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Qualified Institutional Placement (QIP) UPSC NOTE


  • QIP is a mechanism for publicly traded companies to obtain capital without having to file formal documentation with market regulators.

  • In India and other Southeast Asian countries, the usage of QIPs is very widespread.

  • The main goal of QIP development is to protect India from becoming overly reliant on foreign finance to fuel its economic growth.

  • The Securities and Exchange Board of India (SEBI) enacted this rule to prevent enterprises from relying on foreign financing.

  • A publicly traded firm can issue equity shares, completely and partially convertible debentures, or any other security that is convertible to equity shares in a QIP.

  • QIP is a fast way for a publicly-traded firm to issue shares or convertible instruments to a small number of investors.

  • Only institutions or Qualified Institutional Buyers (QIBs) can participate in a QIP issuance, unlike an Initial Public Offerings (IPOs) and Follow on Public Offers (FPOs).

  • Mutual funds, domestic financial institutions including banks and insurance firms, venture capital funds, foreign institutional investors, and others are all examples of QIBs

Importance of QIPs

  • QIPs are less time-consuming for the issuing company than IPOs and FPOs

    • It simply needs to file a placement document with the stock exchanges, which merely contains details about the issue.

  • In comparison to an IPO or an FPO, a QIP is also a less expensive way to raise funds.

  • Unlike an IPO, where an anchor investor is required to stay committed for a month, QIPs have no such limits.

Importance of QIPs

  • QIPs are subject to significantly fewer legal restrictions and regulations (in comparison to FPO), making them far more cost-effective.

  • There are also fewer legal fees and no costs associated with listing overseas.

Benefits of QIP

  • Time-saving

  • Easy Regulations

  • Easy Process of Investing

  • Cost-effective



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Qualified Institutional Placement (QIP) UPSC NOTE
Qualified Institutional Placement (QIP) UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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