The Securities & Exchange Board of India, the regulator for traded securities such as stocks, has given an exemption to Bank of India to conduct a qualified institutional placement or QIP of Rs 3,000 cr.
The bank is technically ineligible for conducting a QIP — which is not considered a ‘public offering’ — as it has not met the minimum float requirements under India security laws.
Under SEBI Listing Obligations and Disclosure Requirements Regulation passed two years ago, all listed companies must have at least 25% of their shares held by the public, including investment institutions such as banks and mutual funds.
Unless this criteria is met, the companies are not allowed to conduct any ‘private sale’ of shares.
Such companies would have to rely on IPP or Institutional Placement Program, which requires a minimum of 50 participants and the declaration of a price band and so on.
However, companies such as Bank of India, can apply for an exemption in case they feel that they cannot go ahead with a public offering — whether IPP or otherwise — due to market conditions.
While IPP is based on the price band-based mechanism, QIP can be done without such price discovery mechanisms.
However, the QIP price cannot be less than average of the weekly high and
low of the closing prices of the shares during the preceding two weeks from the date of the meeting in which the company decides to open the issue.