Complete IPO Glossary
Understanding IPO terminology is essential for making informed investment decisions. This comprehensive glossary covers all important terms you'll encounter in IPO investing.
A
Allotment
The process of distributing IPO shares to successful applicants. After IPO subscription closes, shares are allocated based on category-specific rules (lottery for retail, proportionate for NII/QIB).
Anchor Investor
Qualified institutional buyer who invests in the IPO one day before it opens to the public. Anchor investors can subscribe to up to 60% of the QIB portion with a minimum investment of ₹10 crores.
ASBA (Applications Supported by Blocked Amount)
Mandatory IPO application process where the application amount is blocked in investor's bank account instead of being debited. Money is debited only upon allotment.
Application Money
The total amount blocked/paid by investor when applying for an IPO, calculated as price × number of shares applied.
B
Basis of Allotment
The document that explains how shares were allocated among different investor categories. Published after IPO closes and before listing.
Book Building
Price discovery process where the issue price is determined based on investor bids within a specified price band. Most mainboard IPOs use this method.
Book Running Lead Manager (BRLM)
Investment bank responsible for managing the IPO process, including due diligence, documentation, pricing, and marketing. Also called Lead Manager or Merchant Banker.
BSE
Bombay Stock Exchange, one of India's two major stock exchanges where IPO shares are listed and traded.
C
CAN (Confirmation of Allocation Note)
Document sent to investors confirming their share allotment in an IPO.
Circuit Limit
Maximum percentage a stock price can move (up or down) in a single trading day. IPOs have wider limits (20%) on listing day.
Cut-off Price
Option for retail investors to bid at whatever final price is determined. Recommended to avoid rejection if final price is above your bid.
D
Demat Account
Electronic account where shares are held in dematerialized form. Required for all IPO allotments.
DRHP (Draft Red Herring Prospectus)
Initial prospectus filed with SEBI containing all information except final price and issue size. "Red Herring" indicates information is subject to change.
Discount
Some IPOs offer shares at a lower price to retail investors or employees compared to the official issue price.
E
Employee Reservation
Portion of IPO reserved for company employees, often offered at a discount.
EPS (Earnings Per Share)
Company's net profit divided by number of shares. Key metric for P/E ratio calculation.
F
Face Value
Nominal value of a share as stated in company records, typically ₹1, ₹2, or ₹10 in India. Different from issue price.
Fixed Price Issue
IPO where shares are offered at a predetermined fixed price rather than through book building.
Floor Price
Minimum price in a price band. Investors can bid at or above this price.
FPO (Follow-on Public Offer)
When an already-listed company offers additional shares to the public.
Fresh Issue
New shares issued by company to raise capital. Money goes to the company.
G
GMP (Grey Market Premium)
Premium at which IPO shares trade in unofficial grey market before listing. Indicates market sentiment.
Green Shoe Option
Provision allowing underwriters to sell additional shares (up to 15% more) in case of high demand. Also called over-allotment option.
H
HNI (High Net Worth Individual)
Investor applying in IPO for more than ₹2 lakhs. Falls under Non-Institutional Investor (NII) category.
I
ICDR Regulations
SEBI's Issue of Capital and Disclosure Requirements regulations governing IPOs and other public issues in India.
Issue Price
Final price at which IPO shares are offered to investors, determined after book building closes.
Issue Size
Total value of shares offered in the IPO (shares × issue price).
K
Kostak
Grey market term for fixed premium paid for entire IPO application, regardless of allotment outcome.
L
Lead Manager
See Book Running Lead Manager (BRLM).
Listing
When IPO shares begin trading on stock exchanges after allotment.
Listing Gains
Profit if listing price is higher than issue price. Listing Loss if it's lower.
Lock-in Period
Period during which certain shareholders cannot sell their shares. Anchor investors have 30-90 day lock-in.
Lot Size
Minimum number of shares that can be applied for. IPO applications must be in multiples of lot size.
M
Market Capitalization
Total market value of company's shares (current price × total shares). Indicates company size.
Market Making
Providing liquidity by continuously offering to buy and sell shares. Mandatory for SME IPOs.
N
NII (Non-Institutional Investor)
Investor category for applications above ₹2 lakhs. Gets 15% allocation, with proportionate allotment.
NSE
National Stock Exchange of India, one of two major exchanges where IPO shares list.
O
OFS (Offer for Sale)
When existing shareholders sell their shares in IPO. Money goes to selling shareholders, not company.
Oversubscription
When demand for IPO shares exceeds supply. Expressed as times subscribed (e.g., 10x means 10 times oversubscribed).
P
P/E Ratio (Price-to-Earnings)
Issue price divided by earnings per share. Key valuation metric comparing IPO pricing with peers.
Price Band
Range within which investors can bid in book-built IPO. Has floor price and cap price.
Primary Market
Market where new securities are issued (IPOs). Contrasted with secondary market where existing shares trade.
Promoter
Founders or controlling shareholders of the company. Their holding and actions are closely watched.
Prospectus
Legal document containing comprehensive information about company and IPO offering.
Q
QIB (Qualified Institutional Buyer)
Large institutional investors like mutual funds, insurance companies, FPIs. Gets 50% IPO allocation.
R
Red Herring Prospectus (RHP)
Prospectus filed after SEBI approval, containing price band but not final price.
Refund
Return of application money if shares are not allotted or partially allotted.
Registrar to the Issue
Entity that processes IPO applications, manages allotment, and coordinates share credit/refunds.
RII (Retail Individual Investor)
Individual investor applying for up to ₹2 lakhs. Gets 35% allocation with lottery-based allotment.
S
SEBI
Securities and Exchange Board of India - regulator overseeing IPOs and capital markets.
Secondary Market
Market where existing shares are traded between investors (NSE/BSE).
SME IPO
IPO by small/medium enterprise on SME platform of exchanges. Higher lot size and different rules apply.
Subscription
Total demand for IPO shares expressed as times subscribed (applications received / shares available).
T
T+3/T+5
Timeline for listing after IPO closes. T represents closing day.
U
Underwriting
Guarantee by investment banks to buy any unsold shares in IPO. Mandatory for SME IPOs.
UPI
Unified Payments Interface - commonly used for retail IPO applications with mandate-based blocking.
Key Abbreviations Quick Reference
| Abbreviation | Full Form |
|---|---|
| ASBA | Applications Supported by Blocked Amount |
| BRLM | Book Running Lead Manager |
| CAN | Confirmation of Allocation Note |
| DRHP | Draft Red Herring Prospectus |
| FPO | Follow-on Public Offer |
| GMP | Grey Market Premium |
| HNI | High Net Worth Individual |
| NII | Non-Institutional Investor |
| OFS | Offer for Sale |
| QIB | Qualified Institutional Buyer |
| RHP | Red Herring Prospectus |
| RII | Retail Individual Investor |
Conclusion
Familiarity with these terms will help you navigate IPO investing with confidence. Refer back to this glossary whenever you encounter unfamiliar terminology in prospectus documents, news articles, or investment discussions.