QIB Route for IPO Listing: Meaning of SEBI ICDR Regulations 6(2)

SEBI has regulations for listing profitable companies, but what about companies that are not profitable but are eager to access public funding? So SEBI has made the QIB route for them under SEBI ICDR Regulations 6(2), which is completely different from regulation 6(1) made for listing companies in NSE & BSE for mainboard IPOs.

QIB Route refers to one of the special pathways made by SEBI for companies that are not meeting SEBI’s strict profitability norms to raise funds through IPO in India with the help of Qualified Institutional Investors (QIBs) such as mutual funds, pension funds, insurance companies and other large institutional investors. This route allows firms to allocate at least 75% of their IPO shares to QIBs that not only bypass traditional profit requirements but also make the IPO process more credible and stable.

Institutional Investors possess a deep understanding and expertise of the market and they make it easier for innovative and high-growth companies to raise funds that are essential for their long-term growth and expansion.

Why the QIB Route Exists

SEBI’s Regulations: There are certain criteria set by SEBI regarding the profitability and financial track record for the companies that are going public. Companies that do not meet these profitability norms( mentioned in Regulation 6(1) of SEBI ICDR Regulations) still have a chance to go public through the QIB route but they still have to meet certain conditions apart from profitability.
Investor Protection: QIB route is designed to protect retail investors from potentially riskier IPOs because it limits the exposure and ensures that the majority of shares are allocated to only experienced institutional investors.

Key Conditions of the QIB Route

Book-Building Process: The IPO must be conducted through the book-building process, where institutional investors bid for shares to help determine the price.
Share Allocation: There should be at least 75% of the shares that need to be allotted to QIBs. If the company is unable to do it, it must refund the entire subscription money to all applicants.
Retail and NII Quotas: In the QIB route, retail investors and Non-Institutional Investors (NIIs) also have some quota like 10% for retail investors and up to 15% for NIIs. If there is any unsubscribed portion in these categories left, it can be reallocated to NIIs and QIBs according to SEBI rules.
Special Allocation Rules for NII: SEBI has special allocation rules in the NII category as well. 1/3rd of shares are reserved for investors who are applying for shares worth between ₹2 lakhs and ₹10 lakhs and 2/3rd are reserved for those investors who are applying for more than ₹10 lakhs.
Anchor Investors: Up to 60% of the QIB portion can be allocated to anchor investors, who commit funds before the IPO opens to the public.
No Profitability Requirement: Companies using the QIB route are not required to meet the standard profitability criteria, making it suitable for high-growth, asset-light, or technology-driven firms that may not yet be profitable but have strong institutional backing.

Companies Listed via QIB Route in India

In India, there are many tech and SaaS companies which have gone the QIB route due to not meeting the traditional profitability norms set by SEBI. These companies have demonstrated strong business fundamentals and have seen robust post-listing performance, reflecting investor confidence in the QIB route.

Company Name	Listing Date	Sector/Business Description	Profitability (Operating Profit %)	Post-Listing Price Gain*
RateGain Travel Technologies Limited	17-Dec-2021	SaaS provider for the travel and hospitality industry	-12.67%	3.405
Tracxn Technologies Limited	20-Oct-2022	Market intelligence and SaaS platform	-21.41%	0.9335
Awfis Space Solutions Limited	30-May-2024	Flexible workspace provider	-40.67%	4.025
Unicommerce eSolutions Limited	13-Aug-2024	E-commerce enablement SaaS platform	0.0833	2.1005
Quadrant Future Tek Limited	14-Jan-2025	Train control systems and specialty cables	0.1033	0.2759

QIB Route vs. Regular IPO Route

Feature	Regular IPO Route	QIB Route (Regulation 6(2))
Profitability Criteria	Mandatory	Not required
Minimum QIB Allocation	50% (book-built IPOs)	75%
Retail Investor Allocation	Up to 35%	Up to 10%
Book-Building Mandatory	Optional	Mandatory
Refund if QIB Quota Not Met	Not applicable	Full refund to all applicants

Summary

Overall, the QIB route is one of the great ways for companies looking to go public to raise essential funds for their growth. It allows even those companies to come with the IPOs that do not meet the normal profitability requirements prescribed for companies to go for IPO. This route also safeguards the retail investors by mandating a high allocation(75%) to qualified institutional investors. This route is best suited for the innovative, growth-oriented companies, especially those coming from tech or SaaS sectors but attracts institutional interest due to future growth even with the lack of a long track record of profits.