Short answer: A QIP is a way for a listed company, meaning one whose shares trade on a stock exchange, to raise capital by issuing equity shares, or fully convertible debentures (debt instruments that later turn into equity). The company sells these securities privately to a restricted group of large institutional buyers rather than to the general public.
Last reviewed: 11 November 2026
At a glance
| Item | Detail |
|---|---|
| Securities issued | Equity shares, or fully convertible debentures that later convert into equity |
| Who can buy | Qualified Institutional Buyers (QIBs): mutual funds, pension and provident funds, insurance companies, banks, and SEBI-registered foreign portfolio investors |
| Step 1 | The company appoints an investment banker, which prepares a placement document setting out the issue price, number of shares and purpose of funds |
| Step 2 | Investor outreach, then book-building, where QIB bids are collected and the final issue price is found |
| Step 3 | Shares are allotted to successful bidders |
| Main cost to existing shareholders | Dilution of ownership and voting rights; a discounted offer price can pressure the share price |
Who can buy shares in a QIP?
Only Qualified Institutional Buyers can take part. This category covers mutual funds, pension and provident funds, insurance companies, banks, and SEBI-registered foreign portfolio investors. SEBI is the Securities and Exchange Board of India, the regulator for the country’s securities markets.
Because the offer is restricted to this group, an individual investor cannot apply for shares in a QIP the way they would in a public offer. The buyers are large institutions that invest other people’s money, so the deal is negotiated with a small number of players rather than marketed to millions.
How does the QIP process work step by step?
The process usually starts when the company appoints an investment banker, a firm that advises on and arranges share sales. The banker prepares a placement document, which records the issue price, the number of shares being offered, and what the company plans to do with the money.
Next comes investor outreach, where the company and banker approach likely QIBs. Bids are then collected through book-building, a process in which buyers state how many shares they want and at what price. From these bids the final issue price is found, and shares are allotted to the successful bidders.
Why are QIPs cheaper and faster than IPOs?
An initial public offering (IPO) is a company’s first sale of shares to the public. A follow-on public offering (FPO) is a later sale of shares to the public by a company that is already listed. Both involve wide public marketing and more regulatory formalities.
A QIP involves fewer formalities and less marketing, because it is aimed at a small group of institutions. That is why it costs less and moves faster. The trade-off is that the company reaches fewer buyers, so it depends on how much demand those institutions show.
What is the catch for existing shareholders?
A QIP can dilute existing shareholders, meaning their percentage ownership shrinks because new shares are created. Dilution also affects voting rights, since each shareholder’s share of the total votes falls.
A discounted offer price can add pressure on the share price in the market. When new shares are offered below the prevailing price, some existing holders may see the stock trade lower after the issue. The effect depends on the company and the market, so it cannot be predicted from the offer alone.
How much does dilution look like in numbers?
The example below is hypothetical and invented for illustration. It does not describe any real company.
Suppose a company has 10 crore shares outstanding. It issues 1 crore new shares at Rs 200 each through a QIP, raising Rs 200 crore (1 crore shares multiplied by Rs 200).
An existing shareholder holds 1 lakh shares. Before the QIP, that is 1 lakh out of 10 crore, or 0.10% of the company. After the QIP, the company has 11 crore shares, so the same holding is 1 lakh out of 11 crore, or about 0.09%. The shareholder’s ownership and voting share fall even though they still hold the same number of shares.
Frequently asked questions
Can an individual investor buy shares in a QIP?
QIPs are sold to Qualified Institutional Buyers, such as mutual funds, pension and provident funds, insurance companies, banks and SEBI-registered foreign portfolio investors. They are not offered to the general public.
Is a QIP the same as an IPO?
No. An IPO is a company’s first sale of shares to the public, while a QIP sells securities privately to a restricted group of institutional buyers. A QIP generally costs less and moves faster because it involves fewer formalities and less marketing.
Does a QIP always push the share price down?
No, but it can. New shares can dilute existing ownership, and a discounted offer price can pressure the share price.
Sources and last check
Facts in this article were checked against the sources below on 11 November 2026. Rules and figures can change; check the primary source before acting.
- icicidirect.com (broker education)
- kotakneo.com (broker education)
- 5paisa.com (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.