8/7/2019 qib

1/3

A Qualified Institutional Buyer(orQIB), in law and finance, is a purchaser ofsecurities that is

deemed financially sophisticated and is legally recognized by security market regulators to need

less protection from issuers than most public investors. Typically, the qualifications for this

designation are based on an investor's total assets under management as well as specific legal

conditions in the country where the fund is located.

Certain private placements ofstockandbonds are made available only to Qualified Institutional

Buyers to limit regulatory restrictions and public filing requirements.

The Securities and Exchange Board of India has defined a Qualified Institutional Buyer as

follows:[3]

Qualified Institutional Buyers are those institutional investors who are generally perceived to

possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms

of clause 2.2.2B (v) of DIP Guidelines, a Qualified Institutional Buyer shall mean:

a) Public financial institution as defined in section 4A of the Companies Act, 1956;

b) Scheduled commercial banks;

c) Mutual funds;

d) Foreign institutional investor registered with SEBI;

e) Multilateral and bilateral development financial institutions;

f) Venture capital funds registered with SEBI.

g) ForeignVenture capital investors registered with SEBI.

h) State Industrial Development Corporations.

i) Insurance Companies registered with the Insurance Regulatory and Development

Authority (IRDA).

j) Provident Funds with minimum corpus of Rs.25 crores

k) PensionFunds with minimum corpus of Rs. 25 crores

On 5th March,2010, SEBI announced that it would be mandatory for `Qualified InstitutionalBuyers (QIBs) to put in 100 per cent of the application money towards subscription of shares

in capital issues through offers. This would come into force from 1st May, 2010. Presently,QIBs are required to pay just 10 per cent of the share value on application andAnchor investors are required to pay 25 per cent on application and balance payment is

required to be paid on allotment.QIBs must be registered with SEBI. It is important to know the names of institutions includedunder QIB which is defined in R 2 (zd) of the SEBI (Issue of Capital and DisclosureRequirements) Regulation, 2009 (`ICDR). The list of QIBs is given as under. One commonfeature is that they must be registered with SEBI :(i) mutual fund, venture capital fund and foreign venture capital investor;(ii) foreigninstitutional investor and sub-account (other than a sub-account which is a foreign corporate

http://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Assets_under_managementhttp://en.wikipedia.org/wiki/Private_placementshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Qualified_Institutional_Buyer#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Qualified_Institutional_Buyer#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Assets_under_managementhttp://en.wikipedia.org/wiki/Private_placementshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Qualified_Institutional_Buyer#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Pension

8/7/2019 qib

2/3

or foreign individual),registered with the Board;(iii) public financial institution as defined in S4A of the Companies Act,1956;(iv) schedule commercial bank;(v) multilateral and bilateraldevelopment financial institution;(vi) state industrial development corporation;(vii)insurance company registered with the Insurance Regulatory and Development Authority;

(viii) provident fund with minimum corpus of twenty crore rupees;(ix) pension fund withminimum corpus of twenty five crore rupees;(x) National Investment Fund set up byresolution F.No. 2/3/2005- DDII dated November,23,2005 of the Government of India

published in the Gazette of India;(xi) insurance funds set up and managed by army, navy orair force of the Union of India.`Anchor investor has come to play an important role in public issues. The time is defined in R2 of ICDR to mean a qualified institutional buyer who is required to put in an application forvalue of ten crore rupees or more made through the book building process in accordance withthe provisions of ICDR.QIBs play an active role in both in public issues and private placements. In the years 2008,2009 and 2010 (upto February) corporate India raised 60 per cent of the domestic fundthrough the QIB route with participation in 68 issues raising Rs 45,138 crore. While in 2008there were 8 issues raising Rs 3586 Cr, in 2009 there were 53 issues raising Rs 38,676 croreand in 2010 till February there have been 7 issues raising Rs 2,876 crore.In the follow-on public offering of NMDC which closed on 12th March,2010, QIBs subscribed to2.28 times their reserved portion which aggregates to Rs 37.7 crore. Of the QIBs, LIC bidclose to 60 per cent of the issue which is 20 crore shares and put in Rs 6,000 Crore. Other

QIBs namely, SBI, Indian Bank and Bank of Baroda participated. FIIs in the category bid foronly 83.4 lac rupees.Overall subscription amounts to :

Category wise No. of times

QIBs 2.284

Non-Institutional Investors 0.22

Retail Investors 0.218

Employees 0.066

NMDC issue was subscribed 1.24 times. Bids totaling 41.2 crore shares were received against33.2 crore shares. Price band for the issue was fixed at Rs 300-350. Most bids were receivedat the lower end. On 12th March,2010 NMDC closed at 362.7 on BSE. It is evident that QIBs

are making their presence felt in the capital market. However, SEBI is keen of a level playingground for the QIBs and retail investors.To re-capitulate on the NMDC issue, QIBs were granted reservation in the issue as under:

1. No. ofEquityShares.

Upto 165,250,000 Equity Shares or Net Offer less allocationto Non-Institutional Bidders and Retail

Individual Bidders.

2. Percentage of

Offer sizeavailable for

allocation

Up to 50 per cent of the Net Offer

3. Basis of Allotment

if the category isoversubscribed

Proportionate as follows:

(a) 8,262,500 Equity Shares shall be available for allocationon a proportionate basis on Mutual Funds only; and (b)

156,987,500 Equity Shares shall be available for allocation on

a proportionate Basis to all QIBs including Mutual Fundsreceiving allocation as per a) above.

4. Minimum Bid Such number of Equity Shares in multiples of [.] Equity

Shares so that the Bid Amount exceeds Rs 100,000.

8/7/2019 qib

3/3

5. Maximum Bid Such Number of Equity Shares in multiples of [.] Equity

Shares so that the Bid does not exceed the Net Offer, subject

applicable limits.

6. Mode of AllotmentCompulsory in dematerialized form.

7. Bid Lot [.] Equity Shares and in multiples of [.] Equity thereafter.

The above reservation has been done keeping in view the existing provisions. Prior to SEBICircular dated September,19,2005 allotment to QIBs was on discretionary basis. Allocation ispermitted to Retail Individual Ivenstors(RIIs), Non Institutional Investors (NIIs) and QualifiedInstitutional Buyers(QIBs) shall be in the ratio of 35:15:50. In case of book built issues themandatory allocation in the issue is 60 per cent to QIBs in terms of Rule 19(2)(b) of theSecurities Contracts(Regulation)Rules,1957 and the allocation for RIIs is 30 per cent and 10per cent for NIIs. This is a transitory provision pending harmonization of QIB allocation as perthe aforesaid Rule with that specified in the guidelines.QIBs have come to occupy an important role in the capital market. Growth of the market willrequire its support but parity with retail investors is necessary so SEBI has announced thechange in norms for QIBs in issues so that there is no case of discrimination raised by anyquarter to upset role of QIBs in issues. With disinvestment of PSUs in the pipe line QIBs areset to enjoy a commanding position in the capital market in India.

GOOD SHOW

Issues CompaniesOverall

subscription

QIBRetailbidders

1 Talwalker Fitness 28.10 35.43 8.20

2Tarapur

Transformers1.65 0.03 2.58

3 Mandhana Inds 5.44 7.97 2.62

4 SJVN Ltd 6.51 9.02 3.03

5 Aster Silicates 4.68 0.00 3.88

6 Technofab Engg 12.54 3.98 9.90

7 Engineers India 13.36 23.43 2.99