Login 
Learn & Earn 
Home
11 May 2023 8:15 AM GMT
Summary
It is a way for companies to raise capital without needing to go for much legal paperwork
QIP or Qualified Institutional Placement is a way for companies to raise capital without needing to show any legal paperwork to market regulators. This was created by the Securities and Exchange Board of India (SEBI) to make the companies avoid depending on foreign capital resources. Follow on public offer (FPO) and rights issues demand a lot of time consumption and investments to undergo the documentation and other legalities. This system is used in India and other Southeast Asian countries.
In the Securities Regulations, QIP is defined as “allotment of securities by a listed company to the Qualified Institutional buyers (QIB) on private placement basis”.
The Companies Act defines “private placement” as an offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through the issue of a private placement offer letter.
QIBs were the only ones allowed to buy QIPs. QIB follows a loose set of regulations, but the allottees were highly regulated. QIP saves time and make it cost-efficient.
To raise capital through QIP, a corporation must be listed on stock exchange with a minimum shareholding requirement per se as their listing agreement.
In short, if a company is conveniently capable to raise money from QIBs via QIP even in such unlikely times, it exhibits the good financial health of the company as well as displays Institutional Investors’ confidence in the business model.
Some major QIBs in India are: UTI Asset Management Company Ltd/ SBI Funds Management Private Ltd/ LIC Mutual Fund Asset Management Company Ltd, Aditya Birla Sunlife AMC Limited/Sequoia Capital India,Life Insurance Corporation of India, HDFC Standard Life Insurance Co. Ltd, Small Industries Development Corporation/Maharashtra Industrial Development Corporation or any Public Financial Institution as defined in Section 4A of the Companies Act, 1956 such as Industrial Credit and Investment Corporation of India Limited, Industrial Finance Corporation of India.
