Bank of Maharashtra, a state-run bank, successfully concluded its Qualified Institutional Placement (QIP) offering, raising Rs 1,000 crore. During the board meeting on June 6, the allocation of 35.1 crore shares to institutional buyers was approved. The shares were issued at an issue price of Rs 28.5 per equity share, representing a 4.94 percent discount to the floor price of Rs 29.94 per share set during the QIP launch on June 1. Furthermore, the issue price stood at a 6.25 percent discount to the closing price of Bank of Maharashtra shares on the preceding Tuesday.
Among the institutional buyers, five were granted more than a 5 percent stake in the company. The largest chunk was secured by the state-owned Life Insurance Corporation of India, which obtained 8.34 crore shares, equivalent to 23.77 percent of the total approved issue size. Aditya Birla Sun Life Company followed suit, acquiring 4.50 crore shares, representing 12.84 percent of the total QIP. Other notable institutional buyers included Bajaj Allianz General Insurance Company, Rajasthan Global Securities, and Societe Generale.
What is QIP?
Qualified Institutional Placement (QIP) is a method by which listed companies raise capital by issuing equities, or other equity convertible securities to qualified institutional buyers. It is a common method of private placement where the company does not dilute its management stake and also does not need to repeat elaborate paperwork like it did during its IPO.
- QIPs are a lot cheaper in terms of legal fees or raising costs. The process of listing overseas costs more, a price companies were ready to pay, which the QIPs eliminated.
- Regulatory bodies define the price at which the QIP can be priced so as to not avail too much risk for either the QIBs or the company. The already traded stock price is taken for calculation for a period of six months where the price is averaged out, and is then set at the issue price.
- The time it takes to set up a QIP and to subscribe to it by QIBs is a lot quicker than FPOs or other sources of capital raising may show.
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