IPO Glossary — 68+ Terms Explained
Every IPO, stock market, and trading term you need to know — clearly explained in plain English
ASBA
Application Supported by Blocked Amount — a mandatory mechanism where your application money is blocked (not debited) in your bank account until IPO allotment is finalized. If not allotted, the block is released automatically.
Allotment
The process by which IPO shares are distributed to successful applicants. For oversubscribed retail categories, allotment is done by computerized lottery. For NII, it is proportional.
Anchor Investor
A qualified institutional investor (QIB) who subscribes to up to 60% of the QIB portion one day before the IPO opens. Subject to a 30-day lock-in.
At-The-Money (ATM)
When the strike price of an option is equal to or near the current market price of the underlying asset.
Allotment Date
The date on which the registrar finalizes and announces which applicants have received IPO shares.
Basis of Allotment
A document published by the registrar after subscription closes, showing the total applications received, valid applications, and the allotment ratio across all investor categories.
Book Building
The process by which an IPO price is determined. Investment banks collect bids from investors at various prices within the price band and determine the final issue price based on demand.
BSE SME
Bombay Stock Exchange's platform for listing small and medium enterprises. Companies list here if they prefer BSE over NSE Emerge for their SME IPO.
Book Running Lead Manager (BRLM)
SEBI-registered investment banks or merchant bankers responsible for managing the entire IPO process including due diligence, pricing, roadshows, and allotment.
Cap Price
The upper end of the IPO price band. Most retail investors bid at the cap price to maximize allotment chances.
Cut-Off Price
The final IPO price determined after the book building process. Retail investors who bid at cut-off price accept any price within the band.
Credit to Demat
The date on which allotted IPO shares are credited to successful applicants' Demat accounts, typically one day before listing.
CAGR
Compound Annual Growth Rate — measures the annualized growth rate of a metric (revenue, profit, etc.) over a period. Frequently cited in IPO prospectuses.
Compulsory Market Making
SEBI mandates that SME IPO companies appoint a market maker for at least 3 years post-listing to provide liquidity to the stock.
Demat Account
Dematerialized account where shares are held in electronic form. Mandatory for participating in IPOs. Held with a Depository Participant (DP) registered with NSDL or CDSL.
DRHP
Draft Red Herring Prospectus — the first public document filed by a company with SEBI during IPO planning. Contains business details, financials, and risks but does not include final price and dates.
DP ID
Depository Participant ID — an 8-digit code identifying your Demat account provider (broker/bank). Required for IPO applications.
EPS
Earnings Per Share — Net Profit divided by total shares outstanding. A key metric for valuing IPO stocks. Higher EPS generally indicates better profitability.
Employee Category
A reserved portion of an IPO specifically for employees of the company going public. Offered at a discount to the issue price. Capped at ₹5 lakh per employee.
Face Value
The nominal value of a share as stated in the company's charter. IPO prices are set as a multiple of face value (e.g., ₹10 face value share priced at ₹500 = 50x).
Floor Price
The lower end of the IPO price band. Few investors bid at the floor price as it may reduce allotment chances if the final price is set higher.
FPO
Follow-on Public Offer — when an already-listed company offers additional shares to the public. Different from an IPO (first-ever public offering).
Fresh Issue
New shares created and sold by the company during an IPO. Proceeds from fresh issue go directly to the company for stated purposes (expansion, debt repayment, etc.).
GMP (Grey Market Premium)
The premium at which IPO shares trade in the informal grey market before listing. Unofficial, unregulated, and not guaranteed to predict actual listing prices.
Grey Market
An unofficial market where IPO shares trade before they are formally listed on a stock exchange. Unregulated by SEBI. Participants operate at their own risk.
HNI (High Net Worth Individual)
Investors applying for more than ₹2 lakh in an IPO. They fall under the NII (Non-Institutional Investor) category and are subject to proportional allotment.
Hold-Back
The requirement that underwriters cannot sell their IPO allocation immediately — they must hold for a specified period.
IPO
Initial Public Offering — the first time a company offers its shares to the general public on a stock exchange, transitioning from a private to a public company.
Issue Price
The final price at which IPO shares are sold to investors. For book-built IPOs, this is determined after the subscription period closes.
Issue Size
The total amount of money the company plans to raise through the IPO. Includes fresh issue + offer for sale components.
In-The-Money (ITM)
An option that has intrinsic value. A call option is ITM when underlying price exceeds strike; a put is ITM when underlying is below strike.
Kostak
Grey market price at which an entire IPO application is bought or sold before allotment, regardless of whether the application receives allotment. Unregulated and risky.
Listing
The event when a company's shares begin official trading on a stock exchange. For Indian IPOs following SEBI's T+3 framework, listing occurs 3 days after subscription closes.
Listing Gain
The percentage return calculated from the IPO issue price to the listing day opening price. A positive listing gain means the stock opened above the issue price.
Lot Size
The minimum number of shares that must be applied for in an IPO. Retail investors can apply for multiples of the lot size. SEBI calibrates lot sizes to keep retail minimum investment around ₹13,000-₹15,000.
Lock-In Period
The period during which certain shareholders (promoters, anchor investors) cannot sell their shares after the IPO. Promoters face a 3-year lock-in on 20% of shares.
Mainboard IPO
An IPO by a company listing on the main NSE/BSE segments, requiring minimum ₹10 crore post-issue paid-up capital. Subject to stringent SEBI disclosure requirements.
Market Maker
A broker appointed to buy and sell shares of an SME IPO to ensure liquidity. Mandatory for SME IPOs for 3 years. Provides two-way quotes continuously.
Market Capitalization
Current share price multiplied by total number of shares outstanding. Used to determine if an IPO's valuation is reasonable versus listed peers.
NCD
Non-Convertible Debenture — a debt instrument issued by companies offering fixed interest rates. NCDs trade on stock exchanges and cannot be converted to equity.
NII
Non-Institutional Investor — IPO applicants investing more than ₹2 lakh. Includes HNIs and corporate bodies. Allotment in oversubscribed NII category is proportional.
NSE Emerge
National Stock Exchange's dedicated platform for listing SME companies. Part of NSE but with separate listing criteria and market-making requirements.
NSDL
National Securities Depository Limited — one of India's two depositories (along with CDSL) holding shares in electronic/dematerialized form.
OFS (Offer for Sale)
IPO shares sold by existing shareholders (promoters or investors) rather than the company issuing new shares. Proceeds go to selling shareholders, not the company.
Oversubscribed
When demand for IPO shares exceeds the number of shares available. An IPO subscribed 10x means 10 times more applications were received than shares available.
Over-Allotment Option (Greenshoe)
Option allowing underwriters to sell additional shares (up to 15% more) if demand is very high, used to stabilize post-listing price.
P/E Ratio
Price-to-Earnings ratio — issue price divided by post-IPO EPS. Used to assess valuation. A high PE means investors are paying more for each rupee of earnings.
PAN
Permanent Account Number — a 10-digit alphanumeric identifier issued by the Income Tax Department. Mandatory for all IPO applications in India. Only one application per PAN is allowed per IPO.
PIS
Portfolio Investment Scheme — RBI framework allowing NRIs to invest in Indian listed companies through designated bank accounts.
Price Band
The minimum (floor) and maximum (cap) price range within which investors can bid for IPO shares. Most investors bid at the cap price.
Prospectus
The comprehensive legal document containing all material information about the IPO company, including business, financials, management, and risks. The RHP is the final prospectus.
QIB
Qualified Institutional Buyer — includes mutual funds, FPIs, banks, insurance companies. Typically allocated 50% of an IPO. Subject to stricter regulations and shorter lock-in.
Quota
The percentage of IPO shares reserved for each investor category. Standard mainboard: QIB 50%, NII 15%, Retail 35%.
Registrar
A SEBI-registered entity managing the IPO application process — collecting applications, verifying data, processing allotment, and coordinating with depositories. Major registrars: KFin Technologies, Link Intime, Bigshare.
RHP
Red Herring Prospectus — the final IPO prospectus filed after SEBI approval, including the price band, lot size, and subscription dates. Always read before investing.
Rights Issue
When a company offers additional shares to existing shareholders at a discount in proportion to their current holdings. Not an IPO but listed on exchanges.
RII
Retail Individual Investor — IPO applicants investing ₹2 lakh or less. Allocated 35% of mainboard IPO. Allotment in oversubscribed retail category is by lottery.
ROE
Return on Equity — Net Profit divided by Shareholders' Equity. Measures how efficiently a company uses shareholder capital. Higher ROE generally better.
SEBI
Securities and Exchange Board of India — the primary regulator of India's securities markets. Oversees IPO processes, investor protection, and market integrity.
SME IPO
Small and Medium Enterprise IPO — listing on NSE Emerge or BSE SME. Higher minimum investment, mandatory market making, lower disclosure requirements than mainboard.
Subject to Sauda
Grey market transaction where IPO shares are sold at a premium conditional on allotment. Seller gets paid only for allotted shares (unlike Kostak where payment is regardless of allotment).
STT
Securities Transaction Tax — a tax levied on stock transactions. For IPO delivery, STT is 0.1% of turnover. Different rates for intraday, F&O.
Subscription Status
Real-time data from BSE and NSE showing how many times each category (QIB, NII, Retail) of an IPO has been subscribed.
T+3 Listing
SEBI's accelerated IPO timeline where T = subscription close date. Allotment on T+1, refunds/credits on T+2, listing on T+3.
TDS
Tax Deducted at Source — applicable on IPO gains for non-residents. For NRIs, TDS is deducted by the broker on STCG (15%) and LTCG (10% above ₹1 lakh).
UPI ASBA
Unified Payments Interface based ASBA — allows IPO applications using UPI for blocking funds, without requiring bank's net banking. Simpler and faster for retail investors.
Underwriter
Investment bank or merchant banker guaranteeing the IPO. Agrees to purchase any unsold shares at the offer price. Manages risk for the issuing company.
Valuation
The process of determining the fair market value of an IPO company — comparing P/E, EV/EBITDA, P/Sales ratios against listed peers to assess if the IPO is fairly priced.