📖 IPO Glossary

The process by which shares are given to successful IPO applicants. If an IPO is oversubscribed, allotment happens via a SEBI-mandated lottery for retail investors (RII category). Each successful applicant gets exactly 1 lot, regardless of how many lots they applied for.

Large institutional investors (mutual funds, insurance companies, FIIs) who are allotted shares 1 day before an IPO opens, at the IPO price. This builds investor confidence. They must hold shares for at least 30 days (50% of allocation locked for 90 days).

The standard method to apply for IPOs. Instead of transferring money upfront, your bank account amount is blocked (frozen) until allotment. If you don't get allotment, the amount is unblocked within 6 working days. You continue to earn interest during the block period.

The date on which SEBI-approved allotment of shares takes place. Usually 6 days after the IPO closes. Results are published on the registrar's website and BSE/NSE.

The process of discovering the price of an IPO. Instead of a fixed price, the company offers a price range (e.g. ₹480–₹500). Investors bid within this range. The final price (cut-off price) is set at the top of the band in most oversubscribed IPOs.

When a company repurchases its own shares from existing shareholders at a premium to market price. Unlike an IPO (which issues new shares), a buyback reduces the number of outstanding shares. Often done when management believes the stock is undervalued.

The final price at which an IPO is issued, decided after the book-building process ends. Retail investors can apply at "cut-off price" instead of a specific amount — meaning they agree to pay whatever the final price is within the band. This is the safest option for retail investors.

The first official document a company files with SEBI before launching an IPO. It contains all details about the company — financials, risks, management, objects of the issue, and promoter details. SEBI reviews the DRHP and may ask for changes before approving the IPO. The word "draft" means it's not final yet.

A digital account that holds your shares in electronic form — like a bank account but for stocks. You need a Demat account to apply for IPOs and receive allotted shares. Provided by CDSL or NSDL through a broker like Zerodha, Groww, or Angel One.

The nominal/original value of a share as stated in the company's balance sheet. Usually ₹1, ₹2, or ₹10. It has no relation to the market price. Used in dividend calculations (e.g. "200% dividend" means 2x the face value).

Foreign companies or funds registered to invest in Indian capital markets. They fall under the QIB category in IPOs. High FII interest in an IPO is generally a positive signal.

New shares that a company creates and sells in an IPO to raise new money for the business. The money goes to the company. Contrast with OFS where existing shareholders sell their shares.

An unofficial, informal market that trades IPO shares and application forms before the official listing. The GMP shows the premium at which IPO shares are being bought/sold before listing. A high GMP suggests strong demand and a potentially good listing price. However, GMP is unregulated and not 100% reliable.

When a private company offers its shares to the general public for the first time on a stock exchange (BSE/NSE). After listing, shares can be bought and sold freely on the stock market. Companies do IPOs to raise capital for growth, repay debt, or allow early investors to exit.

The total amount of money a company plans to raise through the IPO. It includes both Fresh Issue and OFS components. A large issue size is not necessarily better — it depends on the company's valuation and purpose.

Listing is when a company's shares start trading on the stock exchange (NSE/BSE) for the first time after the IPO. The Listing Date is when this happens (usually 6 days after IPO closes). Listing Gain is the profit made if you sell your allotted shares on listing day itself.

A period during which certain shareholders (promoters, anchor investors) cannot sell their shares after listing. Promoters must hold 20% for 3 years post-listing. Anchor investors have a 30-day lock-in (50% for 90 days). Retail investors have no lock-in.

The minimum number of shares you must apply for in one application. SEBI mandates that IPOs be designed so that 1 lot costs between ₹13,000 and ₹15,000 for retail investors. You can apply for multiples of the lot size.

Investment banks or financial firms appointed by the company to manage the entire IPO process — filing DRHP, pricing the IPO, marketing to institutional investors, and coordinating with SEBI and the stock exchanges. Also called Book Running Lead Managers (BRLM). Reputed bankers like Kotak, ICICI Securities, Axis Capital add credibility.

Total value of a company = Share price × Total shares outstanding. Used to classify companies: Large Cap (>₹20,000 crore), Mid Cap (₹5,000–₹20,000 crore), Small Cap (<₹5,000 crore). At IPO price, you can calculate the listing market cap.

A type of debt instrument issued by companies to raise money. Unlike regular debentures, NCDs cannot be converted into equity shares. They pay a fixed interest rate (typically 7–10%) and return principal at maturity. Safer than equity, riskier than bank FDs (no DICGC insurance).

Investors who apply for more than ₹2 lakh worth of shares in an IPO. This category is also called HNI (High Net Worth Individual). They get 15% of IPO shares reserved. Unlike RII, allotment in NII is proportional — higher application = higher chance. They cannot apply at cut-off price.

When existing shareholders (promoters or early investors) sell their shares in an IPO. The money goes to the selling shareholders, NOT to the company. A high OFS component can be a red flag — it means promoters are cashing out rather than the company using the money for growth.

When the total bids received exceed the shares available. Example: If an IPO has 1 crore shares for retail but applications came for 50 crore shares, it is 50x oversubscribed in retail. High oversubscription generally indicates strong demand and may suggest a good listing.

A valuation metric = Share Price ÷ Earnings Per Share (EPS). It tells you how many rupees you're paying for ₹1 of company earnings. Compare with industry peers to judge if an IPO is expensive or fairly priced. A very high P/E (e.g. 100x) means you're paying a premium for future growth expectations.

The lower and upper price limit within which investors can bid for IPO shares. Set by the company in consultation with the merchant banker. The spread between floor and cap cannot exceed 20%. Most retail investors apply at the cap (cut-off price) to maximise allotment chances.

Promoters are the founders and major controlling shareholders of a company. Promoter Holding % shows how much of the company they own post-IPO. SEBI requires promoters to hold at least 20% post-listing for 3 years. High promoter holding (60%+) shows confidence; very low holding can be a warning sign.

Large institutional investors like mutual funds, banks, insurance companies, FIIs, and venture capital funds. They get 50% of IPO shares reserved (75% for mainboard book-built IPOs). QIB subscription level is closely watched — strong QIB interest is a positive signal for the IPO quality.

A SEBI-registered entity that processes IPO applications, manages allotment, and refunds. They publish the allotment status on their website. Common registrars: Kfin Technologies (formerly Karvy), Link Intime India, Bigshare Services. You check allotment status on the registrar's website using your PAN or application number.

The final version of the DRHP, filed after SEBI approval and just before the IPO opens. Contains the finalised price band, issue dates, and all company details. This is the document you should read before investing. Available on SEBI's website and the company's IPO page.

Individual investors who apply for up to ₹2 lakh worth of shares in an IPO. They get 35% of shares reserved. Allotment is lottery-based (1 lot per successful applicant). All retail investors have equal probability regardless of how many lots they apply for (applying for more lots does NOT increase chances — it's capped at 1 lot per applicant).

IPOs by smaller companies listed on NSE Emerge or BSE SME platforms (instead of main NSE/BSE boards). SME IPOs have smaller issue sizes, higher risk, higher potential returns, and different eligibility criteria. Minimum application is higher (often ₹1–2 lakh). Less regulated and more volatile than mainboard IPOs.

Shows how many times the IPO has been applied for, relative to shares available. Displayed category-wise (QIB, NII, RII) and in total. Updated twice daily during the IPO window. A higher subscription means more demand. Subscription below 1x means the IPO is undersubscribed — risky signal.

The digital payment method to apply for IPOs online. You enter your UPI ID (e.g. 9999999999@ybl), the bid amount is blocked in your bank, and you get a notification to approve the mandate. Must approve within 1 hour. Works via broker apps (Zerodha Kite, Groww, Upstox) or net banking.

When an IPO receives fewer applications than shares available (subscription below 1x in a category or overall). For mainboard IPOs, undersubscription is a serious red flag. However, QIB allotment at the end of Day 3 can rescue an IPO. Avoid investing in heavily undersubscribed IPOs.

How much a company is worth as implied by the IPO price. Key metrics used: P/E ratio (Price/Earnings), P/S ratio (Price/Sales), EV/EBITDA, Price-to-Book. Always compare valuation with listed industry peers. Overvalued IPOs may list well but underperform in the long term.