IPO Glossary (A-Z)

DRHP (Draft Red Herring Prospectus) is the preliminary document filed with SEBI containing detailed information about the company, its business, financials, risks, and the IPO offer. It does not include the final issue price.

RHP (Red Herring Prospectus) is the final offer document issued after SEBI approval. It includes the price band and all final IPO details. Investors use this to make informed decisions during the bidding period.

Prospectus is the complete legal document that provides all information about the company and the IPO. It includes business details, financial statements, risk factors, use of proceeds, and more.

QIB (Qualified Institutional Buyers) are large institutional investors like mutual funds, banks, insurance companies, and foreign portfolio investors. They get at least 50% reservation in mainboard IPOs.

NII (Non-Institutional Investors) or HNI (High Net Worth Individuals) are investors who apply for more than Rs 2 lakh worth of shares. They typically get 15% reservation in mainboard IPOs.

Retail investors are individual investors who apply for up to Rs 2 lakh worth of shares. They get 35% reservation in mainboard IPOs and often receive preferential treatment in allotment.

ASBA (Application Supported by Blocked Amount) is the application method where your bid amount is blocked in your bank account until allotment. If you don't get shares, the amount is automatically unblocked.

UPI (Unified Payments Interface) is now the most popular way to apply for IPOs. You simply approve a mandate on your UPI app, and funds get blocked directly from your bank account.

Lot size is the minimum number of shares you can bid for in an IPO. For example, if lot size is 100 shares and price is Rs 200, minimum application amount is Rs 20,000.

Cutoff price is the highest price in the price band. Retail investors often choose cutoff price to ensure their bid is considered at whatever final price is determined.

Issue price is the final price at which shares are allotted to investors. It is determined within the price band based on demand during the bidding period.

Price band is the range within which investors can bid. For example, Rs 180 to Rs 200 per share. The final issue price is decided based on bids received.

GMP (Grey Market Premium) is the unofficial premium at which IPO shares are traded before listing. It indicates market sentiment but is not guaranteed.

Market cap (Market Capitalization) is the total value of the company calculated as share price multiplied by total number of shares. It helps compare company size and valuation.

Subscription refers to how many times the IPO was oversubscribed. For example, 50x subscription means demand was 50 times the available shares.

Oversubscription happens when the number of applications received is more than shares available. This often leads to lottery-based allotment in retail category.

Basis of allotment is the method used to distribute shares among applicants. The registrar announces this after the IPO closes. It shows how many shares each category received.

Allotment is the process of assigning shares to successful applicants. If allotted, shares appear in your demat account. If not, your blocked funds are released.

Listing date is the day when IPO shares start trading on stock exchanges (NSE and BSE). This is when you can see the actual listing price and can sell if you want.

Listing gain/loss is the difference between listing price and issue price. Positive listing gain means profit on listing day, while listing below issue price means loss.

Upper circuit/Lower circuit are price limits set by exchanges. A stock can only move up or down by a certain percentage in a single day. For newly listed stocks, this is typically 20%.

Lock-in period is the time during which certain shareholders (like promoters and pre-IPO investors) cannot sell their shares. This ensures stability and commitment.

Book building is the process of collecting bids from investors to determine demand and final issue price. Most IPOs in India use the book building method.

Anchor investors are institutional investors who get shares allocated before the IPO opens to the public. Their participation is seen as a positive signal.

Green shoe option or over-allotment option allows the company to issue additional shares (up to 15% more) if demand is very high. This helps stabilize the stock price after listing.

Fresh issue means new shares created by the company. Money from fresh issue goes to the company. OFS (Offer for Sale) means existing shareholders are selling their shares, and money goes to them.