Qualified Institutional Placement:
Shareholders of the Indian Renewable Energy Development Agency Ltd. (IREDA) recently approved the company’s proposal to raise up to ₹5,000 crore through the Qualified Institutional Placement (QIP) of equity shares in one or multiple tranches.
- Qualified Institutional Placement (QIP) is a capital-raising mechanism through which public listed companies use to issue equity shares or convertible securities exclusively to Qualified Institutional Buyers (QIBs).
- QIBs include mutual funds, venture capital funds, pension funds, and other institutional investors.
- A QIP is, at its core, a way for listed companies to raise capital without having to submit legal paperwork to market regulators.
- It is common in India and other Southeast Asian countries.
- It provides a quicker and cost-effective alternative to traditional public offerings (IPOs and FPOs) while ensuring minimal dilution of management control.
- Earlier, since raising finance in the domestic market involved a lot of complications, Indian companies used to raise funds from the overseas markets.
- So to prevent this, SEBI in 2006 introduced the QIP process so as to make the raising of funds easier in the domestic market.
- QIP allows companies to raise funds domestically, reducing dependence on foreign investors through instruments like American Depository Receipts (ADRs), Global Depository Receipts (GDRs), or Foreign Currency Convertible Bonds (FCCBs).
