Qualified Institutional Placement (QIP)

What is ‘Qualified Institutional Placement – QIP’

When the Securities and Exchange Board of India (SEBI) designates a securities offering as “non-prescribed,” it permits an Indian-listed firm to raise money from its domestic markets without the requirement to submit any pre-issue paperwork to market authorities. On May 8, 2006, the Securities and Exchange Board of India (SEBI) issued rules for this relatively new Indian funding route.

Explaining ‘Qualified Institutional Placement – QIP’

Prior to the introduction of the qualified institutional placement, Indian market regulators and authorities were concerned that Indian enterprises were receiving overseas finance via the issuance of securities in foreign markets, such as American depository receipts (ADRs). This was seen as an undesired export of the local stock market, and the QIP rules were developed to encourage Indian enterprises to seek money domestically rather than via the use of international capital markets.

Qualified Institutional Placement FAQ

What is difference between QIP and IPO?

A Qualified Institutional Placement (QIP) is a capital raising technique that allows a publicly traded firm to issue equity shares, fully and partially convertible debentures, or other securities to raise funds. In contrast to an IPO or an FPO, however, only institutions or qualified institutional purchasers are permitted to participate in a QIP.

Is QIP a private placement?

QIP, on the other hand, refers to the raising of new capital by a publicly traded firm from QIPs or from Institutional Investors who are not publicly traded. It is the only type of private placement, other than preferential allocation, by which a firm may offer shares to a small group of individuals or investors, and it is also the most expensive.

Further Reading

    • Informational effect of select private placements of equity: An empirical analysis in Indian capital market – journals.sagepub.com [PDF]
    • Qualified Institutional Placements-An Exploratory Study in the Indian Context – papers.ssrn.com [PDF]
    • An empirical study on seasoned equity choice between qualified institutional placements and rights issues in India – link.springer.com [PDF]
    • The Choice between QIP and Rights Issue: Evidence from India – journals.sagepub.com [PDF]
    • Investment Banking-How to Regain Trust of Investors – papers.ssrn.com [PDF]
    • Capital Raising: Emerging Trends in Equity Markets in India – www.indianjournals.com [PDF]
    • Financial Engineering and Innovation as Risk Management Tools: The Case of Indian Companies During Global Financial Crisis. – search.ebscohost.com [PDF]
    • Fund Raising by Indian Companies in 2010-Clear Domination of Domestic Sources – papers.ssrn.com [PDF]