In the process, a listed company can issue or allot equity, partly and fully convertible debentures, or other securities besides warrants that can be converted into equity shares, to a Qualified Institutional Buyer (QIB).
Participants in the QIP
1. Listed company raising funds through QIP : Listed company aiming at raising funds from the domestic markets through issue of specified securities.
2. Qualified Institutional Buyers or QIBs: Securities can be issued or allotted only to QIBs. As per the provisions of SEBI ICDR regulations, QIB includes the following- mutual fund or venture capital fund; a scheduled commercial bank; a public financial institution as defined in section 4A of the Companies Act, 1956; and a state industrial development corporation among others. Further, a QIB shall neither be the promoter nor hold any relationship with the promoters of the issuer.
3. Merchant Banker: QIP issue is managed by the merchant banker registered with the capital market regulator.
Procedure of Qualified Institutional Placement
Unlike other capital raising modes, QIP does not requires submission of pre-issue filing with the SEBI. Instead document per se the placement is put on the website of the issuer as well as stock exchanges with a disclaimer that the placement is applicable only for QIBs on private placement basis and is not an offer to the public.
QIP- A favoured route for capital raising
QIP is a comparably favoured tool as capital through this route can be raised at a faster pace and rather conveniently. As the method does not involves the otherwise time consuming procedural requirements for launching the issue such as the requirement to submit pre-issue filing with the SEBI. Fund raising through other modes, including ADR or American Depository Receipts, Foreign Currency Convertible Bonds (FCCB) and Global Depository Receipts or GDR, is expensive as well as time consuming.
As per the Business Line report, QIP emerged as India Inc.'s most favoured route for fund raising in the financial year 2012-2013 for the first time. And, the year in comparison witnessed less rights and public issue by companies.