Procedure for Qualified Institutional Placement.
Ashwin Bhat
Can anyone provide me the detailed procedure of Qualified Institutional Placement.
Please do the needfull at the earliest
Regards
Ashwin Bhat
CS A Rengarajan
FOR MORE DETAILS PLEASE VISIT
QIP Issue - Process and Regulations
\nQualified Institutional Placement (QIP):
Instead of trying to raise cash from a public at large, companies normally use this route to get the cash from a large institutional investor like Public Financial Institution, Banking companies, Mutual Funds, Insurance companies, NBFC or Venture capital companies. SEBI (Indian Market Regulator) allows Companies listed on recognised stock exchanges in India (BSE, NSE, etc.) to raise capital by issuing equity shares, or any securities other than warrants, which are convertible into or exchangeable with equity shares. These Qualified institutional Buyers (QIB) are not promoters or related to promoters of the issuer i.e a company which intends to go for Institutional placement rather than the subsequent public offering or right issue.
QIB’s are generally large institutional investors who have the expertise to evaluate market offering and invest large amount. The issue is managed by a SEBI-registered merchant banker. There is no pre-issue filing of the placement document with SEBI. The placement document is placed on the websites of the stock exchanges and the issuer, only for QIBs on the private placement basis and is not an offer to the public.
QIP is an instrument which could be a better option for the company because of the following reasons:
Time Saving
QIBs can be raised within short span of time rather than in FPO, Right Issue takes long process.
Cost
QIP is a cost effective. It is easier to be listed on the BSE/NSE than ADR, GDR or FCCB because it required huge listing fees.
Ease of exit
If institutional investors invest through an IPO there is a minimum lock In period involved. They cannot sell their shares during this period even they find price extremely attractive. A private placement (QIP) gives the institutional investors an opportunity to invest in non – locking shares. So they can make their exits any time after making their investment i.e hassle-free investment. This is an extremely important for the large investor, especially in today's scenario of volatile market, who does not want to make an opportunity to make a quick back.
Rules & Regulations
In a QIP there are lesser formalities, in regard to rules and regulation, as compared to Follow-on Public Issue (FPO) and Rights Issue. Additionally in the case of a GDR, company would have to convert your accounts to IFRS (International Financial Reporting Standards).
No wondered companies are queuing up to raise money through this route. For Instance, the latest company which adopted the QIP route to raising capital is the cash-strapped real estate major Unitech. While Unitech has managed to garner Rs. 1620 crore through QIP, the promoter holding has now come down to 51%. Even India bulls raised Rs. 2600 crore and a total about a billion dollars have been raised through this route in the last two months.
There are also reports that LIC Housing Finance is mulling over a QIP where it is expected to issue shares of the value of up to 10% of its total paid up capital. More companies have announced their intention to raise another billion dollar in next few weeks/months, so watch out for this space.
Guidelines
The SEBI with effect from 08th May, 2006 inserted chapter XIIIA guidelines (Disclosure and investor Protection) guidelines, 200 to provide guidelines for the Qualified Institutional Placement (THE QIP SCHEME) are as follows:
1. The company who needs to raise the capital through the QIP are required to issue a minimum of 10% of the securities issued under the scheme to Mutual Fund.
2. It is mandatory for the company to ensure that there are at least two allottees, if the size of the issue is up to Rs 250 crore and at least five allottees if the company is issuing securities above Rs 250 crore.
3. Pursuant to the QIP Scheme, the Securities may be issued by the issuer at a price that shall not be lower than the higher of the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange (i) during the preceding six months; or (ii) the preceding two weeks.
4. The aggregate of proposed placement under the QIP Scheme and all previous placements made in the same financial year by the company shall not be more than five times the net worth of the issuer as per the audited balance sheet of the previous financial year.
5. The Securities allotted pursuant to the QIP Scheme shall not be sold by the allottees for a period of one year from the date of allotment, except on a recognized stock exchange.
6. This provision allows the allottees an exit mechanism on the stock exchange without having to wait for a minimum period of one year, which would have been the lock–in period if they had subscribed through a preferential allotment
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Company Secretary, Chennai
email csarengarajan@gmail.com
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badrinath chavan
The SEBI with effect from 08th May, 2006 inserted chapter XIIIA guidelines (Disclosure and investor Protection) guidelines, 200 to provide guidelines for the Qualified Institutional Placement (THE QIP SCHEME) are as follows:
1. The company who needs to raise the capital through the QIP are required to issue a minimum of 10% of the securities issued under the scheme to Mutual Fund.
2. It is mandatory for the company to ensure that there are at least two allottees, if the size of the issue is up to Rs 250 crore and at least five allottees if the company is issuing securities above Rs 250 crore.
3. Pursuant to the QIP Scheme, the Securities may be issued by the issuer at a price that shall not be lower than the higher of the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange (i) during the preceding six months; or (ii) the preceding two weeks.
4. The aggregate of proposed placement under the QIP Scheme and all previous placements made in the same financial year by the company shall not be more than five times the net worth of the issuer as per the audited balance sheet of the previous financial year.
5. The Securities allotted pursuant to the QIP Scheme shall not be sold by the allottees for a period of one year from the date of allotment, except on a recognized stock exchange.
6. This provision allows the allottees an exit mechanism on the stock exchange without having to wait for a minimum period of one year, which would have been the lock–in period if they had subscribed through a preferential allotment.