Qualified Institutional Buyers

May 17, 2023

Securities & Exchange Board of India is taking steps to broaden the scope of qualified institutional buyers (QIBs), aiming to enhance the investor base for issuers of debt securities. SEBI’s aim in expanding the definition of QIBs is to diversify the investor base, enabling a wider pool of potential investors for issuers of debt securities.

Including Various Entities in the Expanded Definition

Under the proposed expansion, SEBI plans to include several types of entities as qualified institutional buyers. These entities include:

Multistate cooperatives with a net worth exceeding Rs 500 crore
Non-banking financial companies
Housing finance companies, pension funds (including overseas pension funds, NPS Trust, and Employee Provident Fund Organization)
Refinancing agencies like MUDRA, reinsurance companies, and small finance banks

Additionally, other SEBI regulated entities with a net worth of more than Rs 500 crore will also be incorporated.

Significance of QIBs in Debt Securities

Qualified institutional buyers play a crucial role in funding issuers seeking capital through private placement of listed debt securities. As per available data, QIBs have subscribed to approximately 94% of the total funds raised through corporate bonds issued via private placement. This underscores the importance of QIBs as a significant funding source for issuers.

Boosting the Debt Securities Market

SEBI’s proposal aligns with its objective of creating a thriving debt securities market in India. By expanding the definition of QIBs, SEBI aims to encourage greater participation from different entities, ultimately facilitating increased investment activity and liquidity in the debt market.

The Role of QIBs in Private Placement

QIBs hold a significant position in the private placement of listed debt securities. Their active participation through subscriptions to corporate bonds issued via private placement channels has been instrumental in facilitating the smooth flow of capital to issuers. With the expansion of the definition of QIBs, issuers will have a broader base of potential investors, leading to increased funding opportunities and market activity.

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