Easier QIPs for well-known corporates: Sebi

Securities and Exchange Board of India (Sebi) has decided to ease the rules for qualified institutional placements (QIPs) for top-notch Indian companies to mobilise resources faster and in a cost-efficient manner.

The capital markets regulator also plans to introduce more products aimed at more sophisticated investors.

The primary market advisory committee of Sebi, at a meeting yesterday, cleared a package of proposals to ease issuances of QIPs. The new rules are expected to come into effect by the end of the month after the board formally approves the proposals, Sebi chairman M Damodaran said.

QIPs allow companies to raise funds by selling shares to qualified institutional buyers (QIBs or institutional investors). The instrument was introduced last year to discourage companies from tapping the global depository receipts (GDR) market.

Since its introduction, a total of 36 companies including IDFC, UTI Bank (now Axis Bank), GVK Power, Max India, Punj Lloyd and Phoenix Mills have raised nearly Rs 14,000 crore ($3.6 billion) through QIPs.

Recently, Sebi also allowed companies having a good track record and very familiar with investors to raise funds through rights and follow-on issues through a fast track manner without getting documents vetted,  Damodaran said at the Ficci seminar here this morning.

In the first phase, 30 companies would qualify for the fast track rights and FPOs, Sebi chief said.

This is a first-of-its-kind procedure for any emerging market and only the second country (after US) to have a file-and-raise money plan. The fast-track issuance for rights and FPOs is largely based on the well-known seasoned issuers (WKSIs) model followed by the Securities and Exchange Commission of the US.

NEW PRODUCTS

Damodaran said Sebi was also in the process of introducing more products for the capital markets, which would be aimed at more sophisticated investors. The expert committee on derivatives products headed by Prof M R Rao, dean, Indian School of Business, Hyderabad, will submit its recommendations soon.

There has to be calibrated efforts to attract more sophisticated investors into the Indian capital markets, he said.

Replying to a query, Damodaran said Sebi was likely to scrap the entry load for open-ended mutual funds if investors are applying directly to the fund houses or put in online applications.