In the Indian stock market, a qualified institutional buyer (QIB) is a type of institutional investor that is permitted to participate in certain investment opportunities, such as initial public offerings (IPOs) or preferential allotments of securities, that are not available to retail investors. QIBs are typically large financial institutions, such as banks, insurance companies, mutual funds, and pension funds, that are regulated by authorities such as the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI).
An anchor investor is a type of QIB that makes a large investment in an IPO to provide confidence to other investors and help to stabilize the price of the securities being offered.
The IPO Stocks NSE is the one that allows Anchor investors and QIB to make investments.
Who Qualifies as a QIB?
In India, an investor who has different requisite expertise and strong financial background to evaluate and invest everything strategically in capital markets can become a Qualified Institutional Buyer.
The following members are Qualified Institutional Buyers:
- Mutual funds.
- All scheduled commercial banks.
- Venture Capital (VC) registered under SEBI.
- Development financial institutions (applicable for bilateral and multilateral).
- Industrial Development Corporations.
- Department of Posts-managed insurance programs.
- Any Pension Fund that contains a minimum identical corpus.
- Provident fund with at least Rs. 25 Crores.
Pros of QIB
- A QIB investment gets a quick settlement
- It goes under the guidelines of SEBI.
- Easy settlement for merchant brokers
- Easy revival of a corpus through the investment
- No need to recruit a team of solicitors
- Zero involvement of bankers and auditors
- Easy to sell off huge chunks of the share market.
- No hesitation to exit at any point.
- 1-year lock-in period.
When Can QIB Sell Its Shares?
A Qualified Institutional Buyer can sell his shares after the allotment. It generally comes after 30 days. When an anchor investor bids for the shares, the declaration will occur. The share price will be decided on the allotment day.
Lock Period in QIB
The lock period is the factor that depends on the different IPO investors. The period usually takes longer for different investors than for an anchor investor.
In the short term, anchor investors can lock in for six months.
What Happens When QIB Isn’t Subscribed?
Every company should possess a minimum subscription of 90% of the issued amount during the closure period. When it is not happening as planned, the company will receive a refund of the entire subscription amount.
Sum up! An anchor investor can become the Qualified Institutional Buyer (QIB) after investing more than Rs. 10 crores. In Online Trading, anchor investors are typically allocated a significant portion of the securities being offered in the IPO, and their participation is intended to signal the quality and likely success of the offering.