The private sector YES Bank Ltd recently said it would go for a fresh round of share sale through QIP. What does QIP mean?

Q. The private sector YES Bank Ltd recently said it would go for a fresh round of share sale through QIP. What does QIP mean?

A. Questionnaires for Investigations Processing

B. Quality Innovation Performance

C. Quality Investment Projects

D. Qualified Institutional Placement

Answer:

On September 7, 2016, private sector YES Bank Ltd made a $1 billion qualified institutional placement (QIP) but within 24 hours the bank scrapped the offer.

On March 23, 2017, the bank said it would go for a fresh round of share sale through qualified institutional placement (QIP).

What is Qualified institutional placement (QIP)?

Qualified institutional placement (QIP) is a capital-raising tool, primarily used in India and other parts of southern Asia, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a qualified institutional buyer (QIB).

Earlier, since raising finance in the domestic market involved a lot of complications, Indian companies used to raise funds from the overseas markets for instance via American depository receipts (ADRs). So to prevent this, SEBI introduced this process through a circular issued on May 8, 2006, to make the raising of funds easier in the domestic market.

Who can issue QIP?

A company whose equity shares are listed on a stock exchange having nationwide trading terminals and which is complying with the prescribed requirements of the minimum public shareholding of the listing agreement will be eligible to raise funds in the domestic market by placing securities with Qualified Institutional Buyers (QIBs).

Qualified Institutional Buyer’ shall mean:

  • A public financial institution as defined in section 4A of the Companies Act, 1956;
  • scheduled commercial banks;
  • scheduled commercial banks;
  • scheduled commercial banks;
  • mutual funds;
  • Foreign institutional investor registered with SEBI;
  • multilateral and bilateral development financial institutions;
  • venture capital funds registered with SEBI.
  • foreign venture capital investors registered with SEBI.
  • state industrial development corporations.
  • insurance companies registered with the Insurance Regulatory and Development Authority (IRDA).
  • provident funds with minimum corpus of Rs.25 crores
  • 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.”

 

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