how a qualified institutional placement qip works
a qualified institutional placement qip was initially a designation of a securities issue given by the securities 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 issuing securities the sebi put forth the guidelines for this unique avenue of indian financing on may 8 2006 the primary reason for developing qips was to keep 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 american depositary receipts adrs foreign currency convertible bonds fccbs and global depositary receipts gdrs rather than by indian based capital sources authorities 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 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 are 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 fiscal year 2024 1regulations for a qualified institutional placement qip to be allowed to raise capital through a qip a firm must be listed on a 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 allottees regulations also exist for the number of allottees on a qip depending on the specific factors within an issue additionally no single allottee is allowed to own more than 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 qips and qualified institutional buyers qibs the only parties eligible to purchase qips are qualified institutional 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 follow on public offer fpo who created the qualified institutional placement qip the securities and exchange board of india sebi created the qualified institutional placement qip the purpose was to avoid the dependence of companies on foreign capital resources 