EN
Qualified institutional buyers play an important role in India’s capital markets due to their financial strength, experience, and ability to assess investment risks. These investors are institutions rather than individuals and usually participate in large-value transactions across equity and debt markets.
Regulated by the Securities and Exchange Board of India (SEBI), QIBs can participate in activities such as initial public offerings (IPOs), private placements, and secondary market transactions. Understanding who qualifies as a QIB and how they operate helps in better understanding the structure and functioning of India’s financial markets.
Key Takeaways
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Qualified Institutional Buyers (QIBs) are specified under Regulation 2 (1) (ss) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018.
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QIBs include mutual funds, registered FPIs (excluding individuals and family offices), banks, insurance companies, pension and provident funds above ₹25 crore, and other designated institutions.
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In book-built IPOs, QIBs can get up to 50% of the net offer size, of which a portion can be reserved for anchor investors.
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The overall anchor investor reservation within the QIB portion has been increased to 40% (from 33%) under SEBI’s amendments effective November 30, 2025.
Who are Qualified Institutional Buyers (QIB)?
Qualified Institutional Buyers, as defined by SEBI rules, are a particular class of institutional investors that possess the knowledge, experience, and resources to make well-informed investment decisions in the capital markets.
Mutual funds, insurance providers, foreign portfolio investors (FPIs), scheduled commercial banks, and other SEBI-accredited financial institutions are included under this exclusive category.
Their participation is important because it gives the market stability, liquidity, and capital to the market. To maintain a vibrant and stable financial environment, QIBs actively take part in qualified institutional placements (QIPs), secondary market transactions, and initial public offerings (IPOs).
Criteria for Qualification
To qualify as a Qualified Institutional Buyer (QIB) in India, an entity must fall under specific categories as defined by SEBI. Key categories per SEBI (ICDR) Regulation 2(1)(ss) include:
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Institutional investors: This includes mutual funds, venture capital funds, alternative investment funds, and foreign venture capital investors that are registered with SEBI.
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Foreign portfolio investors: Excluding individuals, corporate bodies, and family offices, these are foreign entities investing in the Indian markets.
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Key financial institutions: Public financial institutions, scheduled commercial banks, multilateral and bilateral development financial institutions, and state industrial development corporations.
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Insurance companies: Entities that are registered with the Insurance Regulatory and Development Authority of India (IRDAI).
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Funds with significant corpus: Provident and pension funds with a minimum corpus of ₹25 crore, including the National Investment Fund and insurance funds managed by the Indian armed forces and the Department of Posts.
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Systemically important Non-Banking Financial Companies (NBFCs): These are NBFCs that play a crucial role in the financial system due to their size and interconnectedness.
An Overview of the Rules & Regulations that Govern QIBs
QIBs are subject to a set of regulations designed to ensure transparent and fair participation in the securities market:
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They can invest in securities issued by companies that are listed and comply with the minimum public shareholding patterns required by the stock exchange.
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The securities, known as “specified securities”, include equity shares or any other form not including warrants, fully paid at the allotment.
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Specified securities can be converted or exchanged for equity shares at any time after allotment, but not later than sixty months from the date of allotment, as per SEBI’s QIP guidelines.
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SEBI imposes restrictions on who can invest in or be allotted these specified securities, specifically stating that institutional buyers related to the issuers' promoters directly or indirectly are prohibited.
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Corporations can raise an amount through QIBs not exceeding five times the issuer's net worth as of the end of the previous financial year.
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Merchant bankers managing QIPs must be registered with SEBI and submit a due diligence certificate to the stock exchange, ensuring adherence to SEBI's guidelines.
Advantages of Being a QIB
In the Indian financial market, qualified institutional buyers, or QIBs, have several important benefits, including the following:
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Faster, lower-cost capital raising routes: QIBs are the only investors allowed in QIPs and some private placements, allowing companies to obtain funds more rapidly, with fewer regulatory requirements and lower intermediation costs than public offerings.
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Access to unique and early-stage services: QIBs have early access to high-quality issuers through QIPs, anchor allocations, and institutional placements that retail investors do not have.
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Preferential pricing and negotiating leverage: Issuers can negotiate prices with QIBs under SEBI guidelines in QIPs and private placements, which generally results in better terms than broad-based issue pricing.
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Priority allocation for book-built IPOs: Up to 50% of the net offer in book-built IPOs is designated for QIBs, with a portion given to anchor investors, boosting the chances of major allotment.
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Increased liquidity and information access: QIBs have access to more in-depth due diligence and can rapidly exit significant stakes through block and secondary market trades following listing.
Disadvantages of Being a QIB
While Qualified Institutional Buyers (QIBs) add depth to India's capital markets, their influence and scale have significant drawbacks in QIPs, IPOs, and secondary trades, including:
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Shareholder Dilution: QIPs enable QIBs to quickly acquire large interests, reducing current shareholders' holdings and potentially transferring company control away from minority owners.
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Market Volatility: Massive buy/sell decisions by QIBs can cause rapid price fluctuations, worsening downturns, and cause instability for all investors.
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Retail Exclusion: High QIB allocations in IPOs and QIPs limit retail investors' shares, decreasing their participation and creating an unequal playing field.
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Regulatory Scrutiny: SEBI monitors for arbitrage (e.g., AIFs acting as proxies), imposing compliance requirements and fines on non-eligible companies.
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Investment Risks for QIBs: Despite competence, significant exposures imply high volatility, possible post-listing losses, and higher operational costs.
SEBI Guidelines for QIB category
The Securities and Exchange Board of India has laid down specific guidelines to regulate the participation of Qualified Institutional Buyers in public issues. These rules are designed to ensure fair allocation and prevent excessive concentration of shares.
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Minimum QIB allottees based on issue size:
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Up to ₹250 crore issue size: Minimum 2 QIB allottees
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Above ₹250 crore issue size: Minimum 5 QIB allottees
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Retail and QIB allocation in IPOs (current status): Retail allocation remains 35% of the net offer. The proposal to reduce the retail quota to 25% and raise the QIB share to 60% was withdrawn by SEBI.
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Relaxation of a 6-month gap between QIPs:
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SEBI has eased the earlier mandatory 6-month cooling-off period between two QIPs.
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Issuers can raise multiple QIPs within 6 months if pricing and size are pre-disclosed in the shareholders’ special resolution.
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Regulatory basis: Relaxation introduced after SEBI’s 2020 consultation and incorporated through 2021 ICDR amendments. This enables faster institutional fundraising while maintaining disclosure requirements
Conclusion
The fabric of the financial markets depends heavily on Qualified Institutional Buyers. Their capacity to make significant market investments supports the expansion of businesses as well as the general efficiency and stability of the financial system.
Although QIBs have duties associated with their impact, the regulatory framework makes sure that they function within a framework that serves the interests of the larger market. The function of QIBs will surely remain a subject of interest for firms, regulators, and investors alike as the market develops.
