November 11, 2025
6 mins read
Companies often need fresh funds. A Qualified Institutional Placement, or QIP, is one way they raise it. In simple words, it means selling shares or securities directly to big investors, also known as Qualified Institutional Buyers (QIBs).
Unlike IPOs, where anyone can apply, Qualified Institutional Placement is only for institutions banks, insurance firms, mutual funds, pension funds. It’s quicker too. Less paperwork. Fewer approvals.
SEBI introduced Qualified Institutional Placement method in 2006. Why? To cut dependence on foreign funding. A company can issue equity shares, convertible bonds, or similar instruments. The money comes from investors who already understand the risks.
Think of Qualified Institutional Placement as a shortcut. Rather than undertake an extensive IPO process, a listed company will sell directly to institutional investors. These are knowledgeable investors with large amounts of capital.
It is faster, cheaper, and narrower in scope. The Securities and Exchange Board of India (SEBI) ensures this execution is fair. Companies use the proceeds for expansion, debt repayment, or even to shore up their balance sheets.
For example, Axis Bank raised ₹10,000 crore in 2020 through Qualified Institutional Placement. The move boosted its capital position and reassured investors that institutions had confidence in its stability.
The process of Qualified Institutional Placement isn't random. Each step is designed to be fair and transparent.
The board approves it first. Shareholders also need to agree. The reason for raising funds expansion, debt, or anything else must be clear.
Merchant bankers prepare documents with details on pricing, number of shares, and allocation.
SEBI establishes guidelines. The floor price is determined by taking the average price of the shares over the previous two weeks. Companies are required to issue the shares at or over this price.
Institutional buyers place the bids stating how many shares they want and at what price, which would indicate the demand.
Shares are allotted in accordance with SEBI’s rules, which ensure a transparent allotment process.
Finally, the allotted shares are listed on the stock exchanges and are now available for Qualified Institutional Placement to trade in the market, offering liquidity.
Who counts as a Qualified Institutional Buyer? Here’s a quick breakdown:
Mutual Funds – They pool money from many investors and invest it in securities. Their roles allow them to participate.
Banks and Financial Institutions – They possess a large amount of money, so they bring a sense of stability and credibility.
Insurance Companies – They invest the premium that they collect from the policyholders and tend to be long-term investors.
Pension Funds – They manage retirement savings and prefer more stable investments.
Foreign Portfolio Investors (FPIs) – They are registered with SEBI and represent global participation.
Venture Capital Funds – They prefer to invest in rapidly growing businesses and startups.
Alternative Investment Funds (AIFs) – They invest in niche parts of the market, such as real estate or commodities.
Rapid Process – The process is considerably faster when compared to an IPO, as it would usually wrap up within weeks instead of months.
Affordable – The costs incurred in going through the Qualified Institutional Placement process should be lower than that of a public issue as the need for multiple filings and approvals has been eliminated.
Institution focused – The funds are raised solely from institutions, which brings larger sums of money that are more likely to be better-managed investment perspectives.
Price flexibility – It is the issuer's prerogative to determine the price of an 'issue,' as long as it is above the floor price set by SEBI.
Limited dilution – Shares are allocated to a select group of investors, which means dilution is far less than an IPO.
No pre-issue disclosure – Unlike an IPO, the need for lengthy procedures of disclosures is avoided.
Quick capital – The funds raised from a Qualified Institutional Placement are made available sooner than if it was processed through an IPO, which allows companies to allocate capital for expansion or debt repayments, if required.
Qualified Institutional Placement also have some disadvantages as listed below:
Limited access – Access to participation is limited to only QIBs, meaning retail investors cannot participate or purchase.
Market conditions impact – A weak market may result in a lack of buyers if such conditions exist.
Dilution risk – The raised capital will dilute current shareholders and their current holdings, albeit to a lesser extent than its predecessor, the public offering.
Price pressure – Companies have to ensure that the shares issued exceed SEBI's floor price, which will thus tend to make companies and institutional investors less optimistic.
Short-Term approach – The mindset of dealing in several scales favors fewer long-term objectives in many cases, which may negatively impact the company's goals.
Strict Oversight – SEBI’s close monitoring ensures fairness but adds compliance work.
Risk of Misuse – Poorly designed Qualified Institutional Placements may end up helping promoters more than the business itself.
Qualified Institutional Placement is neither a perfect solution nor a niche tool. In the last several years, a number of notable Qualified Institutional Placements have occurred. Just earlier in July 2024, Vedanta raised ₹8,500 crore to help pay down its debt and to help fund new mining projects.
In 2024, food delivery company Zomato also raised ₹8,500 crore as their first equity raise since their IPO of 2021. The money was used to strengthen the balance sheet and support expansion.
Adani Energy Solutions raised ₹8,373 crore for renewable energy projects. Overall, Indian companies raised ₹1,11,719 crore via Qualified Institutional Placements in 2024 up from ₹52,350 crore in 2023.
Companies go for Qualified Institutional Placements because they save time. Unlike IPOs, which take months, Qualified Institutional Placements can close within weeks. That speed matters when funding is urgent.
They also reduce dilution. By issuing shares only to institutions, companies keep ownership more stable.
Finally, Qualified Institutional Placements bring in credible investors with significant funds. Their participation itself builds confidence in the market.
Qualified Institutional Placement, or the QIP, is neither a perfect solution nor a niche tool. It is quicker, cheaper, and narrower in scope.
If you are a company, you can obtain funds without the long lead time after the public offering period. If you are an investor, it signals how large institutions view a company.
Studying Qualified Institutional Placements offer a peek into corporate priorities, market trends, and how firms balance short-term capital raising with long-term planning.
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QIP or Qualified Institutional Placement is the process of issuing equity shares, convertible securities, or debentures to Qualified Institutional Buyers like mutual funds, banks, and insurance companies. Listed companies issue these securities to raise capital without undergoing extensive regulatory filings.
A company’s board of directors approves the QIP, determining the pricing and allocation of shares. The shares are then offered to QIBs through a bidding process, ensuring that the placement complies with SEBI guidelines and market regulations.
Qualified institutional placements are open to large institutional buyers such as mutual funds, insurance companies, banks, and foreign investors are eligible to participate in a QIP. Retail investors and the general public are not allowed to invest through this route.
QIP is faster and less expensive compared to IPOs or FPOs, as it involves fewer regulatory filings and compliance requirements. It also allows companies to get capital quickly by targeting institutional investors with large investment capabilities.
Issuing shares through QIP may dilute existing shareholders’ ownership, as new shares increase the overall share count. However, the dilution impact is generally lower than public offerings since shares are issued to a specific group of institutional investors.
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