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QIP vs OFS routes to promoter dilution
What it is
The two routes to reducing promoter holding, with opposite effects on the company. A Qualified Institutional Placement issues new shares, so the money raised goes to the bank and adds to capital. An Offer for Sale sells the promoter's existing shares, so proceeds go to the government
Both dilute the promoter stake and both count toward minimum public shareholding, which is why they are often discussed interchangeably
Impact on industries
- QIP is genuinely capital-accretive - it lifts CET1, expands lending headroom and strengthens the balance sheet for growth
- OFS does nothing for the bank: proceeds go to the Consolidated Fund of India, so an OFS-led programme is a compliance and revenue exercise rather than a capitalisation one
- Sequencing cuts the wrong way for weaker banks - an OFS that depresses the price means a later QIP must issue more shares for the same money
- Government preference leans to OFS on the argument that PSBs are already well capitalised, making the fiscal case rather than the banking case decisive