What is a Qualified Institutional Placement (QIP)?
A qualified institutional placement (QIP) occurs when the Securities and Exchange Board of India (SEBI) allows an Indian company to issue securities in India without providing preliminary filings regarding the issue.
How Does a Qualified Institutional Placement (QIP) Work?
QIPs are similar to private placements in the United States. Indian companies that are listed on an Indian stock exchange are generally eligible to offer QIPs only to qualified institutional buyers (QIBs).
Some limitations exist. For example, an issuer can raise no more than five times its net worth via QIPs in a year. It must also prepare a placement document containing relevant material disclosures, and a merchant banker must manage each QIP.
Why Does a Qualified Institutional Placement (QIP) Matter?
QIPs help Indian companies raise capital in India, and in turn they help make Indian markets more competitive and efficient. They have been around since about 2006; before that, Indian companies often tapped foreign markets via American depository receipts (ADRs) for capital.
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