Pre and Post Anchor Investment Impact on IPO Returns

Abstract

In the middle of a major crash in Indian stock market, market regulator SEBI had introduced the concept of Anchor investor in June 2009. An anchor investor is a qualified institutional buyer, who can invest up to 60 % of the qualified institutional buyer (QIB) quota; subject to minimum application size of each anchor investor should be Rs.10 crore and a lock in period of at least 30 days. The main intention behind introduction of this concept was to ensure higher efficiency in the Indian stock market as well as to boost the confidence of investors in IPOs. This study, therefore, using the data for 344 IPOs, issued between January 1, 2002 and December 31, 2017, listed in NSE, attempts to compare pre and post Anchor investment impact on IPOs price performance. Analyzing the results using Mann Whitney- U test, the study found some significant impact of anchor investors on IPOs price performance in six months and one year after listing day. In six months and in one year after listing day, returns form Anchor backed IPOs were significantly higher than non Anchor Backed IPOs. Moreover study also absorbed that, returns from Anchor back IPOs were constantly increasing form listing day up to one year as compare to non anchor backed IPOs returns, which turn further indicated that ,introduction of Anchor investment has really been able to achieved price stability objective.