Qualified Institutional Placement

What is QIP ?

QIP means Qualified Institutional Placement is simply the means whereby a listed company can issue equity shares, fully and partly convertible debentures or any other 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 method of private placement whereby a listed company can issue shares or convertible securities to a select group of persons.

Why have QIPs in the News right now?

The latest Company which adopted the QIP route to rais capital is the cash strapped real estate major UniTech.
While Unitech has managed to garner Rs.1620 Crore through QIP, the promoter holding has now come down to 51%.
There are also reports that LIC Housing Finance is mulling over a QIP where it is expected to issue shares of the value of upto 10% of its total paid up capital.

Why was QIP Introduced?

The SEBI has introduced QIB in 2006, to prevent listed companies in India from developinh an excessive dependence on foreign capital

Some Regulations governing QIP -

To be engage in a QIP, companies need to fulfil certain criteria such as being listed on an exchange which has trading terminals across the country and having the minimum public shareholding requirements.

During the process of engaging in a QIP, the company needs to issue a minimum of 10% of the securities issued under the scheme to mutual funds.