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  • QIP Route Example

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    Vishal Sabharwal
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    A real estate firm wanted to hike the public stake to 25% within six months, through the QIP route. Sebi said that the QIP clause is a basic eligibility condition, and only a company meeting the minimum shareholding criteria can make a QIP issue.

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    A real estate firm wanted to hike the public stake to 25% within six months, through the QIP route. Sebi said that the QIP clause is a basic eligibility condition, and only a company meeting the minimum shareholding criteria can make a QIP issue.

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    Attribution Non-Commercial (BY-NC)
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    28 visualizzazioni1 pagina

    QIP Route Example

    Caricato da

    Vishal Sabharwal
    A real estate firm wanted to hike the public stake to 25% within six months, through the QIP route. Sebi said that the QIP clause is a basic eligibility condition, and only a company meeting the minimum shareholding criteria can make a QIP issue.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Scarica in formato PDF, TXT o leggi online su Scribd
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    di 1

    CosshouldfulfilbasiccriteriatotaketheQIProute: Sebi

    CantUseThisRouteToHikePublicHoldingIfItHasGoneBelowListing Threshold RaviAnanthanarayananMUMBAI MARKETSregulatorSebisinformalguidancerulingsmakeinterestingreadingandat timesevensetimportantprecedents.Arecentonemakesitclearthatlisted companies,inwhichthepublicshareholdinghasgonebelowtheminimumlisting threshold,cannothikethepublicstakethroughaqualifiedinstitutionalplacement (QIP). ThequerywasraisedbyarealestatefirmSatraProperties.Aftermerginga privatelyheldfirmOMHousingCompanywithitself,371,92,250sharesofRs2each wereallottedtothepromoters.Thisbroughtdownthepublicstaketo10.09%from 35.8%.Whilelistingthenewsharesontheexchanges,SatraProperties(SPIL)had undertakentohikethepublicstaketo25%withinsixmonths,throughtheQIP route. However,QIPguidelinesprescribethatonlythosecompanieswhichmeetthe minimumpublicissuerequirementcanusethisroute.ButSPILwantedtousethis routetoovercomethisverylimitation.SPILhasusedthelistingagreement,which prescribestheminimumpublicshareholding,topresentitscase.Thelisting agreementsaysthatacompany,wherepublicshareholdinghasfallenbelowthe minimumlevel,shouldincreaseitadoptinganyofthefollowingmethods:apublic issue,anofferforsale,asalethroughthesecondarymarketoranyothermethod whichdoesnotadverselyaffecttheinterestofminorityshareholders. SPILcitedthelastmethod,abroadone,asonethatallowsittousetheQIP route.SPILisoftheviewthatforthepurposeofincreasingthepublicshareholding to25%throughtheQIProute,therestrictionimposedunderclause13A.1.1(b)of theSebi(DIP)GuidelinesonQIP,i.e.complianceofminimumpublicshareholding requirements,isnotapplicableandtherefore,SPILshouldbeabletoincreasethe publicshareholdingbyissueofsharesthroughQIP. ButSebihadadifferentview.TheregulatorsaidthattheQIPclauseisabasic eligibilitycondition,andonlyacompanymeetingtheminimumshareholdingcriteria canmakeaQIPissue.Sebihassaidthattheprovisionsunderthelistingagreement thatrequireacompanytoincreasepublicshareholdingbyanymeans,donotapply inthiscase.Hence,SatraPropertieshasbeentoldtoincreasethepublic shareholdingtotheprescribedlevel,bytheothermethodslikeofferforsale, secondarymarketsaleorapublicissue. Sebisguidancesetsanimportantprecedentforlistedcompanies.Therehave beenquiteafewinstancesofcompaniesmerginggroupcompanieswiththemselves, leadingtoaloweringofpublicshareholding.Insomecases,likethisone,iteven fallsbelowthelistingthreshold.Hence,thesecompanieswillhavetohikepublic holding.AQIPissueismucheasiertocompletecomparedtotheothermeansof dilutingpromotershareholding.Sebisguidelinesensurethattherouteisaccessible toonlythosewhomeetcertaincriteria.

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