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    Question

    Before the opening of a book-built IPO to the public, a

    company allocates 30% of the QIB portion to a few large institutional investors such as mutual funds and insurance companies. These investors commit substantial funds one day prior to the issue opening and are subject to a specified lock-in period. Their participation is intended to build confidence among other investors regarding the issue.  Such investors are best described as ____ 
    A Preferential allotment investors Correct Answer Incorrect Answer
    B Anchor investors Correct Answer Incorrect Answer
    C Accredited Investors Correct Answer Incorrect Answer
    D QIB Investors Correct Answer Incorrect Answer
    E Lead Investors Correct Answer Incorrect Answer

    Solution

    An anchor investor is a Qualified Institutional Buyer (QIB) who invests a significant amount in an IPO just before it opens. Their participation serves as a signal of confidence in the issue, which can boost the sentiment of other investors. The price they pay sets an 'anchor' for the issue's pricing, and their shares are subject to a lock-in period.  As per SEBI ICDR Regulations, anchor investors in an IPO are subject to a staggered mandatory lock-in: 50% of their shares are locked for 30 days, and the remaining 50% are locked for 90 days from the date of allotment. This structure was implemented to reduce immediate post-listing volatility and promote long-term investment.  

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