October 31, 2025
5 mins read
In order to serve as a conduit between the public and the corporation, the Securities and Exchange Board of India introduced anchor investors to the financial market in 2009.
Since anchor investors are crucial in deciding whether or not to invest in an asset, let's talk about them.
Prior to delving into a thorough explanation of what anchor investors are, it is important to note that they are among the primary factors influencing the value and market movement of an asset.
An IPO benefits from the visibility and confidence that anchor investors provide. Their involvement increases market confidence and facilitates price discovery. These investors can boost demand and subscription momentum because they are given shares prior to the IPO's public opening.
Here is what anchor investors do that makes them a significant market participant and answers any questions you may have about what they are:
Because anchor investors are renowned for their thorough due diligence, their choice of an asset or security in the market lends confidence.
Impacts a security's market value
An anchor investor has a huge impact on the success of any asset because they are typically viewed as having a higher value in the stock market.
A day before the IPO opens, shares are distributed to anchor investors. Anchor investors may receive up to 60% of the Qualified Institutional Buyer (QIB) allocation. For these investors, a minimum application size of ₹10 crore is required. After the allotment date, the shares are locked in for at least 30 days.
Since it has been demonstrated that anchor investors are important to the stock market, let's examine how they function:
When investing in securities, an anchor investor must adhere to a rigid investment amount. For example, SEBI states that an anchor investor must contribute at least ₹10 crore to an initial public offering.
Anchor investors must adhere to a 30-day lock-in period, meaning they cannot withdraw from a security before 30 days have passed since the allotment date, because they have a substantial impact on market securities.
To maintain openness and integrity, SEBI oversees every action taken by an anchor investor in the stock market.
Mutual funds, insurance providers, pension funds, sovereign wealth funds, and foreign portfolio investors are examples of anchor investors. ICICI Prudential, SBI Life Insurance, HDFC Mutual Fund, and the Government of Singapore Investment Corporation (GIC) are a few examples.
Using an example is a straightforward method to comprehend what anchor investors mean.
Assume that a business intends to issue 10,000 of its shares as first public offerings (IPOs). The business offers a substantial percentage of its shares to banks or mutual funds as anchor investors at steep discounts prior to launching its initial public offerings (IPOs) on the stock market.
The business permits banks to own 1,000 shares and mutual funds to own 2,000 shares. The company already has 7,000 initial public offerings (IPOs) for the general public after going public on the stock exchange, with assistance from well-known banks and mutual funds to boost the price and establish reputation.
1. Participation of Institutions
Their early involvement gives the IPO problem more institutional weight.
2. The Issuer's Credibility
Having reputable organizations involved can boost trust and awareness.
3. Assistance with Price Discovery
Setting IPO pricing benchmarks is aided by their bids at the upper price range.
4. Momentum for Early Subscriptions
Other investor groups are encouraged to subscribe as a result of their involvement.
5. The Impact of Market Sentiment
Both retail and non-institutional interest may benefit from anchor allocation.
Additional Read: Types of Investors In IPO
1. Lock-in Period of 30 Days
Anchor investors are required by SEBI to retain their allocated shares for a minimum of 30 days, which curbs speculation right after listing.
2. Extra Lock-in for Serious Problems
50% of the anchor portion may be locked up for 90 days for initial public offerings (IPOs) larger than a specific size. In the event of significant fundraising difficulties, this prolonged lock-in offers extra market stability.
3. Lock-in's objective
Stability is guaranteed by the lock-in mechanism, which deters quick profit-booking.
4. Encourages Extended Holding
It shows that institutions are committed to more than just listing gains.
When a company sells its shares to the public for the first time through an IPO (Initial Public Offering), different kinds of investors can buy them. Retail investors, high-net-worth individuals (HNIs), and qualified institutional buyers (QIBs) usually invest during the IPO subscription window. Anchor investors, on the other hand, invest a day before the IPO opens. They must keep their shares for a certain lock-in period and usually invest very large sums of money.
Each of the four main investor groups plays an important role in the stock market. Let’s look at them one by one:
Anchor investors are large financial institutions that put in at least ₹10 crore when subscribing to shares in an IPO. Their early entry gives confidence to the market and signals trust in the company.
These are SEBI-registered institutions such as banks, insurance companies, or mutual funds. They are allowed to buy shares in an IPO but cannot be given more than 50% of the total shares offered. They must invest more than ₹2 lakh.
These investors are similar to QIIs but are not registered with SEBI.
These are everyday investors who can buy shares worth up to ₹2 lakh in an IPO.
Limit on Allocation Anchor investors can get no more than 60% of the shares reserved for the QIB category.
Application Size They must apply for at least ₹10 crore, making sure only big institutions with strong funds can participate.
Lock-in Period For large IPOs, 50% of the shares given to anchor investors are locked in for 90 days, while the rest are locked in for at least 30 days.
Disclosure Rules Details of anchor share allocation must be shared with the public and stock exchanges.
Price Shares are usually sold to anchor investors at the highest price within the IPO range, and all anchor investors pay the same price.
Anchor investors are big institutions that buy shares a day before an IPO starts. Their role builds trust in the market, helps in setting the share price, and attracts other investors. SEBI ensures fair play by setting rules for disclosure, lock-in, and allocation.
While financial terms may sound complex, learning them helps you understand the stock market better. Anchor investors are important because their early commitment supports the IPO while also allowing them to invest with an advantage.
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An anchor investor is a large financial entity registered with SEBI, like a mutual fund or bank that walks in like an investor in shares of a company to add credibility and value.
Anchor investors have a significant role to play in the IPO process as they purchase shares of the company before it announces IPOs at a predetermined price thus adding credibility to IPOs and influencing its value in the market.
Anchor investors serve the primary purpose of enhancing the value of IPOs in the stock market by adding credibility, trust and transparency. Additionally, when shares of a company are offered to anchor investors, the company is left with a limited number of IPOs for the public that again pushes the value.
Any company that is planning to go public by registering itself on the stock exchange are usually seeking the entry of an anchor investor.
SEBI makes anchor investors follow a 30-day lock-in period that stops them from backing out from a share before the passing of 30 days of IPO announcements. This helps prohibit a significant drop in the IPO price.
Anchor investors come bearing certain risks as well including limited price discovery as shares are offered to them at a predetermined price without gauging the stock market additionally, relying heavily on anchor investors has concentration risk as well i.e. keeping a large portion of the company’s shares in a single entity thus restricting diversification.
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