Bond issuers are increasingly ensuring that a portion of the issuances they make on private placement basis are reserved for anchor investors such as mutual funds, non-banking finance companies, banks and insurance companies, in view of demand from the latter.

Investment by anchor investors is par for the course in initial public offer (IPO) of equity shares by companies. Now, it is fast catching up on the debt side too, especially after markets regulator SEBI reviewed the provisions pertaining to electronic book provider (EBP) platform.

SEBI, in its May 16, 2025 circular, said the quantum of allocation to the anchor investor(s) will be at the discretion of the issuer, subject to the anchor portion not exceeding 30 per cent of the base issue portion in the case of debt instruments rated “AAA/ AA+/AA/ AA-”; not exceeding 40 per cent in the case of “A+/A-”; and not exceeding 50 per cent in the case of “others.”

Reserving a portion of the debt issuance for anchor investors gives institutional investors an assurance that bonds will be allotted to them. In an open bidding process, there is no guarantee that they will get the quantum of bonds they want.

A few examples highlight the growing phenomenon of anchor investment in bond issuances. In Samvardhana Motherson International Ltd’s recent ₹2,500 crore non-convertible debenture (NCD) issuance (comprising base issue of ₹2,000 crore and a greenshoe option of ₹500 crore), SBI Capital Market was the anchor investor, investing ₹600 crore (30 per cent of the base issue size).

Jubilant Bevco Ltd’s ₹3,000 crore NCD issue saw anchor investors, including HDFC Mutual Fund, Nippon India MF, Franklin Templeton MD, Aditya Birla Sun Life MF, Axis MF, Kotak Mahidra MF, Nomura Fixed Income Securities and Bajaj Finance, collectively investing ₹900 crore.

In the case of L&T Metro Rail (Hyderabad) Ltd’s ₹2,872 crore NCD issuance, ₹860 crore was reserved for anchor investors such as Aditya Birla Sun Life MF, Nippon MF, Axis MF, HDFC MF, HDFC Standard Life Insurance Company and Kotak MF.

Venkatakrishnan Srinivasan, Founder and Managing Partner of Rockfort Fincap LLP, observed that India’s corporate bond market is steadily entering a more mature phase, and one of the most significant developments driving this evolution is the formalisation of anchor investors in debt private placements.

“While anchor participation has long existed in equity IPOs, it was entirely absent in the bond issuance process until SEBI took the first step in 2023 by introducing a provision allowing up to 30 per cent of the base issue size to be allocated to anchor investors.

“However, that framework lacked specific timelines or disclosure standards, limiting its practical effectiveness. With SEBI’s latest circular dated May 16, 2025, this mechanism has now been sharpened and structured,” he said.

Venkatakrishnan noted that for issuers, early anchor commitments create a strong foundation for price discovery, especially in volatile or tight liquidity conditions. They also provide subscription certainty and signal quality to the broader market, allowing the issuer to price more competitively and access capital at lower yields. For first-time issuers or those with lower ratings, credible anchor participation lends immediate credibility and helps expand investor participation.

“For anchor investors, the framework offers preferred access to well-structured credits, aligns with targeted portfolio strategies and grants strategic influence in shaping deal terms or pricing ranges. Crucially, it gives them a time advantage without being constrained by compressed bidding windows,” the RockFort Fincap chief said.

Marzban Irani, CIO-Fixed Income, LIC MF, observed that the main problem in the debt market is price discovery, with bidding sometimes going all over the place.

“For example, in a ₹200 crore bond issuance, if an anchor investor comes in with ₹50 crore, price discovery is done. So, in a way, it is good that there is an investor in debt issuances, as we (other investors) know that there is somebody else also who is bidding along expected lines,” he said.

Ajay Manglunia, Executive Director, Capri Global Capital Ltd, said anchor investment indicates that investor(s) are committed to subscribing a portion of the bond issuance. However, the pricing has to be discovered by bidding on the EBP.

So, under anchor investment, institutional investors who have large funds to deploy have a surety that they will get allotment of bonds. Besides the reserved portion, these investors can also bid on the EBP in the normal course.

Published on June 30, 2025