Anantara's Series B arrives in a worse market: ₹80 crore pre-money, ₹20 crore in, against a ₹150 crore post-money eighteen months earlier. Price per share falls from ₹60.00 to ₹80 crore ÷ 25,000,000 = ₹32.00, a fall of 46.67%, and 6,250,000 new shares are issued.
Anti-dilution protection exists because the Series A investor paid ₹60.00 for a share now being sold at ₹32.00. The protection does not refund money. It lowers the price at which the Series A preferred converts into common, which issues the Series A holder additional common shares at no further cost, taken out of everyone else's percentage.
Full ratchet vs broad-based weighted average
Full ratchet resets the conversion price to the new round's price, here ₹32.00, as though the Series A had been bought at ₹32.00 all along. The Series A's ₹30 crore then converts into 30 crore ÷ 32 = 9,375,000 shares rather than 5,000,000, an extra 4,375,000 shares, and it does so no matter how small the new round is. A ₹1 lakh issue at ₹32.00 would trigger the identical adjustment, which is why a full ratchet is a weapon rather than a protection and why it survives mainly in distressed rounds.
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Broad-based weighted average asks a proportionate question instead: how much cheap stock was actually issued, relative to what was already outstanding? The formula is
NCP = OCP × (CSO + CSP) ÷ (CSO + CSN)
where OCP is the old conversion price, CSO is the fully diluted share count immediately before the new issue on a broad basis, CSP is the number of shares the new money would have bought at the old price, and CSN is the number of shares actually issued.
On Anantara's Series B: OCP = ₹60.00; CSO = 25,000,000; CSP = ₹20 crore ÷ 60 = 3,333,333; CSN = 6,250,000. The ratio is 28,333,333 ÷ 31,250,000 = 0.906667, so NCP = 60 × 0.906667 = ₹54.40. The Series A now converts into 30 crore ÷ 54.40 = 5,514,706 shares, an extra 514,706.
The word broad-based is the whole negotiation. It means CSO includes the option pool and every convertible instrument, which makes the denominator large and the adjustment small. A narrow-based version counts only outstanding preferred on an as-converted basis, shrinking the denominator and moving the answer toward a ratchet. Put Anantara's two preferred rounds, 9,000,000 shares as converted, into CSO in place of the full 25,000,000 and the conversion price falls to ₹48.52 rather than ₹54.40, issuing 1,182,432 extra shares against 514,706. One adjective, and more than twice the transfer.
Both weighted-average versions at least respond to how much cheap stock was actually sold. A ratchet does not care.
How much does each version cost the founders?
| No protection | Broad-based WA | Full ratchet | |
|---|---|---|---|
| Series A conversion price | ₹60.00 | ₹54.40 | ₹32.00 |
| Series A shares | 5,000,000 | 5,514,706 | 9,375,000 |
| Post-B total shares | 31,250,000 | 31,764,706 | 35,625,000 |
| Founders | 41.60% | 40.93% | 36.49% |
| Seed investor | 12.80% | 12.59% | 11.23% |
| Option pool | 9.60% | 9.44% | 8.42% |
| Series A investor | 16.00% | 17.36% | 26.32% |
| Series B investor | 20.00% | 19.68% | 17.54% |
The founders' ownership track across the whole history reads 100% to 65.00% to 52.00% to 40.93%. Broad-based protection cost them 0.67 percentage points; a full ratchet would have cost 5.11 points, seven and a half times as much, and would also have taken 2.46 points from the incoming Series B investor, which is why Series B investors negotiate anti-dilution waivers as hard as founders do.
One consequence is worth carrying into any conversation about a down round. Anti-dilution transfers ownership between shareholders; it creates nothing. In a company now valued at ₹100 crore post-money, the Series A holder's ₹30 crore is worth ₹17.36 crore with broad-based protection and ₹16.00 crore without it. The protection recovered ₹1.36 crore of a ₹14.00 crore paper loss, and the founders paid for all of it.