What Is a Qualified I🌄nstitu♊tional Placement (QIP)?

A qualified institutional placement (QIP) is, at its core, a way for listed companies to raise capital without having to submit le🌼gal paperwork to market regulators. It is common in India and other Southeast Asian countries.

The Securities and Exchange Board of India (SEBI) created the rule to avoid the dependence of co👍mpanies on foreign capital resources.

How a Qualified I♌nstitutional Placement (Q♎IP) Works

A qualified institutional placement (QIP) was initially a designation of a 澳洲幸运5开奖号码历史查询:securities issue given by the Securitie🍒s and Exchange Board of India (SEBI). The QIP allows an Indian-listed company to raise capital from domestic markets without the need to submit any pre-issue filings to market regulators. The SEBI limits companies to only raising money through issu𒆙ing securities.

The SEBI put forth the guidelines for this unique avenue of Indian 澳洲幸运5开奖号码历史查询:financing on May 8, 2006. The primary reason for developing QIPs was to ke𓆉ep India from depending too much on foreign capital to fund its economic growth.

Before the QIP, there was a growing concern from Indian regulators that its domestic companies were accessing international funding too readily via 澳洲幸运5开奖号码历史查询:American depositary receipts (ADRs), 澳洲幸运5开奖号码历史查询:foreign currencꦚy convertibleಌ bonds (FCCBs), and 澳洲幸运5开奖号码历史查询:global depositary receipts (GDRs), rather than by Indian-based capital sourcesꦍ. Aꦓuthorities proposed the QIP guidelines to encourage Indian companies to raise funds domestically instead of tapping into overseas markets.

QIPs are helpful for a few reasons. Their use saves time as the issuance of QIPs and the access to capital are far quicker than through a 澳洲幸运5开奖号码历史查询:follow-on public offer (FPO). The speed is because QIPs have far fewer legal rules and regulations to follow, making them much more cost-efficient. Further, there areꦆ fewer legal fees, and there is no cost of listing overseas.

In India, 20 firms together raised 18.443 billion rupees ($221 billion) through QIPs in the first half of 澳洲幸运5开奖号码历史查询:fiscal year 2024.

Regulati𒈔ons for a Qualified Institutio⛄nal Placement (QIP)

To be allowed to raise capital through a QIP, a firm must be listed on a 澳洲幸运5开奖号码历史查询:stock exchange along with the minimum shareholding requirements as specified in their listing agreement. Also, the company must issue at least 10% of its issued securities to mutual funds or 澳洲幸运5开奖号码历史查询:allottees.

Regulations also exist for the number of allottౠees on a QIP, depending on the specific factors within an issue. Additionally, no single allottee is allowed to own more tha꧑n 50% of the total debt issue. Furthermore, allottees must not be related in any way to promoters of the issue. Several more regulations dictate who may or may not receive QIP securities issues.

Qualified Institutional Placements (Q✅IPs) and Qualified Institutional Buyers (QIBs) 

The only parties eligible to purchase QIPs are 澳洲幸运5开奖号码历史查询:qualified institutiona💃l buyers (QIBs), which are accredited investors, as defined by whatever securities and exchange governing body preside over it. This limitation is due to the perception that QIBs are institutions with expertise and financial power that allows them to evaluate and participate in capital markets, at that level, without the legal assurances of a fo💙llow-on public offer (FPO).

The Bottom Line

Qualified institutional placements (QIPs) are a way for listed companies to raise capital without having to submit legal paperwork to market regulators. They follow a looser set of reℱgulations, but in return, allottees are more highly regulated. QIPs are used mostly in India and other Southeast Asian countries.