Rs. 100- Rs. 10 crore
Start investing with Rs. 100 | Easy KYC | Expert-managed funds
In summary
Qualified Institutional Buyers
A Qualified Institutional Buyer, or QIB, is an eligible institutional investor recognised under SEBI regulations. Unlike a retail investor, a QIB is an organisation that invests in securities as part of its institutional activities. QIBs can participate in public issues and other securities transactions, subject to the applicable rules.
Here are the key points to remember:
- QIB stands for Qualified Institutional Buyer.
- QIBs are institutional investors that meet specific SEBI requirements.
- Mutual funds, scheduled commercial banks and eligible insurance companies are among the entities that can fall under the QIB category.
- In a book-built public issue, not more than 50% of the offer may be available for allocation to QIBs under the applicable SEBI framework.
- Up to 60% of the QIB portion may be allocated to anchor investors, subject to the applicable rules.
A QIB and a QIP are different. A QIB is an investor, while a Qualified Institutions Placement (QIP) is a method used by an eligible listed company to raise capital.
Understanding these terms can help you follow how institutional investors participate in IPOs and other capital-market transactions.
What is a Qualified Institutional Buyer?
Qualified Institutional Buyers (QIBs) are institutional investors that meet the categories and conditions specified under SEBI regulations. An institutional investor is an organisation that invests in securities rather than an individual investing for personal purposes.
For example, certain mutual funds, banks, insurance companies and pension funds can qualify as QIBs if they meet the applicable requirements.
The term QIB is particularly relevant when you read about IPOs, QIPs and other securities-market transactions.
If you want to understand how mutual funds work, you can also explore mutual fund schemes.
What does QIB stand for?
QIB stands for Qualified Institutional Buyer.
The word “qualified” refers to the regulatory requirements that apply to the institution. “Institutional” means that the investor is an organisation rather than an individual. “Buyer” refers to the institution's role as an investor in securities.
An individual investor does not become a QIB simply by investing a large amount of money. QIB status depends on the institution's category and the applicable regulatory requirements.
Who qualifies as a QIB?
SEBI regulations specify the categories of institutions that can qualify as QIBs. The requirements can differ depending on the type of institution.
The main categories specified under the applicable SEBI framework include the following:
| QIB category | Simple explanation |
|---|---|
| Mutual funds | Funds that pool money from investors and invest it in securities |
| Venture capital funds | Funds that invest in eligible businesses and investments |
| Alternative investment funds | SEBI-registered funds that use alternative investment strategies |
| Foreign venture capital investors | Eligible foreign venture capital investors registered with SEBI |
| Certain foreign portfolio investors | Eligible FPIs subject to the applicable exclusions |
| Public financial institutions | Institutions recognised as public financial institutions under applicable law |
| Scheduled commercial banks | Eligible commercial banks |
| Development financial institutions | Eligible multilateral and bilateral development financial institutions |
| State industrial development corporations | Eligible state-level development corporations |
| Insurance companies | Insurance companies registered with IRDAI |
| Provident funds | Eligible provident funds meeting the applicable requirements |
| Pension funds | Eligible pension funds meeting the applicable requirements |
| National Investment Fund | The National Investment Fund established by the Government of India |
| Specified insurance funds | Certain insurance funds managed by the armed forces and Department of Posts |
| Systemically important NBFCs | Non-banking financial companies meeting the applicable requirements |
Some categories have specific conditions. For example, the SEBI definition specifies a minimum corpus of Rs. 25 crore for qualifying provident funds and pension funds. There is no single Rs. 100 crore asset threshold that applies to every QIB category.
How do QIBs participate in financial markets?
QIBs can participate in different parts of the securities market, depending on their category and the applicable regulations. They may invest in equity, debt and other permitted securities.
Their role is particularly visible in IPOs and institutional fundraising.
QIBs in IPOs
An Initial Public Offering (IPO) is when a company offers its shares to the public. In a book-built IPO, a portion of the offer can be allocated to QIBs under the applicable SEBI framework.
For applicable book-built public issues, not more than 50% of the offer may be available for allocation to QIBs, subject to the relevant rules and issue structure.
QIB participation is therefore one part of the IPO allocation structure. It does not mean that QIBs automatically receive shares before every other investor category.
QIBs in Qualified Institutions Placements
A Qualified Institutions Placement, or QIP, is different from a QIB.
A QIP is a fundraising method through which an eligible listed company issues eligible securities to QIBs on a private placement basis, subject to SEBI regulations.
In simple terms:
- QIB = the eligible institutional investor.
- QIP = the fundraising method.
- QIBs can participate in QIPs.
QIBs in other securities
Depending on their category and regulatory permissions, QIBs can also participate in securities such as equity shares and debt securities.
Their investments may take place in the primary market, where securities are issued, or the secondary market, where existing securities are bought and sold.
The securities that a QIB can invest in depend on its regulatory status and the rules applicable to the transaction.
How does QIB allocation work in an IPO?
The allocation of shares in an IPO depends on the issue structure and the applicable SEBI rules. In a book-built public issue, the QIB portion forms part of the overall allocation structure.
For applicable issues, not more than 50% of the offer may be available for allocation to QIBs. The company may also allocate up to 60% of the QIB portion to anchor investors, subject to applicable requirements.
These percentages refer to different things. The 60% figure applies to the QIB portion, not to the entire IPO.
For example, if the QIB portion of an issue is Rs. 50 crore, a permitted anchor allocation of up to 60% would be calculated from that Rs. 50 crore QIB portion. It would not mean that 60% of the entire IPO is automatically allocated to anchor investors.
The exact allocation can vary depending on the issue and applicable regulations.
What is the role of anchor investors?
Anchor investors are a specific category within the QIB allocation framework for applicable public issues. They can receive an allocation from the QIB portion before the public issue opens for bidding, subject to the applicable rules.
Up to 60% of the QIB portion may be allocated to anchor investors in applicable issues. The allocation is made in accordance with the SEBI framework.
Not every QIB is an anchor investor. Anchor investors are a specific category within the QIB portion.
QIB vs retail investor vs non-institutional investor
QIBs, retail individual investors and non-institutional investors are different investor categories used in public issues. The main difference is the type of investor and the allocation rules that apply to each category.
The following table provides a simple comparison.
| Investor category | Who is it? | Role in an IPO |
|---|---|---|
| QIB | An eligible institutional investor | Participates in the QIB portion under applicable SEBI rules |
| Retail individual investor | An individual investor applying within the applicable retail limit | Applies under the retail portion |
| Non-institutional investor | An investor who falls outside the retail category and meets applicable requirements | Applies under the non-institutional portion |
The allocation limits and application requirements can vary by issue. You should check the relevant offer document for the applicable details.
What is the difference between QIB and QIP?
QIB and QIP are similar-sounding terms but have different meanings.
A QIB is an investor. A QIP is a fundraising method.
For example, suppose an eligible listed company wants to raise capital by issuing eligible securities to institutional investors. If it uses the QIP route, eligible QIBs can participate in the issue.
The difference can be summarised as follows:
| Term | Meaning |
|---|---|
| QIB | Qualified Institutional Buyer; an eligible institutional investor |
| QIP | Qualified Institutions Placement; a fundraising method for an eligible listed company |
Why are QIBs important in the market?
QIBs are an important category of institutional investors in the securities market. Their participation can bring institutional capital into public issues and other market transactions.
QIB activity can also contribute to trading activity and price discovery. Price discovery is the process through which buying and selling interest helps determine the market price of a security.
However, QIB participation does not guarantee that a security will perform well. An institution makes its investment decisions based on its own objectives, analysis and applicable rules.
A simple example of a QIB participating in an IPO
Suppose a mutual fund qualifies as a QIB under the applicable SEBI regulations. A company then launches a book-built IPO with a portion of the offer available for QIB allocation.
The mutual fund can place a bid as an eligible QIB, subject to the rules of the issue. If shares are allotted to the mutual fund, those shares become part of its investment portfolio.
This example shows the basic difference between investor categories. An individual investor applies through the applicable individual investor category, while an eligible mutual fund participates as an institutional investor.
What are the advantages and disadvantages of QIBs?
QIBs can play an important role in capital markets, but the term does not itself represent an investment product or a guaranteed benefit.
Their participation can support capital raising and market activity. At the same time, institutional transactions can have an impact on the ownership structure of a company when new securities are issued.
For example, when a company issues new shares through an institutional fundraising route, the ownership percentage of existing shareholders may be diluted. The effect depends on the size and structure of the issue.
QIB regulations in India
QIBs are governed by SEBI regulations applicable to the relevant securities transaction. The requirements can vary depending on the type of institution and the transaction.
The SEBI framework specifies the categories that can qualify as QIBs and sets out rules for public issues and qualified institutions placements.
The relevant regulations and offer documents should always be checked because allocation requirements and other provisions can differ depending on the type of issue.
QIBs and Rule 144A
Rule 144A is a US securities regulation concerning the resale of certain restricted securities to Qualified Institutional Buyers. It is separate from the Indian SEBI framework for QIBs.
For someone learning about QIBs in the Indian market, the SEBI framework is more directly relevant. Rule 144A applies to the US securities market and should not be treated as an Indian QIB rule.
Explore Investment Tools
Articles and Insights
Frequently Asked Questions
Understanding QIB eligibility
Can an individual investor qualify as a QIB?
No. QIB status applies to specified institutional investors that meet the requirements under SEBI regulations. An individual investor cannot become a QIB simply by investing a large amount.
Do QIBs have to invest a minimum amount in every IPO?
The applicable investment and application requirements depend on the IPO and the SEBI rules governing it. You should check the relevant offer document for the minimum application size and other requirements instead of assuming that one amount applies to every issue.
Are foreign investors automatically treated as QIBs?
No. A foreign investor does not automatically qualify as a QIB. The investor must fall within an eligible category and satisfy the applicable conditions under SEBI regulations.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.
Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.