What is Qualified institutional placement

Qualified institutional placement (QIP) is a capital-raising tool, primarily used in India and other parts of southern Asia, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a qualified institutional buyer (QIB).

Apart from preferential allotment, this is the only other speedy method of private placement whereby a listed company can issue shares or convertible securities to a select group of persons. QIP scores over other methods because the issuing firm does not have to undergo elaborate procedural requirements to raise this capital.

In India Therefore, to encourage domestic securities placements (instead of foreign currency convertible bonds (FCCBs) and global or American depository receipts (GDRs or ADRs)), SEBI) has provided guidelines for Qualified Institutional Placements (the QIP Scheme). The QIP Scheme is open to investments made by “Qualified Institutional Buyers” (which includes public financial institutions, mutual funds, foreign institutional investors, venture capital funds and foreign venture capital funds registered with the SEBI) in any issue of equity shares/ fully convertible debentures/ partly convertible debentures or any securities other than warrants, which are convertible into or exchangeable with equity shares at a later date (Securities).

  • No individual allottee is allowed to have more than 50% of the total amount issued. 
  • Also no issue is allowed to a QIB who is related to the promoters of the company.
  • QIBs can be raised within short span of time rather than in FPO, Right Issue takes long process.
  • It provides an opportunity to buy non-locking shares and as such is an easy mechanism if corporate governance and other required parameters are in place.