QUALIFIED INSTITUTIONAL PLACEMENTS.

INTRODUCTION

MEANING

Qualified institutional placement (QIP) is a capital raising tool, primarily used in India, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a Qualified Institutional Buyer (QIB).

Why was it introduced?

The Securities and Exchange Board of India (SEBI) introduced the QIP process to prevent listed companies in India from developing an excessive dependence on foreign capital.

To encourage Indian companies to raise funds domestically instead of tapping overseas markets.

What are some of the regulations governing a QIP?

To be able to engage in a QIP company should be

listed on an exchange which has trading terminals across the country.

Have the minimum public shareholding requirements which are specified in their listing agreement.

During the process…….

Issue a minimum of 10% of the securities issued under the scheme to mutual funds.

Ensure that there are at least two allottees, if the size of the issue is up to Rs 250 crore and at least five incase issue is above Rs 250 crore.

No individual allottee is allowed to have more than 50% of the total amount issued.

Also no issue is allowed to a QIB who is related to the promoters of the company.

QIPs In India

The SEBI has with effect from May 8, 2006 inserted Chapter XIIIA into the SEBI (Disclosure & Investor Protection) Guidelines to provide guidelines for QIPs

The QIP Scheme is open to investments made by “Qualified Institutional Buyers”

Who can participate in the issue? Can be issued only to QIBs, who shall not be

promoters or related to promoters of the issuer. The issue is managed by a Sebi-registered

merchant banker. No pre-issue filing of the placement document

with Sebi. Placement document is placed on the websites

of the stock exchanges and the issuer The placement is not an offer to the public.

Qualified Institutional Buyers Qualified Institutional Buyers (QIBs) those institutional

investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets.

Qualified Institutional Buyer’ can be: Public financial institutions Scheduled commercial banks Mutual Funds Foreign institutional investor registered with SEBI Multilateral and bilateral development financial institutions Venture Capital Funds registered with SEBI Foreign Venture Capital investors registered with SEBI State Industrial Development Corporations Insurance Companies registered with the IRDA Provident Funds with minimum corpus of Rs.25 crores Pension Funds with minimum corpus of Rs. 25 crores

Benefits of Qualified Institutional Placements

Time saving Lesser rules and regulations Cost efficient No lock in period

QIP NEWS

RELIANCE MEDIA WORKS

On Tuesday said it will raise funds up to Rs 500 crore by private placement of shares with potential investors.

It received approval from the shareholders to raise up to Rs 500 crore through QIPs,

Declared in a filing to the Bombay Stock Exchange. Last year, it had passed a similar enabling

resolution for QIP to 25 per cent of the issued/ paid up capital.

Anil Sekhri ,Gautam Doshi, Ajay Prasad appointed as Director on the board of the company.

GODREJ PROPERTIES

Its a part of the $2.5 billion Godrej group.

Will raise up to Rs 1,000 crore of debt through QIP in the next 18 to 24 months, said by Group Chairman Adi Godrej.

Adi Godrej said the real estate wing of the group is expected to be its largest revenue generator in the next five to ten years.

INDIABULLS FINANCIAL SERVICES

Its one of India’s leading NBFCs. Raised Rs 1,280 crore QIP of non-

convertible debentures and warrants. The warrants will entitle the holder to

buy shares at a fixed price on a future date and can be traded separately from the secured NCDs.

SEBI DIP [DISCLOSURE AND INVESTOR PROTECTION] GUIDELINES

i. Definition of “Qualified Institutional Buyers (QIBs)(a) Presently, foreign institutional investors (FIIs) registered with SEBI are included in the definition of QIBs. These FIIs invest in securities in the primary market, either on their account or on behalf of their sub-account(s), in terms of the SEBI (Foreign Institutional Investors) Regulations, 1995. It has been decided to exclude sub-accounts falling in the categories of “foreign corporate” and “foreign individual” from the definition of QIBs.(b) Further, it has been decided to include the definition of “QIB” in the definition clause of the SEBI (DIP) Guidelines, for the purpose of clarity.

(ii) Eligibility for making Qualified Institutions Placement (QIP)

a) Presently, the eligibility criteria for listed companies desirous of making QIP include a condition that the equity shares of the same class of such companies shall have been listed on a stock exchange having nationwide terminals, for a period of at least one year as on the date of issuance of notice to shareholders for considering the QIP.

(b) It is noted that companies, which have been listed during the preceding one year pursuant to approved scheme(s) of merger/ demerger/ arrangement entered into by such companies with companies which have been listed for more than one year in such stock exchange(s), are not able to use the QIP route for raising funds. In order to enable such companies to raise funds through QIP route, it has been decided that for the purpose of fulfillment of the abovementioned eligibility criterion, such companies may take into account the listing history of the listed companies with which they have entered into the approved scheme(s) of merger/ demerger/ arrangement.

(iv) Pricing norms for QIP

In order to facilitate eligible listed companies to raise funds through QIP route, it has been decided to modify the pricing guidelines for QIP by bringing the issue price of the securities offered closer to their market price. This has been effected through change in the floor price formula and definition of relevant date

(v) Pricing norms for preferential allotment to QIBs

In order to facilitate eligible listed companies to raise funds from QIBs without having to go through the elaborate documentation process required for QIP, it has been decided to extend the modified pricing guidelines of QIP to preferential allotment to QIBs, provided that the number of QIB allottees in such preferential allotment does not exceed five.