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Allotment – Allotment is the distribution of shares to the public during an offer. The normal rule of allocation is to allocate the shares in the event of oversubscription on a proportionate basis. This however excludes the firm allotment portion.

Auditor – An auditor is an individual who conducts an examination and verification of a company's financial and accounting records and supporting documents.

American Depository Receipt (ADR) – They are negotiable certificates that represent a certain number of shares of a foreign stock traded on a US exchange and held by a US bank.

Annual General Meeting (AGM) – The shareholders meeting, usually held at the end of each financial year, to discuss the previous performance and future outlook.

Authorised Capital – The maximum equity capital a company can raise, which is mentioned in the Memorandum of Association and Articles of Association of the Company. However, share premium is excluded from the definition of authorized capital.Go to top


Bankers to the issue – Bankers to the issue are entities that are registered by SEBI and act as issue and collecting centres for IPO forms and cheques.

Book Building – In a book building offer, the syndicate members decide the price range and the people decide the price of the issue based on a tender method.

Bonus Issues – They are the shares issued to capitalize on the reserves and surplus of the company without charging the shareholders. From the accounting perspective it involves a debit to the free reserves and a credit to the share capital.

Bought Out Deals – A bought out deal is a process by which an investor (usually the investment banker) buys out a significant portion of the equity of an unlisted company with a view to make it public within an agreed time frame.

Bridge Loan – A Bridge Loan is a loan that is used for a short duration of time until permanent financing is put in place. Companies that come out with an IPO issue access bridge finance for the interim period before the issue proceeds are actually realized.

Brokers – Companies making public issues appoint brokers to procure subscription. The managers to the issue distribute prospectuses and application forms to the brokers. These brokers form a very important link in the distribution value chain of financial products.

Brokerage – It is the commission paid to the brokers for the purchase and sale of shares.Go to top


Conditional Offer  – An offer to purchase securities depending on the effectiveness of a registration statement and the pricing of an IPO.Go to top


Dematerialisation – Dematerialisation or "Demat" is a process of converting the physical securities into electronic form and stored in computers by a Depository. Securities present in the physical form are surrendered to the respective company which will then nullify them and credit the depository account.

Direct Public Offerings – Offering of securities to the public directly by an issuer without the assistance of any Investment Banking firm.

Draft Prospectus – A draft prospectus provides the information on the financials of the company, promoters, background, tentative issue price etc. It is filed by the Lead managers to SEBI to provide issue details. Overview of the draft prospectus can be seen on www.sebi.gov.in (SEBI’s web site). The final prospectus is printed after obtaining the clearance from SEBI and Registrar of Companies (ROC).Go to top


External Risk Factors – The external factors that influence the company’s performance vis-a-vis share performance, which has to be spelt out by the company in the offer document. These are usually factors like changes in macroeconomic variables which are outside the control of the company.

Extraordinary General Meeting (EGM) – The meeting which is not an annual general meeting. This can be conducted by any point of time whenever the company needs to take some crucial decisions.Go to top


Firm Allotment – Out of the total amount the company proposes to raise in the market, some portion is fixed to the promoters in order to avoid diluting their stake in the company. This is called Firm Allotment.

Filing – A copy of prospectus having attached to the documents required to be submitted to the Registrar of Companies (ROC).

Flipping – The practice of subscribing to a new security offer and quickly selling it in the after-market.Go to top


Global Depository Receipt (GDR) – They are negotiable certificates held by a bank of one country that represent a certain number of shares of a foreign stock traded on another exchange, usually a European exchange. The accounting requirements for GDRs are not as stringent as that for ADRs.

Guest User – A person who is not a trading member (and hence cannot subscribe a new issue) but is eligible to view listings and prospectus of new issues.Go to top


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Impersonation – A person who

  1. uses fictitious names for acquiring or subscribing shares
  2. induces the company to allot or register any transfer of shares to him or any other person in a fictitious name

Internal Risk Factors – The internal factors that influence the company's performance vis-a-vis share performance, which has to be spelt out by the company in the offer document. These are usually factors pertaining to the company's internal operations and management which are within the control of the company.

Investment Banking Firm – A financial entity acting as an underwriter or agent, and serves as an intermediary between an issuer of securities and the investing public. Investment bankers perform various services: financing, facilitating mergers, corporate restructuring activities, broking and trading on their own accounts.

IPO – Initial Public Offer (IPO) is a source of collecting money from the public for the first time in the market to fund for its projects. In return, the company gives the share to the investors in the company

Issuer – An entity, like a company, municipality or government, that has the power to issue and distribute securities.

Issued capital – The capital proposed by the company to be raised from the market. Out of the issued capital the shares for which both application and allotment monies are paid in full represents the paid-up capital.Go to top


Joint Applications – Applications can be filled in single or in joint names (more than one person). In joint application, all payments will be made in favor of the first applicant.Go to top


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Lead Managers – The lead manager is appointed by the company which desires to raise capital from the market. The lead manager performs the following activities:

Designing the instrument

Pricing the issue

Timing the issue


Preparing the offer document



Listing – The process of making the securities officially quoted on the notified stock exchange for the trade.Go to top


Management Perception of Risk Factors – The management's comment on the possible impact of the risk factors and a statement of how the company is prepared to tackle and overcome these risk factors.

Merchant Bankers – Merchant Bankers facilitate the issue process.

Role of Merchant Banker:

Directing and co-ordinating the activities with under writers, registrars and bankers.

Assuring the investors of the soundness of the issue

Promising companies/entrepreneurs/promoters to tap resources, Complying with SEBI guidelines.

Minimum Subscription – The minimum shares the company needs to get from the public out of the total issue by the date of closure. (Presently every company need to raise 90% of the issued amount). Else, the company shall refund the whole amount received. This 90 % has to be exclusive of the cheques that are not cleared.

Multiple Applications – Two or more applications submitted on a single name are considered as multiple applications.(An applicant is supposed to submit only one application irrespective of the number of shares applied for.) The applications submitted for both electronic and physical equity shares are considered as multiple applications.Go to top


National Securities Depository Limited (NSDL) – This is an organization, which is an intermediary between the Registrar and the company for dematerialisation of shares.

Net Offer – The rest of the issued capital after allotting to promoters, which would be raised from the public is called Net Offer.Go to top


Oversubscription – Any extra amount received by the company more than the proposed issued capital.Go to top


Paid Up capital – The part of the issued capital of a company that has been paid up by the shareholders

Preferential Shares – These are the shares issued at a fixed coupon rate to investors which entails the foregoing of the right to participate in the management.

Private Placement – A type of offering, exempted from registration that allows the issuing company to avoid registration requirements and save underwriting fees by offering company shares directly to institutional and accredited investors.

Profit Earning (P/E) ratio – P/E is the ratio of a company's share price to earnings per-share. It essentially shows the amount that an investor is willing to pay for every one rupee earned by the company.

Prospectus – The official offer document included in the registration statement filed with SEBI in conjunction with a public offer. The prospectus contains information about the offer of securities and should be given to the original purchasers no later than the written confirmation of their purchase.Go to top


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Registration Statement – A document that must be filed with SEBI before securities can be sold to the public. It describes the business of the issuer of the securities, how the proceeds of the offering will be used, audited financial statements, some background on the principal executives, and other pertinent data.

Rights Issue – If a company wants to increase its subscribed capital by allotment of further shares after 1 or 2 years of first allotment, it has to offer to the existing shareholders first in proportion to the capital paid up on the shares held by them. Rights shares are issued to existing shareholders in proportion to their current holding and hence it prevents dilution of stake.

Road Show – The process by which underwriters acquaint potential institutional investors with the products, people and finances of a company planning to go public. Generally, this presentation is a face-to-face meeting. However they are emerging on online and video presentations.

Registrar – They play an administrative role in conducting a public issue. They are responsible for collecting information from the collecting banks and report to the companies and lead managers about the issue collections. They advise the company regarding the closure or extension of closing date of the issue.Go to top


Secondary Offering – The sale of newly issued securities by an issuer which already has publicly traded securities.

Stock Option – The right to buy a stock at a specified price at a specified time in the future. Stock options are usually given to senior managers and executives as an incentive to continue with the company.Go to top


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Underwriter – An investment banking firm which enters into a contract with the issuer of new securities to distribute them to the investing public.

Underwriting Commission – The commission paid to the underwriter for bearing the risk of an issue. Go to top


Venture Capital – An important source of financing used to fund start-up companies that do not have access to capital markets. Venture Capital typically entails significant investment risk but offers the potential for above-average future returns.Go to top


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