A Qualified Institutional Buyer, or QIB, is a large professional investor that SEBI recognises as having the knowledge and financial strength to invest in securities without the extra protection given to small investors. The category includes mutual funds, insurance companies, banks, pension and provident funds, foreign portfolio investors, public financial institutions and certain other registered entities. In an IPO, a part of the issue is reserved for QIBs. For a typical book-built issue where the company meets profitability norms, not more than 50 percent of the net offer is allotted to QIBs, and a portion of that, up to 60 percent, can be given to anchor investors before the issue opens. QIBs usually bid on the last day of the issue, and their subscription figure is watched closely because strong institutional demand is read as a sign of confidence in the company’s valuation and prospects. Unlike retail investors, QIBs bid through a different route and are allotted on a proportionate basis within their quota. QIB subscription is shown separately on exchange data and on IPO Bulletin’s live subscription tables.
Example: If an IPO has a net offer of 1 crore shares with 50 percent for QIBs, 50 lakh shares go to that category. If QIBs place bids for 2 crore shares, the QIB portion is subscribed 4 times, and each bidder receives roughly a quarter of what it asked for.