Define Qualified Institutional Placement

Qualified Institutional placement is the placing on a private placement basis specified securities with the QIBs (Qualified Institutional Buyers) only. Specified securities mentioned above are Equity Shares and other convertible /exchangeable securities excluding warrants.

Q.I.P is subject to the following conditions

Mutual funds should be allotted a minimum of 10% of the specified securities and the portion allotted but not subscribed can be allotted to other QIBs.

If a QIB is a promoter or related to promoter no allotment can be made to it either directly or indirectly.

The private placement should comply with the requirements of sec.67 (3a) of the companies act.

Persons related to QIB means QIB having

Rights under a shareholders/voting agreement.

Veto right

Right to appoint any nominee director on the Board of the Issuer.

The minimum number of allottees for each placement should not be less than

Two, where the issue size is up to ` 250 crore

Five, where the issue size is above ` 250 crore

An allottee should not be allotted more than 50% of the issue size. (The same group/under common control QIBs would be deemed to be single allottee).

The maximum total amount that can be raised through QIBs in a financial year is five times the net worth (as per the audited balance sheet of the previous year) of the issuer.

The issue should be made on the basis of placement documents which should contain all material information specified in annexure 14J on the website. This is a private document to select the investors. This should be placed in the website of the concerned stock exchange. A copy should be filed with the SEBI for record within 30 days of allotment of the specified securities.

Other provisions relating to QIP

QIP would be managed by SEBI registered merchant bankers. They should furnish a due diligence certificate to the stock exchange stating that the issue complies with all the relevant requirements.

The issue price shall not be less than the higher of the average of the closing prices of the related shares quoted on the stock exchange during the (i) six months (ii) two weeks preceding the relevant date.

The QIB can sell the allotted securities for 12 months only through stock exchange.

The securities should be made fully paid up at the time of allotment.

The prices considered for determination of issue prices would be subject to appropriate adjustment if the issuer company

Makes an issue of shares by way of capitalization of profit/ reserve and on rights basis

consolidates its outstanding shares into a smaller number of shares

divides the outstanding shares including by way of stock split reclassifies its share into other securities is involved in similar events/circumstances which in the opinion of the concerned stock exchange require adjustments.

Securities can be converted into shares at any time within a maximum of 60 months from the date of allotment.

The allotment of securities should be completed within 12 months from the date of passing of the shareholders resolution to allot securities to QIBs.

A minimum of 6 months gap should be provided between two placements.

Obligations of Merchant Banker

The issue should be managed by a merchant banker registered with SEBI. He should exercise due diligence.

The merchant banker should furnish to the concerned stock exchanges a due diligence certificate.

Due diligence certificate to the effect that the issue complies with all the requirements along with the application for seeking in principle approval and final permission for listing.

Issuer Certificate

The issuer should furnish to the concerned stock exchanges

A copy of the placement document Certificate of compliance with all the requirements and Documents/undertakings specified in the listing agreement for seeking in principle approval/final permission for listing of the specified securities.