IPO glossary

Offer documents

DRHP (Draft Red Herring Prospectus). The draft offer document a company files with SEBI before its IPO is approved. Its financials are often a year or more old, and the price band and dates are not in it. A DRHP tells you an IPO is coming, not that it is open.

RHP (Red Herring Prospectus). The near-final offer document filed shortly before the issue opens. It carries the latest financials, the risks, how the money will be used and, once announced, the price band. It is the document an analysis should be read against.

Prospectus. The final offer document, filed after the issue price has been fixed.

[●] (blank placeholder). A blank in an offer document that means “to be decided”, typically the price band or lot size in a draft. It is not a zero and not a missing figure we lost: it is simply not stated yet.

Price and size

Price band. The range, lower and upper price per share, within which you may bid. The final issue price is fixed within the band once bidding closes.

Cut-off price. An option for retail investors to bid at whatever the final issue price turns out to be. For calculation purposes it is treated as the upper end of the band.

Lot size. The minimum number of shares you can bid for; you can bid for multiples of it. The minimum investment is the lot size times the upper price band.

Face value. The nominal value printed on a share, such as ₹1, ₹2 or ₹10. It is an accounting figure and has no link to the price you pay.

Issue size. The total amount the IPO raises at the issue price, fresh issue and offer for sale together. It is usually quoted in ₹ crore.

Fresh issue. New shares created and sold by the company. The money goes to the company, normally for growth, repaying debt or general purposes.

OFS (Offer for Sale). Existing shareholders, such as promoters or early investors, sell some of their shares. The money goes to those sellers, not to the company. An IPO that is entirely OFS has no fresh issue.

Who bids: investor categories

QIB (Qualified Institutional Buyer). Large institutions such as mutual funds, insurers and banks. They usually have the biggest share of the issue and their bids are watched closely, because they tend to bid late, on the last day.

NII (Non-Institutional Investor). Investors who are not QIBs and bid for more than ₹2 lakh, often called HNIs (high-net-worth individuals).

Retail (RII). Individual investors bidding up to ₹2 lakh in total. Many issues reserve about 35% of the offer for them, but each offer document states its own split.

Anchor investors. Institutions that are allotted shares a day before the issue opens, out of the QIB portion. A strong anchor list is read as a sign of institutional interest, though it says nothing certain about listing.

Demand and the grey market

Subscription (times subscribed). How many times the shares on offer were applied for. If 1 crore shares are offered and 10 crore are bid for, the issue is 10 times subscribed (10x). It is shown for each category and as a total, and updates through the bidding days.

GMP (Grey Market Premium). The premium over the issue price at which an IPO's shares are said to trade unofficially before listing. It is not regulated, not published by an exchange and not a forecast. A GMP of ₹40 on a ₹200 upper band is 20%, and the “estimated listing price” is the upper band plus the GMP, ₹240.

Listing gain. The opening price on listing day compared with the issue price, as a percentage. It can be negative: a listing loss.

Listing-day close. The price at the end of the first trading day. It can be very different from the opening price.

Applying and allotment

ASBA and UPI mandate. The way you apply: the application amount is blocked in your bank account (through a UPI mandate for retail bids) and is only debited if you are allotted shares. If you are not, the block is released.

Allotment and basis of allotment. When an IPO is oversubscribed, not everyone gets shares. The basis of allotment is the published method of dividing the shares; in an oversubscribed retail category, winners are usually picked by lottery. Check your status on the registrar's website.

Registrar. The company appointed to run the application process and publish the allotment status. You use its website to check whether you were allotted shares.

BRLM (Book Running Lead Manager). The investment banks that manage the IPO: marketing it, building the order book and handling the paperwork.

Book building. The usual method of pricing an IPO: investors bid within a price band, and the final price is set from the demand collected in that “book”.

Boards and ratios

Mainboard IPO. An IPO listed on the main platforms of NSE and BSE, typically by larger, more established companies, with stricter eligibility rules.

SME IPO. An IPO by a small or medium-sized company on a separate exchange platform (NSE Emerge, BSE SME). Lot sizes are larger, trading is thinner and prices can move sharply, so the risk is generally higher.

Market capitalisation. The company's total value at a given share price: price times the number of shares. For an IPO it is quoted after the issue, at the upper band.

P/E (Price to Earnings). The share price divided by earnings per share. It shows how many years of current profit the price pays for, and is most useful when compared with listed peers in the same business.

P/B (Price to Book). The share price divided by net worth per share. It is mostly used for banks, lenders and other asset-heavy businesses.

EPS (Earnings per Share). Profit after tax divided by the number of shares.

RoE / RoNW. Return on equity, or return on net worth: profit as a percentage of shareholders' funds. It shows how efficiently the company turns its capital into profit.