Who are Qualified Institutional Buyers (QIBs)?

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In this lesson you will learn about the Qualified Institutional Buyers also abbreviated as QIBs.

Qualified Institutional Buyers (QIBs)

Qualified Institutional Buyers are those institutional investors who are generally perceived to expertise and the financial muscle to evaluate and invest in the capital markets.

To explain it more I will quote few lines from other sources as you need to get little bit technical to understand this term more clearly.

In terms of clause 2.2.2B (v) of DIP Guidelines, a Qualified Institutional Buyer shall mean, “Public financial institution as defined in section 4A of the Companies Act, 1956; scheduled commercial banks, mutual funds, foreign institutional investors 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 crore, pension funds with minimum corpus of Rs. 25 crore.

As per SEBI, following measures shall be implemented in respect of participation of QIBs in the book-built issues:

1: Qualified Institutional Buyers (QIBs) shall bring at least 10% margin while submitting the bids.

2: The allotment of shares to Qualified Institutional Buyers shall be on proportionate basis.

3: Out of the existing 50% portion available for Qualified Institutional Buyers, 5% thereof shall be specifically available for mutual funds registered with SEBI. However, these mutual funds participating in Qualified Institutional Buyers category will also be eligible for allotment in the remaining portion i.e. 45% available to Qualified Institutional Buyers.

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