IPO Glossary

96 terms you will meet while reading an offer document, placing a bid or checking an allotment — each one explained in plain English, with a note on why it matters to you as an investor.

IPO Basics

IPO (Initial Public Offering): The first sale of shares by a company to the public, after which its shares are listed and traded on a stock exchange.; Why it matters: It is the only time you can buy shares directly at the issue price rather than the market price.
FPO (Follow-on Public Offering): A further issue of shares by a company that is already listed, to raise more capital or let existing holders sell.
Fresh Issue: The part of an IPO in which the company creates and sells new shares. The money raised goes to the company.; Why it matters: Fresh issue proceeds fund the business — debt repayment, capex, working capital — so this is the portion that can change the company’s prospects.
Offer for Sale (OFS): The part of an IPO in which existing shareholders — promoters or early investors — sell their own shares. The money goes to them, not the company.; Why it matters: An issue that is entirely OFS raises nothing for the business itself; it is an exit for existing owners.
Mainboard IPO: A public issue that lists on the main platforms of the NSE and BSE, subject to SEBI’s full eligibility and disclosure requirements.
SME IPO: A public issue by a small or medium enterprise that lists on NSE Emerge or BSE SME, with lighter eligibility norms and a much larger minimum application size.
Book Building: The price-discovery method used by most IPOs: investors bid within a price band and the final issue price is set from the demand collected.
Fixed Price Issue: An issue where the price per share is fixed in advance and printed in the offer document, with no band and no bidding on price.
Primary Market: The market in which securities are issued for the first time — IPOs, FPOs and rights issues. Money flows from investors to the issuer.
Secondary Market: The stock exchange where already-listed shares change hands between investors. The company receives nothing from these trades.
Rights Issue: An offer of new shares made only to existing shareholders, in proportion to what they already hold, usually at a discount.
Listing: Admission of a company’s shares to trading on a stock exchange, which happens a few days after the IPO closes.

IPO Documents

DRHP (Draft Red Herring Prospectus): The first draft offer document a company files with SEBI. It describes the business, financials and risks but not the price band or dates.; Why it matters: A DRHP filing is the earliest public signal that a company intends to go public — often months before the issue.
RHP (Red Herring Prospectus): The near-final offer document filed with the Registrar of Companies before the issue opens. It carries the price band, dates, lot size and reservation split.; Why it matters: This is the document to read before applying. Every figure on an IPO page should be traceable to it.
Prospectus: The final document filed after the issue price is fixed, containing the confirmed price and number of shares allotted.
Abridged Prospectus: A short-form summary of the RHP that must accompany the application form, covering the key terms and risk factors.
Objects of the Issue: The section of the offer document stating exactly what the company will do with the money it raises.; Why it matters: Proceeds earmarked for debt repayment behave very differently from proceeds going into new capacity.
Risk Factors: The mandatory section listing everything that could go wrong — litigation, customer concentration, regulatory dependence, promoter issues.
Corrigendum: A formal correction or addendum to an offer document, sometimes used to revise the price band or extend the issue dates.

Dates & Timeline

Anchor Investor Bidding Date: The working day before the issue opens, on which anchor investors are allotted shares at a fixed price.; Why it matters: The anchor book shows which institutions backed the issue, and at what price, before retail bidding starts.
Issue Open Date: The first day on which investors can submit bids for the IPO.
Issue Close Date: The last day for bidding. Retail applications generally have to be submitted by 5:00 pm and UPI mandates approved by 5:00 pm on that day; brokers usually set earlier internal cut-offs.
Basis of Allotment: The day the registrar finalises who gets how many shares, and publishes the allotment document on its website.
Refund / Unblocking Date: The day funds blocked under ASBA are released for applications that received no allotment or a partial allotment.
Credit of Shares: The day allotted shares appear in your demat account, usually one day before listing.
Listing Date: The day the shares start trading on the exchange, beginning with a special pre-open session.
T+3 Listing Timeline: SEBI’s rule that shares must list within three working days of the issue closing. T is the close date, and listing happens on T+3.; Why it matters: It shortens the period your money stays blocked and reduces the window in which grey market rates can drift from reality.

Price & Valuation

Price Band: The range within which you can bid, for example ₹100 to ₹105. The final issue price is set inside this range.
Floor Price: The lower end of the price band — the minimum price at which a bid is accepted.
Cap Price: The upper end of the price band — the maximum price at which shares will be issued.
Cut-off Price: An option available only to retail investors, meaning “I accept whatever final price is discovered”. You are blocked for the cap price and refunded the difference if the final price is lower.; Why it matters: Bidding at cut-off is the safest way for a retail investor to avoid being rejected for bidding below the final price.
Issue Price: The final price per share fixed after book building, at which shares are allotted to everyone in a category.
Face Value: The nominal value of a share as stated in the company’s capital structure, commonly ₹1, ₹2 or ₹10. It has no relationship to what the share is worth.
Market Capitalisation: The issue price multiplied by the total number of shares after the issue — what the whole company is being valued at.
P/E Ratio (Price to Earnings): The issue price divided by earnings per share. It says how many rupees you pay for each rupee of annual profit.; Why it matters: Comparing an IPO’s P/E with its listed peers is the quickest check on whether the issue is priced aggressively.
EPS (Earnings Per Share): Net profit divided by the number of shares outstanding.
RoNW (Return on Net Worth): Net profit as a percentage of shareholders’ funds — how efficiently the company turns its own capital into profit.
NAV (Net Asset Value): Net worth per share. Offer documents show NAV before and after the issue, which reveals the dilution.
EBITDA Margin: Operating profit before interest, tax, depreciation and amortisation, as a percentage of revenue.
Peer Comparison: The table in the RHP comparing the issuer’s valuation ratios with listed companies in the same business.; Why it matters: The issuer chooses its own peer set, so check whether the comparison is genuinely like-for-like.
Dilution: The reduction in existing shareholders’ ownership percentage caused by issuing new shares in the fresh issue.

Application & Payment

ASBA (Application Supported by Blocked Amount): The mandatory application method in which your bank blocks the application money in your own account instead of debiting it. It is debited only if you get an allotment.; Why it matters: Your money keeps earning interest in your account while the issue is open.
UPI Mandate: The block request sent to your UPI app when you apply through a broker. You must approve it before the cut-off or the application is rejected.; Why it matters: Unapproved mandates are the single most common reason a retail IPO application fails.
Blocked Amount: Money frozen in your bank account against an IPO application — visible in the balance but not usable until allotment or unblocking.
Lot Size: The fixed number of shares in one application unit. Bids must be for one lot or a whole multiple of it.
Minimum Order Quantity: The smallest bid allowed — one lot. For Mainboard issues this typically works out to about ₹14,000–₹15,000, and for SME issues to ₹1 lakh or more.
Bid: A single application specifying the number of lots and the price you are willing to pay.
Bid Revision: Changing the quantity or price of a submitted bid before the issue closes. Retail investors may revise or withdraw; QIBs and NIIs cannot withdraw once submitted.
Demat Account: The electronic account with NSDL or CDSL where your allotted shares are credited. An IPO application is impossible without one.
One Application Per PAN: The rule that a single PAN may submit only one application in a category. Multiple applications on the same PAN are all rejected.; Why it matters: Families often apply through separate PANs and demat accounts instead, which is permitted.
SCSB (Self Certified Syndicate Bank): A bank authorised by SEBI to accept and block ASBA applications, whether at a branch or through net banking.
Sponsor Bank: The bank appointed by the issuer to route UPI mandate requests between the exchanges and investors’ UPI apps.
Syndicate Member: A broker appointed to collect bids for the issue and upload them to the exchange bidding platform.

Investor Categories

RII (Retail Individual Investor): An individual applying for up to ₹2 lakh in a single application. SEBI reserves at least 35% of a book-built issue for this category when the company is profitable.
NII / HNI (Non-Institutional Investor): An investor applying for more than ₹2 lakh who is not a qualified institution. Usually 15% of the issue is reserved for this category.
sNII (Small NII): The NII sub-category for applications between ₹2 lakh and ₹10 lakh. One third of the NII portion is reserved for it.
bNII (Big NII): The NII sub-category for applications above ₹10 lakh, which receives two thirds of the NII portion.
QIB (Qualified Institutional Buyer): Mutual funds, insurers, banks, pension funds and foreign portfolio investors registered with SEBI. Typically 50% of a book-built issue is reserved for them.; Why it matters: QIB demand usually arrives on the final day, so the column can look empty until then.
Anchor Investor: A QIB that is allotted shares a day before the issue opens, at a fixed price, out of the QIB portion, with a lock-in on those shares.
Employee Quota: A portion reserved for employees of the issuer, often at a discount to the issue price and usually undersubscribed.
Shareholder Quota: A portion reserved for existing shareholders of the listed parent company, where an issue has one.
Reservation: The share of the total issue set aside for each investor category, fixed in the RHP in line with SEBI’s rules.

Subscription & Allotment

Subscription (times / x): Shares bid for divided by shares offered. “Retail 3.2x” means retail investors applied for 3.2 times the shares reserved for them.
Oversubscription: Demand above the shares on offer — anything over 1x.; Why it matters: Heavy oversubscription means allotment moves to a lottery, so most applicants get nothing.
Undersubscription: Demand below the shares on offer. If the issue does not reach 90% of the offer, it must be withdrawn and all money returned.
Allotment: The process of deciding which applicants receive shares, and how many.
Lottery Allotment: When the retail portion is oversubscribed, eligible one-lot applications go into a computerised draw and the winners get one lot each.; Why it matters: Applying for more lots does not improve your odds in the retail draw — each application gets one entry.
Proportionate Allotment: The method used for NII and QIB categories, where each applicant gets shares in proportion to the size of their bid.
Basis of Allotment Document: The registrar’s published table showing, for each application size, how many applicants applied and what ratio received shares.
Allotment Status: The result of your application, which you can check on the registrar’s website or the exchange portal using your PAN or application number.
Registrar to the Issue (RTA): The agency — such as Link Intime, KFin Technologies, Bigshare or MUFG Intime — that processes applications, decides allotment and handles refunds.
Unblocking: Release of the blocked ASBA amount for shares you did not receive, normally on the working day after the basis of allotment.
Technical Rejection: An application thrown out for a defect — PAN mismatch, wrong demat number, an unapproved mandate or a duplicate application — regardless of demand.

Grey Market Terms

GMP (Grey Market Premium): The unofficial premium at which IPO shares change hands before listing, quoted by grey market dealers.; Why it matters: GMP is not published by any exchange, regulator or registrar, it is not verifiable, and it can change several times a day. Treat it as sentiment, not data.
Kostak Rate: The fixed amount a buyer pays for an entire IPO application in the grey market, whether or not it receives an allotment.
Subject to Sauda: A grey market deal that becomes valid only if the application actually receives an allotment.
Expected Listing Price: Issue price plus the current GMP. It is an indication of sentiment, not a forecast, and it is often wrong.

Listing & Post-Listing

Special Pre-open Session (SPOS): The 60-minute call auction on listing morning, from 9:00 am to 10:00 am, that discovers the opening price of a newly listed share.
Listing Price: The price at which the share actually opens for trading on listing day.
Listing Gain: The difference between the listing price and the issue price, expressed in rupees or as a percentage.
Flat or Discount Listing: Listing at or below the issue price, which happens whenever demand at the discovered price fails to match the hype.
Circuit Limit: The maximum percentage a share may move in a session. Newly listed shares are placed in a 5%, 10% or 20% band depending on the exchange’s rules.
Lock-in Period: A period during which certain shareholders cannot sell. Anchor investors are locked in for 30 days on half their shares and 90 days on the rest.; Why it matters: Anchor lock-in expiry frequently brings selling pressure in the weeks after listing.
Promoter Lock-in: The longer lock-in applied to promoters’ shareholding after an IPO, under SEBI’s ICDR regulations.
Free Float: The portion of shares actually available for public trading, excluding promoter and locked-in holdings.
Trade-to-Trade (T2T): A surveillance segment where shares must be taken to delivery — intraday trading is not allowed. Some newly listed scrips start here.

SME IPO Terms

NSE Emerge: The National Stock Exchange’s platform for listing small and medium enterprises.
BSE SME: The BSE’s equivalent platform for small and medium enterprise listings.
Market Maker: A broker obliged to offer two-way quotes in an SME scrip for at least three years after listing, so that some liquidity always exists.
Lot Multiple Trading: The rule that SME shares can only be bought and sold in multiples of the lot size, even after listing.; Why it matters: You cannot sell a single share of an SME company — it makes partial exits impossible.
Migration to Mainboard: The process by which an SME company that meets SEBI’s size and track-record criteria moves its listing to the main board of the NSE or BSE.

Regulators & Intermediaries

SEBI: The Securities and Exchange Board of India, which regulates the securities market and reviews every offer document.; Why it matters: SEBI observations on a DRHP are not an endorsement of the issue or its price.
BRLM (Book Running Lead Manager): The merchant banker that structures the issue, markets it to institutions and runs the book-building process.
Underwriter: An intermediary that contracts to subscribe to unsold shares if the issue falls short.
Depository (NSDL / CDSL): The institutions that hold shares in electronic form. Your demat account sits with one of them through your broker.
Stock Exchange (NSE / BSE): The platforms that run the electronic bidding system during an IPO and list the shares afterwards.

Put it to use

Now that the vocabulary is clear, see which IPOs are open today, read how to apply for an IPO, follow category-wise subscription, or check common IPO questions.

These definitions are for information only and are not investment advice. See our disclaimer.