IPO Glossary for Beginners

IPO coverage is full of abbreviations and jargon that get thrown around as if every reader already knows them. This glossary defines the terms you will actually encounter while researching an Indian IPO, grouped by theme so you can use it as a reference rather than reading it top to bottom.

Issue Structure Terms

• IPO (Initial Public Offering) — the first sale of a company's shares to the public, after which the stock lists on an exchange.
• DRHP (Draft Red Herring Prospectus) — the preliminary offer document filed with SEBI, containing financials, risk factors and business details but not the final price or issue size.
• RHP (Red Herring Prospectus) — the updated offer document filed just before the IPO opens, including the price band and final issue structure.
• Price band — the range between the floor price and cap price within which investors can bid; the final issue price is fixed within or at this band.
• Cut-off price — the final issue price decided after book-building; retail investors can bid "at cut-off" to accept whatever price is finally fixed.
• Lot size — the minimum number of shares that must be applied for in one bid, with further bids in multiples of that lot.
• Fresh issue — new shares issued by the company, with proceeds going to the company's balance sheet.
• Offer for Sale (OFS) — existing shares sold by promoters or investors, with proceeds going to those sellers, not the company.
• Book-building — the price discovery process where investors bid within a price band and the final price is set based on demand.
• Mainboard IPO — an IPO listed on the main board of NSE or BSE, subject to full disclosure and eligibility norms.
• SME IPO — an IPO on the SME platform of NSE or BSE, for smaller companies, with different eligibility, lot size and disclosure requirements; see mainboard vs SME IPOs.

Investor Category Terms

• QIB (Qualified Institutional Buyer) — banks, mutual funds, insurers and registered FPIs bidding in the largest, most closely watched category; see understanding QIBs.
• NII (Non-Institutional Investor) — the category for applications above 2 lakh rupees, split into small and big HNI; see how HNI applications work.
• RII (Retail Individual Investor) — individuals applying up to 2 lakh rupees, generally getting proportionate allotment up to one lot with a lottery if oversubscribed.
• Anchor investor — a QIB allotted shares a day before the issue opens at a fixed price, subject to 30-day and 90-day lock-in on portions of the allocation.
• Employee reservation — a quota reserved for eligible employees of the issuing company, sometimes offered at a discount to the issue price.
• Shareholder quota — a reserved portion for existing shareholders of the company or its promoter group, where applicable.

Subscription and Demand Terms

• Subscription (times/x) — how many times a category's shares on offer have been bid for; tracked live on the IPO subscription status page.
• Oversubscription — when total bids in a category exceed the shares available, triggering proportionate allotment or a lottery.
• Undersubscription — when a category receives fewer bids than shares on offer, which can affect overall issue success depending on minimum subscription rules.
• Kostak rate — an unofficial grey market rate paid for an entire IPO application before allotment, regardless of outcome.
• Subject to Sauda — a grey market deal paid only if the underlying application is allotted shares.

Grey Market and Pricing Terms

• GMP (Grey Market Premium) — the unofficial premium over issue price that grey market dealers quote before listing; see what is IPO GMP.
• Implied listing price — issue price plus GMP, used as an informal estimate of where a stock might list.
• Listing gain — the percentage or rupee gain between issue price and the actual listing price on the exchange.
• Listing loss — a negative listing gain, where the stock lists below its issue price.

Application and Payment Terms

• ASBA (Applications Supported by Blocked Amount) — the mandatory mechanism where your bid amount is blocked, not debited, in your bank account until allotment is finalised.
• UPI mandate — the payment authorisation retail and small HNI investors approve through a UPI app, which blocks funds for an ASBA-linked IPO application.
• Bid-cum-application form — the form, physical or digital, used to submit an IPO bid, including PAN, demat details and bid quantity.
• Syndicate member — a broker or intermediary authorised to collect and process IPO bids on behalf of the lead managers.
• Lead manager (BRLM) — the merchant banker responsible for structuring, pricing and marketing the IPO on behalf of the issuer.
• Registrar to the issue — the entity, such as a registrar and transfer agent, responsible for processing applications and finalising allotment.

Allotment and Listing Terms

• Allotment — the process of assigning shares to successful applicants based on the SEBI-prescribed allotment methodology for each category; see how IPO allotment works.
• Basis of allotment — the official document published by the registrar showing how shares were allocated across categories.
• Refund — the unblocking of funds for bidders who did not receive allotment, or the portion not used for allotted shares.
• Demat credit — the crediting of allotted shares into an investor's demat account, usually a day or two before listing.
• T+3 listing — the current timeline where shares list on the exchange three working days after the issue closes.
• Listing date — the day a company's shares begin trading on NSE and/or BSE.
• Lock-in period — a mandatory period during which certain shareholders, such as promoters or anchor investors, cannot sell their shares.

Market and Analysis Terms

• Face value — the nominal value of a share as stated in the company's records, distinct from its market or issue price.
• P/E ratio (Price to Earnings) — issue price divided by earnings per share, used to judge whether an IPO is priced richly relative to peers.
• Anchor lock-in — the SEBI rule locking 50 percent of anchor shares for 30 days and the remaining 50 percent for 90 days from allotment.
• Retail discount — a reduction to the issue price sometimes offered to retail investors or employees, stated per share.
• Green shoe option — a stabilisation mechanism allowing additional shares to be allotted to support the stock price for a limited period after listing.

Where to Put These Terms to Use

Once these terms feel familiar, the fastest way to apply them is to follow a live issue end to end: check the upcoming IPO list for the next opening, watch GMP and subscription trends on the IPO GMP list and IPO subscription status pages, and once allotment is out, use the IPO allotment status tool to check your own application.

Frequently Asked Questions

Q: What is the difference between DRHP and RHP?

A: The DRHP is the preliminary draft filed for SEBI review without a final price band, while the RHP is the updated document filed just before the issue opens, including the price band.

Q: What does ASBA mean for my bank account?

A: ASBA blocks your application amount in your own bank account rather than debiting it, releasing the unused portion automatically after allotment.

Q: What is the difference between fresh issue and offer for sale?

A: A fresh issue raises new capital for the company, while an offer for sale simply transfers existing shares from promoters or investors to new shareholders.

Q: What does cut-off price mean when bidding?

A: Bidding at cut-off means you agree to pay whatever final price is fixed within the band, which is the simplest option for most retail investors.

Q: How long is the anchor investor lock-in period?

A: Half of the anchor allocation is locked for 30 days from allotment and the other half for 90 days from allotment.