Anchor investor is the investor who comes first to participate in any issue of securities by a Company. Any subscription by an anchor investor establishes a higher level of confidence in other investors. The general psychology is unless the company has one investor to invest, nobody wants to invest. The moment you have one investor, other would feel assured that others are amenable to invest and that builds a trusts about the company proposing to issue securities. Generally, an anchor investor invests in any company to infuse confidence before that company hit the market for public offering. The quantum and price of investments by anchor investors indicates the goodwill and soundness of the fund raising exercise and sets a benchmark. Globally, privates equity funds, institutions, banks and mutual funds acts as the anchor investors.
Securities and Exchange Board of India (SEBI) had introduced the concept of anchor investors in India in July 2009 by amending SEBI (Disclosure and Investor Protection) Guidelines 2000 (DIP Guidelines). Put briefly, anchor investors are the investors who shall be offered, and subscribed to the securities in a book building offer before the offer is open to the public. The concept continued with the enactment of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR) which replaced DIP Guidelines in August 2009, to governs the public offering in India.
As defined in the ICDR, “anchor investor" means a qualified institutional buyer (“QIB”) an application for a value of ten crore rupees or more in a public issue made through the book building process in accordance with these regulations. As per ICDR the following category of investors are covered in the definition of QIB and accordingly can act as the anchor investors in India:
i) a mutual fund, venture capital fund and foreign venture capital investor registered with SEBI; ii) a foreign institutional investor and sub-account...