Qualified Institutional Buyers (QIBs) in an IPO: Meaning, Eligibility and Allocation

QIBs form a separate investor category in certain public issues and are subject to specific allocation and bidding requirements under the SEBI ICDR Regulations.

Full Form and Definition of QIB

QIB stands for Qualified Institutional Buyer. Under Regulation 2(1)(ss) of the SEBI ICDR Regulations, QIBs are specified institutional entities that meet the eligibility conditions prescribed by SEBI and are eligible to participate in the QIB category of applicable public issues.

Who Are QIBs

QIBs include specified entities such as mutual funds, certain Alternative Investment Funds (AIFs), eligible Foreign Portfolio Investors (FPIs), public financial institutions, scheduled commercial banks, specified insurance companies, pension and provident funds meeting prescribed conditions, state industrial development corporations, certain development financial institutions and systemically important NBFCs, among other entities covered by Regulation 2(1)(ss) of the SEBI ICDR Regulations.

QIB Allocation in IPOs

In a book-built public issue under Regulation 6(1) of the SEBI ICDR Regulations, not more than 50% of the Net Offer is generally available for allocation to QIBs. Certain issues covered by Regulation 6(2) have a different allocation framework, under which not less than 75% of the offer is available for allocation to QIBs. The applicable allocation structure is disclosed in the offer document.

QIBs participate in an IPO through the following defined mechanisms:

Book Building and the QIB Portion

In a book-built IPO, the issuer and merchant bankers determine and disclose a price band, within which investors across categories, including QIBs, submit bids. The QIB portion comprises bids received from investors that qualify as QIBs under SEBI regulations during the bidding period. QIBs are not permitted to withdraw or lower their bids in terms of quantity or bid amount after submission, subject to the applicable SEBI regulations.

Lock-in Requirements for Anchor Investors

Anchor investors, a sub-category within QIBs, are subject to a mandatory lock-in period on their allotted shares. Under the SEBI ICDR Regulations, 50% of the equity shares allotted to Anchor Investors are locked in for 90 days from the date of allotment, while the remaining 50% are locked in for 30 days from the date of allotment.

Anchor investors are a sub-category of QIBs that are permitted to bid one working day before the IPO opens for other investors, subject to the conditions specified under SEBI's ICDR Regulations. In a mainboard book-built issue, up to 60% of the QIB portion may be allocated to anchor investors. An anchor investor must make an application of at least ₹10 crore, with a minimum allotment of ₹5 crore per investor, subject to the applicable conditions.

Under the current framework, 40% of the Anchor Investor Portion is reserved for specified institutional categories, including domestic mutual funds, life insurance companies and pension funds, subject to the prescribed conditions. The allocation to anchor investors and the applicable details are disclosed before the issue opens to the public.

QIB participation in IPOs is governed by SEBI's ICDR (Issue of Capital and Disclosure Requirements) Regulations, 2018. The regulatory framework includes:

• QIB Allocation: In book-built issues under Regulation 6(1), not more than 50% of the Net Offer is generally available for allocation to QIBs. Certain issues under Regulation 6(2) have a different framework, with not less than 75% of the offer available for allocation to QIBs.

• Subscription Disclosure: Category-wise IPO bid and subscription information is displayed by the stock exchanges during the bidding period and is updated periodically in accordance with the applicable framework.

• QIB Bid Restrictions: QIBs are not permitted to withdraw or lower their bids in terms of quantity or bid amount after submission, subject to the applicable SEBI regulations.

• Anchor Investor Lock-in: Anchor investors, a sub-category of QIBs, are subject to prescribed lock-in requirements on shares allotted to them, as specified under the SEBI ICDR Regulations.

QIBs constitute a distinct investor category under the SEBI ICDR Regulations and are subject to specific eligibility, allocation and bidding requirements. The applicable QIB portion, Anchor Investor framework and category-wise allocation structure vary according to the type of public issue and are disclosed in the relevant offer document. Understanding these provisions helps explain how the institutional portion of a book-built IPO is structured.