Anchor Exits
IPOs in the Rs 0-250 crore category recorded the highest exit rates, with 9.1 per cent sold after 30 days, 20.3 per cent by 60 days and 32.4 per cent by 90 days.
Exit rates generally declined as issue size increased. The Rs 1,001-2,500 crore category recorded the lowest first-exit rate at 2.6 per cent.
The pattern persisted over a longer period. Among the 167 IPOs tracked for a year, the smallest issue-size bucket recorded a 365-day exit of 72.5 per cent, against 40.8 per cent for IPOs in the Rs 1,001-2,500 crore category.
Mutual funds were particularly conservative sellers. In the Rs 501-1,000 crore IPO category, 46 of 71 issues recorded zero MF exit at 30 days, compared with 25 of 70 issues for FPIs. The study found no instance of mutual funds exiting 100 per cent of their anchor holdings in any issue-size category.
Anchor Selling Can Hurt Stock Prices
The research also found a link between heavy anchor selling and stock-price performance around the first unlock.
"The analysis indicates a directionally negative relationship between anchor exit intensity (particularly at higher exit rates i.e. >10%) and price performance during the first unlock window, consistent with the supply pressure mechanism," the authors said.
For IPOs where more than 10 per cent of the anchor portion was sold during the first unlock, the average price impact was around minus 3.5 per cent. The median price impact was around minus 6 per cent. At the 90-day unlock, however, the price impact was much more muted.
FPIs were the largest contributors to selling in this high-exit group, with an average exit of 24.5 per cent, compared with 11.5 per cent for mutual funds.
Anchor Selling Picks Up Gradually After Lock-In
The study also found that anchor investors sold just 3.2 per cent of their IPO holdings after the first 30-day unlock, rising to 17.3 per cent by the 90-day mark. This shows that most anchor investors continued to hold their shares even after the lock-in periods ended.
For 167 IPOs tracked over a year, anchor exits rose to 34.4 per cent by 180 days and 50.7 per cent by 365 days. “By one year from allotment, approximately half of aggregate anchor allotment value has been disposed of across the anchor investors’ portfolio,” the Sebi researchers said.
