SEBI notifies QIP to dampen fixation for GDRs / FCCBs

SEBI has allowed domestic companies to raise money from institutional investors through the 'qualified institutional placements' (QIP). The market regulator issued guidelines for such placement yesterday.

Domestic companies can raise any amount through QIP. The only limitation is that the total amount raised through this route should be within five times the net worth of the issuing company as at the end of the previous financial year.

Companies can issue equity shares or related instruments, except convertible warrants. In the case of related instruments convertible into equity shares, such conversion must take place within five years from the date of issue. Pricing of these issues would be similar to the existing norms for GDR / FCCB issues.

Such placement can be made only to 'qualified institutional bidders' (QIB) as defined by SEBI. The investors should not be connected to the promoters either directly or indirectly. For placements aggregating less than Rs250 crore, there should be at least two investors. There should be at least five investors for bigger placements. No single QIB can be allotted more than 50 per cent of the total issue size.

To make such placements more attractive to QIB's, SEBI has done away with the lock in period. QIP investors would be free to exit even immediately after allotment.

Issuing companies should prepare a 'placement document' providing relevant information as specified by SEBI guidelines. This document should be published on the websites of the issuing company and major stock exchanges. The placement document need not be filed with SEBI.