| ign="center"> | | | | capital. |
| Until a few years back, domestic companies faced lot | | | | Benefits of Qualified Institutional Placement |
| of difficulties in raising capital for their business | | | | A QIP can be raised faster than a FPO or a rights |
| operations. This prompted many leading Indian | | | | issue. In a QIP there are very few formalities with |
| companies no alternative but to access the foreign | | | | regard to rules and regulations unlike a FPO or a |
| markets for funding their capital needs by issuing | | | | rights issue. |
| securities like the American Depository Receipts or | | | | What is Share Buyback? |
| ADRs in markets outside India. The QIP process was | | | | When a company buys its own shares back from the |
| launched by the SEBI in order to encourage Indian | | | | general public, it is called as a buyback share |
| companies to access funds domestically without any | | | | transaction. The shares so purchased form the |
| difficulty. | | | | shareholders results in the reduction of the share |
| What is Qualified Institutional Placement? | | | | capital and at the same time involves outflow of cash |
| When a listed company issues equity shares or fully | | | | from the company to the extent of the shares |
| and partly convertible debentures or any securities | | | | purchased from the shareholders. |
| other than convertible warrants to a Qualified | | | | Companies buy back shares when they have surplus |
| Institutional Buyer, the process is called as QIP or | | | | cash reserves and there is a lack of good investment |
| Qualified Institutional Placement. This mode is the only | | | | opportunities. In such circumstances, the company |
| quickest way of the companies to issue equity | | | | may use the situation to buy its own shares in order |
| shares or convertible securities to a select group of | | | | to increase their own value. Likewise, a company |
| individual raising private equity capital, other than | | | | opts for a share buyback when it wants to increase |
| making a preferential allotment of shares. This | | | | the promoter’s holdings in the company. Apart |
| process allows investors without having to undergo | | | | from this, there are a number of other reasons as |
| any extended procedural requirements for raising | | | | well for a company to opt for a share buyback. |