prefrential allotment

To be able to engage in a QIP, companies need to fulfil certain criteria such as being listed on an exchange which has trading terminals across the country and having the minimum public shareholding requirements which are specified in their listing agreement.

During the process of engaging in a QIP, the company needs to issue a minimum of 10% of the securities issued under the scheme to mutual funds. Moreover, it is mandatory for the company to ensure that there are at least two allottees, if the size of the issue is up to Rs 250 crore and at least five allottees if the company is issuing securities above Rs 250 crore.

No individual allottee is allowed to have more than 50% of the total amount issued. Also no issue is allowed to a QIB who is related to the promoters of the company.

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Qualified Institutional Buyers (QIBs) those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified Institutional Buyer’ shall mean: a) Public financial institution as defined in section 4A of the Companies Act, 1956; b) Scheduled commercial banks; c) Mutual Funds; d) Foreign institutional investor registered with SEBI; e) Multilateral and bilateral development financial institutions; f) Venture Capital funds registered with SEBI. g) Foreign Venture Capital investors registered with SEBI. h) State Industrial Development Corporations. i) Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA). j) Provident Funds with minimum corpus of Rs.25 crores k) Pension Funds with minimum corpus of Rs. 25 crores "These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process."