Qualified Institutional Placement (QIP's) the buzz word heard commonly these days among India Inc. Corporates raising money through QIP's has become a frequent phenomenon. As per a report published in Bloomberg* on Oct 08, 2009, Indian companies have raised $7bn through QIP's this FY and plan to double this no by the end of this FY. Some prominent QIP offerings are Unitech raising 1620 Cr and Indiabulls going a step ahead by raising 2600 cr.
But what is actually a QIP?
QIP is a mode of raising money for the Corporates. A tool for private placement introduced by SEBI in May 2006. In a QIP a listed company raises Equity shares, fully or partly convertible debentures or any other securities apart from warrants to a Qualified Institutional Buyer (QIB's: which includes Public Financial Institutuions, Mutual funds, FII and Venture capital firms registered with SEBI).
This was introduced by SEBI to avoid Indian companies raising money through overseas markets and avoid dependency on foreign capital which was raised through Foreign Currency Convertible Bonds (FCCB's) and Global Depository Receipts (GDR's).
QIP is a mode of raising money for the Corporates. A tool for private placement introduced by SEBI in May 2006. In a QIP a listed company raises Equity shares, fully or partly convertible debentures or any other securities apart from warrants to a Qualified Institutional Buyer (QIB's: which includes Public Financial Institutuions, Mutual funds, FII and Venture capital firms registered with SEBI).
This was introduced by SEBI to avoid Indian companies raising money through overseas markets and avoid dependency on foreign capital which was raised through Foreign Currency Convertible Bonds (FCCB's) and Global Depository Receipts (GDR's).
QIP's have become a cushion for Corporates for easy and speedy capital raising from the market unlike Public offerings. A Public Offering needs filing with SEBI and also a considerable time in hitting the markets whereas a QIP doesnt require any filing formalities. Also the complications which the companies face while tapping the overseas markets are not present with QIP's thus giving the corporates a comfort in raising money. Corporates through QIP can directly approach the QIB's thus asking them to let loose their pockets. However the QIP offer needs to be managed by a SEBI registered Merchant Banker. The offer documents need to placed on the website of Stock exchanges and the company raising money.
Exit options in case of a QIP also are easy as Investors donot have any lock in period for thier investments. They can exit if they find vauations of their securities attractive enough at any point of time.
Exit options in case of a QIP also are easy as Investors donot have any lock in period for thier investments. They can exit if they find vauations of their securities attractive enough at any point of time.
The economy is ripe with improving positive sentiments after an unforgettable recessionary downturn. Corporates also would like to take advantage of this situation by raising money to service thier debts and fulfill thier cash requirements#. The rising markets and profits announced by India Inc are giving confidence to the Investors. The Investors although are not going frenzy compared to some previous years but after a downturn are gradually gearing up to cautiously invest their money and get some value out of their investments in the improving economic scenario. This leaves a good scope for more QIP's to be rolled out by Corporates looking forward for investors who seek to get value for their investments by participating in the Indian growth story.
Some good Sites for more info on QIP's:
http://indianblogger.com/2009/06/05/what-is-a-qip-why-is-it-hot-now/
http://indianblogger.com/2009/06/05/what-is-a-qip-why-is-it-hot-now/
