The IPO glossary

An Initial Public Offering is the process by which a privately held company offers its shares to the general public for the first time and gets them listed on a stock exchange such as the BSE or the NSE.

An IPO does two things at once: it lets the company raise capital, and it gives existing shareholders a public market in which to sell. In India the process is governed by SEBI’s ICDR Regulations, and every issue must be routed through a merchant banker, backed by a prospectus, and applied for through ASBA.

A Follow-on Public Offer is a public issue made by a company whose shares are already listed. It is the same machinery as an IPO, applied a second time.

Because a market price already exists, an FPO is usually priced at or slightly below the prevailing quote. Like an IPO, it can be a fresh issue, an offer for sale, or a mix of both.

Issue type describes where the shares on offer come from. A pure fresh issue creates new shares and the money goes to the company. A pure offer for sale transfers existing shares and the money goes to the selling shareholders. Most Indian IPOs are a combination of the two.

The split matters to investors: only the fresh-issue portion adds capital to the business.

A fresh issue is the portion of an IPO through which the company issues entirely new shares to raise money for itself. The proceeds fund whatever is listed under Objects of the Issue: debt repayment, capital expenditure, working capital or general corporate purposes.

A fresh issue increases the total share count, which dilutes the percentage holding of existing shareholders.

An Offer for Sale is the mechanism through which existing shareholders — typically promoters, private equity funds or early investors — sell part of their holding to the public as part of an IPO.

No new shares are created and the company receives nothing. A large OFS component is worth reading closely: it tells you who is exiting, and at what price.

A mainboard IPO is a public issue that lists on the primary platforms of the BSE and NSE, as distinct from an SME IPO on NSE Emerge or BSE SME.

Mainboard issues face heavier eligibility tests, a minimum of 1,000 allottees, larger issue sizes and mandatory book building in most cases. Lot sizes are set so a retail application stays within roughly ten to fifteen thousand rupees.

Book building is the mechanism used to discover an IPO’s price. Instead of naming one figure, the company publishes a price band and investors bid at any price within it. The bids are collected into a book over the issue period.

Once bidding closes, the company and its lead managers set the final issue price from the level at which the book is comfortably covered. Retail investors normally sidestep the guesswork by bidding at the cut-off price.

In a fixed price issue the company sets one offer price in advance and prints it in the prospectus. Investors either apply at that price or do not apply at all.

Demand is only visible after the issue closes, and at least 50 percent of the net offer is reserved for retail applicants. The format is now mostly seen in smaller SME issues.

A pre-IPO placement is a sale of shares to selected institutional or strategic investors in the weeks before the IPO opens. It de-risks the offer by locking in capital early, and the fresh-issue size is usually cut by the amount raised.

Shares issued in a pre-IPO placement carry a lock-in, and the price paid must be disclosed in the offer document — it is a useful reference point against the eventual price band.

A Qualified Institutions Placement lets an already-listed company issue shares or convertible securities to qualified institutional buyers without running a full public issue.

It is faster and cheaper than an FPO because the disclosure burden is lighter, but retail investors cannot participate. QIPs often follow an IPO by a year or two, once the company needs more capital.

A rights issue offers new shares to existing shareholders in a fixed ratio — one new share for every four held, for example — normally at a price below the market quote.

Shareholders may take up the rights, let them lapse, or trade the rights entitlement on the exchange during the offer window. It is not an IPO, but it uses much of the same plumbing, including ASBA.

The Draft Red Herring Prospectus is the first document a company files with SEBI and the exchanges when it intends to go public. It carries the business description, restated financials, risk factors, promoter details, litigation and the intended use of proceeds.

What it does not carry is the price band, the final issue size or the dates — those arrive with the RHP. SEBI publishes every DRHP for public comment before issuing its observations.

The Red Herring Prospectus is the legally binding document filed with the Registrar of Companies at least three days before the issue opens. It updates the DRHP with the price band, the issue dates and the final structure.

It is called a red herring because the exact issue price and number of shares are still absent — they are only fixed after book building closes. The RHP is the single most important document to read before applying.

The final prospectus is filed with the Registrar of Companies once the issue price has been determined and allotment is complete. It is the RHP with the blanks filled in: the issue price, the exact issue size and the final category-wise allocation.

For anyone studying an IPO after the fact, this is the definitive record of what was actually sold.

The abridged prospectus is a condensed version of the RHP — a handful of pages covering the business, the financials, the objects of the issue, the top risk factors and the basis for the issue price.

SEBI mandates that it accompany every application form, and it must be accessible from a QR code on the form. It is the fastest honest summary of an issue you will find.

Objects of the Issue sets out, line by line, how the company intends to deploy the money raised in the fresh issue — repaying borrowings, funding a plant, financing working capital, funding acquisitions or general corporate purposes.

SEBI caps how much may be parked under vague heads such as general corporate purposes. Where the objects involve significant sums, a monitoring agency reports on actual utilisation every quarter.

Risk factors is the section in which the company is required to disclose everything that could go wrong: customer concentration, promoter litigation, regulatory dependence, negative cash flows, related-party transactions, contingent liabilities and more.

Risks must be ordered by materiality, and quantified where possible. It is written defensively by lawyers, but the first ten entries usually tell you what the issue really hinges on.

Basis for Issue Price is where the company and its lead managers argue that the price band is reasonable. It sets out the qualitative strengths, the key performance indicators the board actually tracks, and quantitative measures such as EPS, P/E, RoNW and NAV at both the floor and the cap price.

SEBI also requires a comparison against the price paid in recent pre-IPO transactions, which is often the most revealing table in the document.

Peer comparison places the issuer alongside listed companies in the same industry on metrics such as revenue, EPS, P/E, RoNW and NAV per share.

The peer set is chosen by the company, so check whether the comparables are genuinely similar in size, margin profile and growth before drawing conclusions from the table.

Restated financials are the company’s audited accounts for the preceding three financial years, re-presented under a uniform set of accounting policies so the years are genuinely comparable.

Restatement adjustments are disclosed separately — they show where earlier reported profits were revised, which is worth a look before trusting a growth chart.

After reviewing a DRHP, SEBI issues an observation letter — in practice, the clearance an issue needs before it can open. The company must incorporate the observations into the RHP.

Observations are not an endorsement of the issue or its price. SEBI reviews disclosure, not investment merit. An observation letter is typically valid for twelve months, within which the IPO must launch.

Where an issue raises above the prescribed threshold, SEBI requires the appointment of a monitoring agency — a registered credit rating agency — to verify how the money is being deployed against the stated objects.

The agency files a report with the exchanges each quarter until the proceeds are fully used, and flags any deviation. It is a useful post-listing check on whether the plan survived contact with reality.

Anchor bidding happens one working day before the public issue opens. Selected qualified institutional buyers commit to large allocations at a fixed anchor price and pay in full on the same day.

The anchor book is published before the issue opens, and it is the first hard signal of institutional appetite. A book filled with long-only domestic funds reads very differently from one filled with short-horizon money.

The opening date is the first day of the subscription window. Bidding is open on exchange platforms from 10:00 a.m., and applications flow in through ASBA at banks and through UPI at brokers.

Mainboard issues stay open for a minimum of three working days. Day-one subscription numbers are watched closely, though retail demand typically arrives on the final day.

The closing date is the final day of the subscription window. Retail investors normally have until 5:00 p.m. to submit or revise, though brokers and banks set earlier internal cut-offs to allow time for UPI mandate approval.

Once the window shuts, no new bids are accepted and the registrar begins reconciling applications against the shares on offer.

The exchange bidding window runs from 10:00 a.m. to 5:00 p.m. on each day of the issue. Intermediaries usually stop accepting fresh retail applications an hour or two earlier so that UPI mandates can be raised and approved in time.

A mandate approved after the window closes does not save a late application — the bid must be on the exchange before cut-off.

On the allotment date the registrar finalises the allocation of shares against valid applications, in consultation with the exchange and the lead managers. Under the T+3 timetable this falls on the first working day after the issue closes.

Allotment status becomes checkable on the registrar’s website and on the exchange portals the same evening, using the PAN, application number or demat account.

On the refund initiation date the registrar instructs the banks to unblock the money held against applications that received no allotment, and the excess held against partial allotments.

Under ASBA nothing was ever debited, so no cash actually moves — the lien is simply lifted and the balance becomes usable again, usually within a day.

Once allotment is finalised, the registrar instructs NSDL and CDSL to credit shares to the demat accounts of successful applicants. This happens the working day before listing.

If shares do not appear, the usual cause is a mismatch between the DP ID and client ID quoted on the application and the actual demat account — which the registrar treats as a technical rejection.

The listing date is the first day of trading. It opens with a special pre-open session that establishes the equilibrium price, after which normal trading begins.

Under the current T+3 timetable, listing falls on the third working day after the issue closes.

T+3 means shares must list within three working days of the issue closing date, counting the closing day as T. Allotment is finalised on T+1, refunds and demat credits happen on T+2, and trading begins on T+3.

The cycle was cut from T+6 to T+3, which shortens the period for which an applicant’s funds stay blocked and reduces the window in which grey market pricing can drift from reality.

If the issuer revises the price band while an issue is open, the bidding period must be extended by at least three additional working days, subject to the overall ten-working-day cap.

The revision has to be advertised in the same newspapers that carried the original announcement, and existing bidders are entitled to revise their bids.

The price band is the range within which bids may be placed — for example 275 to 289 rupees per share. The lower end is the floor price and the upper end is the cap price.

SEBI requires the cap to be no more than 120 percent of the floor. The band is announced only a couple of days before the issue opens, in the RHP and the accompanying advertisement.

The floor price is the minimum of the price band. No bid below it is valid.

It is not a valuation opinion — in a well-subscribed issue the final price almost always lands at the cap, so the floor mostly matters as the base of the SEBI-mandated 20 percent band width.

The cap price is the maximum of the price band, and the figure that matters most in practice. Retail applications are blocked at the cap price multiplied by the lot size, regardless of where the bid is placed.

In an oversubscribed issue the final price is set at the cap, so the cap is effectively the price you should assume you are paying.

Bidding at the cut-off price means accepting whatever price the book building process produces. The bid can never be rejected for being priced too low, which is why the overwhelming majority of retail applications use it.

Funds are blocked at the cap price. If the issue prices below the cap, the difference is unblocked after allotment. Only retail individual investors and employees may bid at cut-off — QIBs and NIIs must name a price.

The issue price is the single price at which shares are ultimately allotted to all investors in a category. It is fixed after the book closes and printed in the final prospectus.

In a heavily oversubscribed issue it lands at the cap price. In a weak issue it may be set lower within the band, and the difference between the blocked amount and the issue price is released.

Face value is the nominal value assigned to a share in the company’s books — typically 1, 2, 5 or 10 rupees. It has no relationship to what the share is worth.

Face value matters for corporate actions: dividends are sometimes declared as a percentage of it, and a stock split changes it. It also splits the issue price into capital and premium.

Share premium is the difference between the issue price and the face value. A share with a face value of 10 rupees issued at 290 rupees carries a premium of 280 rupees.

The premium is credited to the securities premium account rather than to share capital, and its use is restricted by the Companies Act.

Issue size is the total amount the IPO seeks to raise, computed at the cap price and stated as the sum of the fresh issue and the OFS.

Size drives the structure of the offer: it determines the category-wise reservation, whether the issue must be book built, and the free float that will be available for trading after listing.

Market capitalisation at IPO is the issue price multiplied by the total number of shares outstanding after the issue. It is what the market is being asked to value the whole company at — not just the slice on sale.

A small issue size can still imply a very large market cap, so always compute this figure rather than judging an IPO by how much it raises.

Earnings per share is the company’s net profit divided by its shares outstanding. Offer documents present both basic and diluted EPS, restated across three years and weighted for the period.

Check whether the EPS quoted is pre-issue or post-issue: the fresh issue increases the share count, which mechanically lowers EPS until the new capital starts earning.

The P/E ratio divides the issue price by EPS, giving the number of years of current earnings the buyer is paying for. The RHP shows it at both the floor and the cap price.

It is only meaningful against something: the peer comparison table, the industry average, or the company’s own growth rate. A high P/E on a one-off spike in profit is a common trap.

EV/EBITDA compares enterprise value — market cap plus net debt — against earnings before interest, tax, depreciation and amortisation.

Because it looks past capital structure, it is the fairer multiple for capital-intensive or heavily leveraged businesses, where P/E can be distorted by interest costs.

Return on Net Worth expresses profit after tax as a percentage of net worth. A business earning 22 percent on equity is deploying shareholder capital far better than one earning 8 percent.

Watch what happens after the issue: fresh capital raises net worth immediately while the profit from it arrives later, so post-issue RoNW usually dips before recovering.

NAV per share is the company’s net worth divided by the number of shares — the accounting value of each share before the market has an opinion.

Offer documents show NAV before the issue and after it, since fresh capital lifts book value. The ratio of issue price to NAV is the price-to-book multiple, which matters most for banks and lenders.

An issuer may revise the price band during the offer period, in either direction, subject to the 20 percent band width rule.

A revision triggers a mandatory extension of at least three working days and a fresh public advertisement. Existing bidders may revise their bids, and blocked amounts are adjusted accordingly.

Some issuers offer a discount of a few rupees per share to retail individual investors, to employees bidding in the reserved portion, or to shareholders of a parent company.

The discount is announced in the RHP and applied to the issue price for that category. It cannot exceed the limit set in the ICDR Regulations, and it slightly lowers the amount blocked per lot.

The anchor allocation price is set on anchor day, before the public issue opens. If the book subsequently prices higher, anchors must pay the difference; if it prices lower, they are not refunded.

That asymmetry is deliberate — it stops anchor pricing from being used to give institutions a cheaper entry than the public.

The lot size is the fixed block of shares in which an IPO must be applied for. If the lot is 51 shares, valid applications are for 51, 102, 153 shares and so on — never 60.

For mainboard issues the lot is set so that one lot at the cap price lands close to fifteen thousand rupees. SME issues use far larger lots.

The minimum bid quantity is one lot. An application for fewer shares is invalid and will be rejected outright by the registrar.

The term appears on the application form and in the RHP bid details table, alongside the maximum quantity permitted in each investor category.

The minimum investment amount is the lot size multiplied by the cap price. This is the amount blocked in your account, even if you bid at cut-off and the issue eventually prices lower.

The excess is released after allotment. You need the full amount as a free balance on the day you apply — an overdraft or credit limit will not do.

The bid cum application form captures everything the registrar needs: name, PAN, DP ID and client ID, bid quantity and price, investor category, and the bank account or UPI ID against which funds are blocked.

Forms are colour-coded by category — white for resident individuals, blue for non-residents — and each must be accompanied by the abridged prospectus. Broking desks print them in bulk from client masters rather than filling them by hand.

ASBA is the only permitted way to pay for a public issue in India. The money stays in your own bank account under a lien; it is debited only to the extent of shares actually allotted.

The practical effect is that you keep earning interest on the blocked balance and never wait for a refund cheque. ASBA can be initiated through a Self Certified Syndicate Bank or, for applications within the UPI limit, through the UPI mandate route at a broker.

When you apply through a broker, the exchange routes a UPI mandate to the UPI handle you supplied. Opening the app and approving it blocks the money in your bank account, exactly as an ASBA lien would.

The bid is not complete until the mandate is approved. Use the same UPI ID that is linked to the bank account you intend to fund the application from, and approve it well before the cut-off.

The UPI route is available only up to the prescribed per-application ceiling, currently five lakh rupees. Applications above it must go through a Self Certified Syndicate Bank under the conventional ASBA process.

This is why large HNI applications are typically routed through bank ASBA or a broker’s syndicate arrangement rather than a UPI app.

Mandate pending means the application is registered on the exchange but no money has been blocked yet, because the UPI request is still awaiting approval in your app.

A pending mandate at the close of the issue results in rejection. If the request has not appeared, check the pending mandates section of the UPI app before asking the broker to re-initiate it.

Mandate failed means the block request was declined or could not be completed — commonly because of an insufficient balance, a wrong or inactive UPI handle, a bank or app outage, or a UPI ID not linked to the bank the funds sit in.

A failed mandate can usually be retried while the issue is still open, but the underlying bid may need to be re-entered.

Every UPI mandate carries a validity window — typically until the evening of the following day. If it is not approved within that window it expires and the application stays unfunded.

Approve on the day you apply. Waiting for the last day of the issue leaves no room to recover from an app or bank failure.

The application number is the unique identifier issued when a bid is accepted. It appears on the acknowledgement slip, in the broker’s order book and in the confirmation message.

Along with the PAN and the demat account, it is one of the three ways to look up allotment status on the registrar’s portal.

The PAN is mandatory on every application, and it is the field the registrar uses to identify an applicant. It must match the PAN registered against the demat account exactly.

Because deduplication runs on PAN, it is also the mechanism that catches multiple applications from the same person — all of which are then rejected.

A demat account holds securities in electronic form with NSDL or CDSL, through a depository participant. It is a prerequisite for any IPO application — allotted shares can only be delivered there.

The account must be active and the PAN on it must match the PAN on the application, or the credit will fail.

The DP ID identifies your depository participant and the client ID is your account number with that participant. Together they form the sixteen-digit beneficiary account number that IPO shares are credited to.

CDSL accounts are a single sixteen-digit number; NSDL accounts begin with IN followed by fourteen characters. Quoting these incorrectly is one of the most common causes of technical rejection.

A bidder may revise a submitted bid — upward or downward in price, or in quantity — at any time before the issue closes, using a revision form or the broker’s platform.

If the revision increases the application value, the additional amount is blocked. Retail investors may revise freely; qualified institutional buyers and non-institutional investors may not lower or withdraw their bids once placed.

Retail individual investors may withdraw a bid up to the closing date, after which the blocked amount is released.

Qualified institutional buyers and non-institutional investors cannot withdraw or reduce their bids after submission — a rule designed to stop the subscription figures being inflated by demand that evaporates on the last day.

Only one application per PAN per category is permitted. If the registrar’s deduplication finds two, both are rejected — including the one that would otherwise have been allotted.

Family members with separate PANs and separate demat accounts may each apply, and that is the legitimate way to increase the number of lottery entries. Applying twice under one PAN is not.

Where the issuer is being carved out of a listed parent, a shareholder quota may reserve part of the issue for shareholders of that parent as on a specified record date.

The reserved portion is usually far less contested than the retail category, so allotment odds are better. Holding even one share of the parent on the record date qualifies, and an application may be made in this category in addition to the retail one.

The bank account or UPI handle used to block funds must belong to the first applicant. Funding a spouse’s or child’s application from your own account makes it a third-party application, which is not permitted.

Registrars run checks against the bank records, and third-party applications are rejected even when allotment would otherwise have been made.

A retail individual investor is a resident individual, HUF or NRI applying for up to two lakh rupees in a single application. Retail is the only category that may bid at cut-off.

At least 35 percent of the net offer is reserved for retail in a standard book-built issue. In an oversubscribed issue, allotment within the category is by lottery, so a large application confers no advantage over a single lot.

Qualified institutional buyers are institutions registered with or regulated by a financial regulator: mutual funds, insurance companies, scheduled commercial banks, foreign portfolio investors, pension and provident funds, and certain development institutions.

At least 50 percent of the net offer goes to QIBs in a standard book-built issue, with a portion of that reserved for mutual funds. QIB bids cannot be withdrawn or reduced, and allotment within the category is discretionary rather than proportionate.

The non-institutional category covers individuals, HUFs, companies, trusts and societies applying above two lakh rupees. At least 15 percent of the net offer is reserved for it.

The category is split into two buckets — applications between two and ten lakh rupees, and applications above ten lakh — with one third of the reservation going to the smaller bucket. NIIs must bid at a specific price and cannot withdraw their bids.

The small HNI bucket covers applications above two lakh and up to ten lakh rupees. One third of the non-institutional reservation is set aside for it.

Splitting the NII category was intended to stop very large applications from crowding out smaller ones. Allotment within the bucket is by draw of lots when it is oversubscribed.

The big HNI bucket covers applications above ten lakh rupees, with no upper ceiling, and receives two thirds of the non-institutional reservation.

This is where leveraged IPO funding shows up in the subscription numbers — bHNI demand can spike dramatically on the final day and is a poor guide to underlying conviction.

An anchor investor is a QIB that commits to a large allocation the working day before the public issue opens, paying in full at the anchor price. Up to 60 percent of the QIB portion may be allotted to anchors, with sub-reservations for domestic mutual funds.

The anchor book is disclosed before bidding starts and is read as a quality signal. The minimum anchor application is ten crore rupees.

Anchor allocations are locked in on a staggered basis: half the shares for 30 days from allotment, and the balance for 90 days.

The 90-day expiry is worth marking on a calendar — it releases a block of institutional stock into the market and often coincides with pressure on the price.

Some issuers reserve a slice of the offer for eligible employees, often with a per-share discount. The reservation cannot exceed 5 percent of the post-issue capital, and an individual employee’s application is capped by the ICDR Regulations.

The employee bucket is usually undersubscribed relative to retail, so allotment odds are better. Employees may also apply in the retail category separately.

A foreign portfolio investor is an overseas entity registered with SEBI to invest in Indian securities. FPIs bid within the QIB category and frequently appear in the anchor book.

Their participation is subject to sectoral foreign investment caps and to the individual and aggregate holding limits under the FEMA rules.

Subscription status expresses total bids as a multiple of the shares offered — an issue subscribed 14.2 times has received bids for over fourteen times the stock available.

The exchanges publish it live during the issue, broken down by QIB, NII and retail. Read the category numbers rather than the headline: heavy QIB demand and thin retail demand say something quite different from the reverse.

An issue is oversubscribed when bids exceed the shares available. Retail allotment then moves to a draw of lots, and the non-institutional and QIB categories are scaled back proportionately or at the issuer’s discretion.

Heavy oversubscription raises the probability that the issue prices at the cap, and lowers the probability that any individual retail application receives anything.

An issue is undersubscribed when it receives bids for fewer shares than it offers. Every valid applicant receives a full allotment, and spare shares in one category may be moved to another where permitted.

If total subscription falls below the 90 percent minimum, the issue is withdrawn and all blocked funds are released.

An issuer must receive minimum subscription of 90 percent of the offer, failing which the issue is called off and every blocked amount is released.

The rule protects investors from being locked into a company that could not raise the capital its plan depended on. In an OFS-only issue the requirement applies to the offer as a whole.

When the retail category is oversubscribed, every valid application competes for one lot through a computerised, registrar-run and exchange-supervised draw.

Because the draw operates per application rather than per share applied for, five separate single-lot applications across five PANs give five chances, while one five-lot application under one PAN gives one. Applying for more lots does not improve the odds.

The basis of allotment is filed with the exchanges once allotment is finalised. It tabulates, for each category and each application size, how many applications were received, the ratio applied and how many shares were allotted.

It is the authoritative record of the allotment ratio — the place to look if you want to know what the real odds turned out to be.

Pro-rata allotment scales every application in a category down by the same proportion, so a bidder who applied for twice as much receives roughly twice as many shares.

It is the method used in the non-institutional categories. Where the proportionate entitlement falls below one lot, the registrar runs a draw among those applicants instead.

Allotment is the act of assigning shares to applicants. It is finalised by the registrar in consultation with the exchange and the lead managers, and it is the point at which a bid becomes a holding.

Only the amount corresponding to allotted shares is debited from the blocked balance; the rest is released.

Allotment status tells an applicant how many shares, if any, were allotted. It can be checked on the registrar’s website, on the BSE and NSE portals, or through the broker.

Broking desks with large client books check status in bulk against a list of PANs rather than one applicant at a time.

A technical rejection removes an application from consideration entirely. The usual causes are a PAN that does not match the demat account, an inactive or wrongly quoted DP ID and client ID, multiple applications under one PAN, a third-party bank account, or a UPI mandate that was never approved.

Rejected applications are not in the draw at all, which is why bulk desks validate client data against depository records before the issue opens.

The registrar to the issue is the operational engine of an IPO: it collects and validates applications, deduplicates on PAN, runs the allotment, publishes the basis of allotment, instructs the banks to unblock funds and instructs the depositories to credit shares.

Link Intime and KFin Technologies handle most Indian issues, and their portals are where allotment status is checked.

Because ASBA blocks rather than debits, an unsuccessful applicant receives no refund in the traditional sense — the lien is simply lifted and the balance becomes usable again.

Partial allotments release the unused portion the same way. If the money is still shown as blocked a few days after the release date, the bank, not the registrar, is the party to chase.

Post-issue shareholding is the capital structure once the fresh issue and OFS are complete: how much the promoters retain, what institutions hold, and what proportion sits with the public.

The offer document shows the pre-issue and post-issue tables side by side, which is the clearest way to see exactly how much of the company changed hands.

The grey market premium is the price at which allotments are informally traded before listing, quoted as a premium over the issue price. A GMP of 120 rupees on a 300-rupee issue implies an expected listing near 420.

The grey market is unregulated, unenforceable and thinly traded, and quotes are easily moved by a handful of operators. Treat GMP as a sentiment reading rather than a forecast — it can swing sharply in the days before listing and frequently overstates the eventual pop.

The estimated listing price is simply the issue price plus the prevailing GMP. It is arithmetic on an unofficial number, not a valuation.

It has no regulatory standing, no one is obliged to honour it, and the actual pre-open equilibrium price is set by real orders on listing day.

The Kostak rate is a fixed amount quoted for buying a whole IPO application before allotment is known. The seller receives it regardless of the outcome, and the buyer takes on the full risk of getting nothing.

It is an unregulated private arrangement with no legal enforceability, and it exists only in the grey market.

Subject to sauda is a conditional version of the Kostak deal: the agreed amount is paid only if the application is allotted. Nothing changes hands if the applicant draws a blank.

Because the buyer’s risk is lower, the quoted rate is higher than a comparable Kostak rate. Like everything in the grey market, it is unregulated and unenforceable.

Listing gain is the return between the issue price and the listing price. A share issued at 300 that lists at 375 has delivered a 25 percent listing gain.

It is the metric most IPO applicants actually optimise for, and the reason retail demand concentrates in issues with a strong grey market. It is also realised only if you sell — many issues give back the pop within weeks.

An issue lists at a discount when the opening price falls below the issue price. Allottees start under water, and the discount is often deepest in issues that were aggressively priced or that arrived into a weak market.

A high grey market premium is no protection: GMP can collapse in the days between allotment and listing.

The listing price is the equilibrium price discovered in the special pre-open session on listing day, and it is the first officially traded price for the stock.

It is set by actual buy and sell orders, which is what distinguishes it from any grey market estimate quoted beforehand.

On listing day the stock enters a special pre-open session — orders are collected for roughly 45 minutes, then modification stops and the exchange computes the equilibrium price at which the largest volume can trade.

That price becomes the opening price, and normal continuous trading begins at 10:00 a.m.

A newly listed stock is placed in a dynamic price band on day one — commonly 20 percent for mainboard issues, and 5 percent for issues placed in the trade-for-trade segment.

The band is measured from the equilibrium price discovered in the pre-open session, and the exchange may widen it during the day within the prescribed limits.

The upper circuit is the highest price at which a stock may trade in a session. Once the price locks there, buyers queue but no seller will transact lower, so volume dries up.

Newly listed shares frequently hit the upper circuit on day one, which means holders cannot realise the gain until sellers appear.

The lower circuit is the floor for the session. A stock locked at the lower circuit has an order book full of sellers and no bids, so exiting is effectively impossible until the lock breaks.

Consecutive lower circuits after a weak listing are the main liquidity risk in aggressively priced small issues.

A lock-in restricts named shareholders from selling for a set period after allotment. The promoters’ minimum contribution — 20 percent of the post-issue capital — is locked in for 18 months, the balance of promoter holding for six months, and pre-IPO investors for six months.

Lock-in expiries are scheduled supply events. The calendar is in the offer document, and the dates are worth knowing before they arrive.

Promoter holding is the stake retained by the founding or controlling group. The offer document shows it before and after the issue, and a steep drop signals substantial promoter selling in the OFS.

Promoters must hold at least 20 percent of the post-issue capital as their minimum contribution, locked in for 18 months.

Dilution occurs when new shares are created, so each existing share represents a smaller slice of the company. A fresh issue dilutes; an offer for sale does not, because it only transfers shares that already exist.

Dilution also depresses EPS in the short run: the share count rises immediately, while the returns on the new capital take time to appear.

Free float is the share count genuinely available to trade — total shares less promoter, locked-in and strategic holdings.

A thin free float makes a stock volatile and easy to move, and it is a common feature of issues where only a small slice of the company was sold.

Listed companies must maintain minimum public shareholding of 25 percent. Very large issuers may list with less and are given a defined period to comply, typically through follow-on offers or promoter sales.

Pending compliance is worth noting: it implies a known future supply of stock.

In the trade-for-trade segment, intraday squaring off is not allowed — every purchase must be taken to delivery and every sale must be backed by shares already held.

Newly listed SME issues and stocks under surveillance are commonly placed here for an initial period, usually with a tight 5 percent price band.

An SME IPO is a public issue by a smaller company on a dedicated exchange platform, with lighter eligibility and disclosure requirements than the mainboard and a minimum of 50 allottees.

Application sizes are much larger, lots run to a lakh rupees or more, and market making is compulsory after listing. Liquidity is thinner and price moves are sharper than on the mainboard.

NSE Emerge is the SME platform of the National Stock Exchange. Issuers must meet track-record, net-worth and promoter-holding criteria, and the issue must be fully underwritten with a market maker appointed.

Companies that grow past the mainboard eligibility thresholds may migrate from Emerge to the main board.

BSE SME is the SME platform of the BSE, operating on broadly the same model as NSE Emerge: relaxed eligibility, compulsory underwriting, a mandatory market maker and larger lot sizes.

Issuers choose one platform, and may later migrate to the main board once they qualify.

SME issues use a large lot size by design — the minimum application generally runs to a lakh rupees or more, against roughly fifteen thousand on the mainboard.

The threshold exists to keep small retail investors out of a segment with thinner liquidity and higher risk. It applies to secondary market trading too, which is one reason SME stocks trade so sparsely.

Every SME listing must appoint a market maker — a registered member required to provide continuous buy and sell quotes for at least three years, within a prescribed spread.

A portion of the issue is reserved for the market maker’s inventory. Without this obligation, many SME stocks would have no tradable price at all.

An SME company may migrate to the main board after completing the prescribed period on the SME platform and meeting the eligibility tests on paid-up capital, net worth, profitability and shareholder count.

Migration requires a special resolution with a supermajority of public shareholders. It usually improves liquidity, brings the lot size down to a normal level and widens institutional participation.

SEBI regulates India’s securities markets. For IPOs it frames the ICDR Regulations, reviews every DRHP and issues observations, registers the intermediaries involved and enforces the disclosure regime.

SEBI vets disclosure, not investment merit. Its observation letter is a clearance to proceed, never an opinion on whether the issue is worth buying.

The BSE is one of India’s two principal exchanges and the older of the pair. It hosts the bidding platform for IPOs, publishes live subscription data, and operates the BSE SME platform for smaller issuers.

Most mainboard IPOs list on both the BSE and the NSE.

The NSE is India’s largest exchange by traded volume. It runs the electronic bidding platform used by most IPO applications, publishes category-wise subscription data through the day, and operates NSE Emerge for SME issuers.

The book running lead manager is the merchant banker responsible for the issue: due diligence, drafting the offer document, obtaining SEBI’s observations, marketing to institutions, building the anchor book and setting the final price with the issuer.

Large issues appoint several BRLMs. The quality of the lead manager is one of the few reliable soft signals about an issue.

A merchant banker is a SEBI-registered intermediary authorised to manage public issues. When it also acts as underwriter, it commits to subscribing to shares left unsold, for a fee.

Underwriting is compulsory for SME issues, which is why an SME IPO cannot technically fail for want of subscription in the way a mainboard issue can.

A syndicate member is a stockbroker appointed by the lead manager to accept applications and upload bids to the exchange. Sub-syndicate members and registered brokers extend the same reach into smaller centres.

They are the distribution layer of an issue — the desks that actually collect forms and get bids onto the platform before cut-off.

A Self Certified Syndicate Bank is a bank permitted to offer the ASBA facility — accepting applications, blocking the amount in the applicant’s account, and confirming the block to the registrar.

SEBI publishes the current list of SCSBs. Applications above the UPI ceiling must be routed through one.

The sponsor bank is appointed by the issuer to act as the conduit for UPI applications: it pushes the block request from the exchange to the applicant’s UPI app and reports the confirmation back.

When mandate requests are delayed across an entire issue, the sponsor bank or the NPCI rails are usually the bottleneck rather than the broker.

India has two depositories: NSDL and CDSL. They hold all listed securities in electronic form and maintain the ownership record, reached by investors through a depository participant.

On allotment, the registrar instructs the relevant depository to credit shares to the beneficiary account identified by the DP ID and client ID.

A registrar and transfer agent maintains the shareholder register, processes transmissions and corporate actions, and handles investor correspondence for a listed company.

The same firms usually act as registrar to the issue during the IPO and continue as RTA afterwards, which is why the allotment portal and the post-listing service desk are often the same organisation.