Role of Qib in Indian Capital Markets
ROLE OF QIB (QUALIFIED INSTITUTIONAL BUYER) IN THE INDIAN CAPITAL MARKET FOR THE LAST 6 YEARS
A] Who are the Qualified Institutional Buyers?
Qualified Institutional Buyers (QIBs), as defined under sub-clause (v) of clause 2.2.2B of the SEBI (DIP) Guidelines, can be one of the following:
1. A Public Financial Institution as defined in Section 4-A of the Companies Act.
2. A Bank
3. FII (Foreign Institutional Investors) that are registered with SEBI
4. Development Financial Institutional, both multilateral and bilateral
5. VCF (Venture Capital Funds) registered with SEBI
6. SIDC (State Industrial Development Corporations)
7. Insurance Companies registered with the IRDA (Insurance Regulatory and Development Authority)
8. Provident and Pension Funds with minimum corpus of 25 crores.
Such QIBs shall not be promoters or related to promoters of the issuer, either directly or indirectly. Besides, QIBs cannot have either veto rights or the right to appoint any nominee director to the board because that would also be considered to be related to the promoter.
The QIBs (especially the Mutual Funds and FIIs) play a very important role in the stock price movements. QIBs play an important role by bringing in the necessary funds needed by the equity stock market. The FIIs, though volatile and essentially market driven, facilitate significantly to the foreign funds inflow. QIBs are generally believed to bring in more efficiency and liquidity in the system.
B] Changes brought in by SEBI that impacted QIB role in the recent years
Earlier, in the book building route for public issue, 50% was reserved for QIBs, 15% for HNI and 35% for Retail investors. Even without this reservation for QIBs, the merchant bankers had the discretion alot shares to QIBs in any manner they liked. SEBI brought about the following major changes in the Primary Market in the last 6 years which impacted the role of QIBs in a big way: (a) QIBs now have to bid with margin money of 10% of the application
A] Who are the Qualified Institutional Buyers?
Qualified Institutional Buyers (QIBs), as defined under sub-clause (v) of clause 2.2.2B of the SEBI (DIP) Guidelines, can be one of the following:
1. A Public Financial Institution as defined in Section 4-A of the Companies Act.
2. A Bank
3. FII (Foreign Institutional Investors) that are registered with SEBI
4. Development Financial Institutional, both multilateral and bilateral
5. VCF (Venture Capital Funds) registered with SEBI
6. SIDC (State Industrial Development Corporations)
7. Insurance Companies registered with the IRDA (Insurance Regulatory and Development Authority)
8. Provident and Pension Funds with minimum corpus of 25 crores.
Such QIBs shall not be promoters or related to promoters of the issuer, either directly or indirectly. Besides, QIBs cannot have either veto rights or the right to appoint any nominee director to the board because that would also be considered to be related to the promoter.
The QIBs (especially the Mutual Funds and FIIs) play a very important role in the stock price movements. QIBs play an important role by bringing in the necessary funds needed by the equity stock market. The FIIs, though volatile and essentially market driven, facilitate significantly to the foreign funds inflow. QIBs are generally believed to bring in more efficiency and liquidity in the system.
B] Changes brought in by SEBI that impacted QIB role in the recent years
Earlier, in the book building route for public issue, 50% was reserved for QIBs, 15% for HNI and 35% for Retail investors. Even without this reservation for QIBs, the merchant bankers had the discretion alot shares to QIBs in any manner they liked. SEBI brought about the following major changes in the Primary Market in the last 6 years which impacted the role of QIBs in a big way: (a) QIBs now have to bid with margin money of 10% of the application
References: 1. http://www.blonnet.com/2006/08/27/stories/2006082703260200.htm 2. http://www.vccircle.com/2006/12/29/legal-guest-column-demystifying-qips/ 3. http://www.sebi.gov.in/circulars/2006/dipcir0506.html 4. http://www.indiaenews.com/business/20061005/24971.htm 5. http://www.businessstandard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=312002 6. http://www.sebi.gov.in/faq/pubissuefaq.pdf 7. http://www.blonnet.com/2008/01/06/stories/2008010651040300.htm 8. http://www.mahindrafinance.com/media/pdf_press_reports/report07_0008.pdf