FPIs bet big on Indian IPOs: Anchor investments jump 300% in FY25 to Rs 26,508 crore; domestic institutions also scale up participation

Foreign portfolio investors, despite being net sellers in the listed secondary market, are substantially investing as anchor investors in IPOs of Indian companies, demonstrating confidence in India's exceptional growth trajectory.Overseas funds' investments in Indian IPO anchor books increased by 300% to Rs 26,508 crore in FY25 compared to the previous year. FPIs' proportion in total anchor investment rose to 46% in the year ended March, up from 35% in FY23.Their dedication to this investment category continues, despite concerns about changing global trade tariffs. In the current financial year until August, foreign funds have invested Rs 7,142 crore in anchor books."You are backing a company before the market fully prices its future prospects," Bhavesh Shah, managing director and investment banking head, Equirus Capital told ET, explaining the overseas funds' attraction to IPOs.Anchor investors must retain allocated IPO shares for a specified duration before selling in the secondary market. Domestic institutional investors, including mutual funds, insurance firms, and alternative investment funds, increased their anchor participation by 250% to Rs 30,709 crore in FY25 compared to the previous year.

Initial listing offers advantages such as early-stage investment opportunities, minimal price impact from bulk purchases, and access to distinctive business models at attractive valuations, according to Shah.Recently, overseas funds have shown caution in secondary markets due to high valuations, geopolitical issues, and uncertainties about tariffs affecting India's exports to the US.Foreign funds divested nearly Rs 1.3 lakh crore of Indian equities in FY25, and Rs 2,322 crore in the current financial year until mid-August.While domestic institutional funds remain the primary anchor book contributors, their share decreased to 53% in FY25 from 65% in FY23.Pranav Haldea, managing director, Prime Database Group, views domestic institutions' significant presence in the primary market as beneficial. "Especially for smaller IPOs, it has significantly reduced their dependence on foreign investors," Haldea said.Among domestic institutional IPO supporters, mutual funds contributed Rs 21,740 crore, while insurance companies invested Rs 5,098 crore as anchor investors in FY25.