Anchor Investors Resist Initial Selloffs But SEBI Reveals: Half Their IPO Bets Are Dumped Within A Year

Anchor Investors Resist Initial Selloffs But SEBI Reveals: Half Their IPO Bets Are Dumped Within A Year​

A new study by the Securities and Exchange Board of India (SEBI) reveals a significant post-IPO trend for anchor investors. While these sophisticated participants may not rush to exit when their lock-in periods conclude, the data shows that their holdings steadily diminish over the subsequent months. The findings underscore that the prescribed lock-in windows only capture a fraction of eventual divestment within the market.

Anchor Investor Landscape and Allocation Dynamics​

Anchor investors are Qualified Institutional Buyers (QIBs) who receive pre-IPO allocations from issuers in consultation with Book Running Lead Managers (BRLMs). This allocation serves as an institutional endorsement, intended to stabilize demand during the initial subscription period.

The anchor investor universe is heavily weighted towards foreign portfolio investors (FPIs) and mutual funds (MFs). According to SEBI data, FPIs accounted for 43.8% of the allotment value, closely followed by MFs at 38.5%. Other QIB categories, including insurance companies and banks, contributed 10.5%, while alternative investment funds (AIFs) made up 5.3%.

The composition of anchor allotments also varies significantly based on issue size. In smaller issues (beyond the ₹1,000 crore mark), the presence of AIFs and Body Corporates sharply decreases. Larger offerings generally see a nearly binary split between FPIs (45-47%) and MFs (38-42%).

Early Exit Rates Post Lock-in Window​

The study analyzed 242 mainboard IPOs, tracking the gradual sell-off against initial institutional backing. At the aggregate level, the weighted exit percentage immediately after the first unlock event stood at 3.2%. This trend accelerated progressively, rising to approximately 8% after 60 days and reaching 17.3% after 90 days.

This gradual selling indicates that anchor investors generally retain a significant portion of their initial holdings even past the mandated lock-in periods. SEBI also found an inverse relationship between issue size and early exit rates, with the smallest issues (₹0-250 crore) experiencing the highest intensity of early selling. These smaller categories saw 32.4% disposed of after 90 days.

Component Performance Across Exit Windows​

When examining the institutional segments, FPIs showed a more assertive early exit strategy than MFs. At the first exit window, FPIs exited 3% of their allotment; however, their cumulative exit rose to 20% after the second exit window.

Mutual funds recorded significantly lower cumulative exits in this period, showing 3% at the first window and 15% by the second. While Other QIBs tended toward lower exit rates similar to MFs, both FPIs and AIFs exhibited exit levels comparable to or higher than their institutional counterparts. SEBI’s analysis confirmed that FPIs maintained a higher median exit percentage across all stages compared to MFs.

The One-Year Reckoning for Anchor Holdings​

Extending the analysis over 167 IPOs listed through the end of 2024 provided the most striking insight: the aggregate weighted exit intensity reached 51% after one year from allotment. This outcome demonstrates that initial lock-in periods capture only a minor phase of anchor selling.

By this critical one-year mark, roughly half of the entire anchor allotment value had been disposed of across the tracked portfolios. FPIs led this divestment trend, having exited approximately 60% of their aggregate allocation. Body Corporates followed at 58%, AIFs at 55%, while MFs recorded the lowest exit rate at 38%.

Price Dynamics and Anchor Exit Intensity​

The research also highlighted a directionally negative relationship between high anchor exit intensity and stock performance during the first unlock window. For stocks where the exit exceeded 10% in this initial period, FPIs were the largest contributor, recording an average exit of 24.5%. MFs averaged a 11.5% exit in such scenarios.

While price impact at the 30-day unlock window was notable, the subsequent 90-day unlock generally registered muted market effects compared to the initial intense selling phase. The divergence between FPI and MF performance widened substantially by one year; FPI exits stood at approximately 60%, while MFs were around 38%.