IPO Glossary: 100+ Important Terms Every Investor Should Know

IPO glossary includes all the key terms that are frequently used in RHP, DRHP, IPO review articles, and IPO analytics. This one-place IPO resource is designed to help investors at every level—whether you are a beginner, intermediate, or experienced investor. Each IPO term is explained in simple language, along with its meaning, real-world relevance, and why it matters in making better investment decisions.

Core IPO Concepts

1. Initial Public Offering (IPO)

Initial Public Offering (IPO) is an offer made by a company to raise money for the first time by selling its shares to the public through a stock exchange like NSE or BSE or both.
For example, Meesho launched its IPO in December 2025 to raise ₹5,421.20 crore by offering its shares to investors.
Companies usually launch IPOs to raise capital for expansion, repay debt, or allow existing investors to exit partially. For investors, it provides an opportunity to invest in a company at an early stage of its public journey. You can learn more about IPOs at our What Are Initial Public Offers In India?

2. Issue Size

Issue Size means how much money a company plans to raise from the public through its IPO.

For example, Meesho Limited launched its IPO to raise ₹5,421.20 crore. This amount represents the total issue size of the IPO.

Issue size is an important factor as it helps investors understand the scale of the IPO and how the company plans to use the funds, such as for expansion, debt repayment, or other business purposes.

3. Issue Price

Issue price of an IPO is the price at which a company offers its shares to investors.

For example, in the case of Meesho IPO, the price band was ₹105 to ₹111, and investors usually apply at the upper price (₹111), which becomes the effective issue price.

Issue price is an important factor as it helps investors evaluate the valuation of the IPO, including metrics like P/E ratio, and decide whether the IPO is fairly priced or not.

4. Price Band

Price band of an IPO is a range within which investors can bid for the shares. It consists of a lower price called the floor price and a higher price called the cap price.

For example, in the case of Meesho IPO, the price band was ₹105–₹110.

Price band is important because it gives investors an idea about the valuation range of the IPO and allows them to place bids within that range. Most retail investors apply at the cap price to increase their chances of allotment.

5. Floor Price

Floor price of an IPO is the lowest price at which investors can bid for the shares.

For example, in the case of Meesho IPO, the floor price was ₹105.

Floor price is important because bids cannot be placed below this price, and it also represents the minimum valuation at which the company is offering its shares.

6. Cap Price

Cap price is the highest price at which investors can bid for shares in an IPO.

For example, in the case of Meesho IPO, the cap price was ₹110.

Cap price is important because it represents the upper end of the IPO’s valuation and is the price at which most retail investors apply to increase their chances of allotment.

7. Listing Price

Listing price of an IPO is the price at which a company’s shares start trading on the stock exchange on the listing day.

For example, in the case of Meesho IPO, the stock listed at ₹161.2, which is the listing (opening) price.

Listing price is important because it determines whether the IPO has listed at a premium or a discount compared to its issue price.

8. Listing Gain

Listing gain of an IPO is the profit earned by investors, which is the difference between the listing price and the issue price.

For example, in the case of Meesho IPO, the issue price was ₹111 and the listing price was ₹161.2, the listing gain is ₹50.2 or around 45.2%.

Listing gain is important because it shows how much profit investors earned on the listing day and reflects the market demand for the IPO.

9. Listing Premium

Listing premium means the stock lists above its issue price on the listing day.

In the case of Meesho IPO, the listing premium was around 45.2%.

Listing premium is important because it reflects strong investor demand and positive market sentiment for the IPO.

10. Listing Discount

Listing discount occurs when a stock lists below its issue price on the listing day.

For example, Innovision Limited IPO had an issue price of ₹548, but the stock listed at ₹467.7, which is ₹80.3 lower than the issue price, or around a 14.7% discount.

Listing discount indicates weak investor demand and negative market sentiment towards the IPO.

2. IPO Structure

11. Fresh Issue

Fresh issue is when a company issues new shares to raise money from the public through an IPO.

For example, PNGS Reva Diamond Jewellery Limited IPO was a fresh issue of ₹380 crore, and the funds raised were planned to be used for the growth and expansion of the company.

Fresh issue is important because it indicates that the funds raised from the IPO will directly benefit the company, such as for expansion, debt repayment, or other business purposes, rather than going to existing shareholders.

12. Offer for Sale (OFS)

Offer for Sale (OFS) is when existing shareholders sell their shares to the public through an IPO.

For example, Sedemac Mechatronics Limited IPO was a 100% OFS, which means the entire ₹1,087.45 crore raised from the IPO went to the existing shareholders.

OFS is important because it indicates that the IPO proceeds will not be used for the company’s growth or operations, but will go to existing investors who are selling their stake.

13. Book Building Process

Book building process in an IPO is the method used to determine the final issue price based on investor demand within the price band.

For example, Central Mine Planning & Design Institute Limited IPO had a price band of ₹163 to ₹172 per share, where investors placed bids at different price levels. Based on the overall demand across these price levels, the final issue price was decided within the range.

In contrast, Elfin Agro India Limited IPO had a fixed price of ₹47 per share, where the price was pre-determined and did not involve the book building process.

This process helps in discovering the fair issue price of the IPO based on investor demand.

14. Fixed Price Issue

Fixed price issue is a type of IPO where the issue price is pre-determined and there is no price band for bidding.

For example, Elfin Agro India Limited IPO and Yashhtej Industries (India) Limited IPO were fixed price issues, where investors had to apply at a fixed price.

Fixed price issue is important because the valuation of the IPO is decided in advance, and investors do not have the option to bid at different price levels as in the book building process.

15. Share Premium

Share premium is the amount that investors pay above the face value of a share.

For example, in the case of Rajputana Stainless Limited IPO, the issue price was ₹122 and the face value was ₹10, so the share premium was ₹112.

Share premium is important because it shows how much investors are willing to pay above the base value of the share, reflecting the company’s valuation and growth expectations.

16. Face Value

Face value is the nominal value of a share as decided by the company.

For example, Rajputana Stainless Limited had a face value of ₹10 per share, while the issue price was ₹122. Face value is different from the issue price or market price of a share.

Face value is important for accounting purposes and is used in dividend calculations. For example, if a company declares a 50% dividend, it means 50% of the face value. So, if the face value is ₹10, the dividend would be ₹5 per share.

17. Market Capitalization

Market Capitalization is the total number of outstanding shares of a company multiplied by the current share price of the company.

For example, Billionbrains Garage Ventures (also known as Groww) had an estimated market capitalization of around ₹1,01,632.27 crore as on 27.03.2026, with a share price of ₹162.28 per share.

Market capitalization helps investors understand the size of a company, whether it is a small-cap, mid-cap, or large-cap company.

18. Dilution of Equity

Dilution of equity occurs when a company issues new shares to investors, reducing the ownership percentage of existing shareholders. In an IPO, dilution happens in the case of a fresh issue.

For example, PNGS Reva Diamond Jewellery IPO is a fresh issue, so there is dilution of equity because new shares are issued to the public.

19. Pre-IPO Placement

Pre-IPO placement is the sale of shares by a company to selected investors before the IPO subscription starts, through which the company raises funds privately.

For example, Billionbrains Garage Ventures was considering a pre-IPO placement of around ₹850 crore.

Companies go for pre-IPO placement to raise funds for business needs such as expansion, debt repayment, or strengthening their financial position before the IPO.

20. Follow-on Public Offering (FPO)

Follow-on Public Offering (FPO) is an issue of shares by a company to raise funds after the company is already listed.

Many companies use FPO to raise capital for their business activities instead of taking on additional debt.

FPO is one of the ways companies can raise funds for expansion, but it may lead to dilution of equity.

3. IPO Documents

21. Draft Red Herring Prospectus (DRHP)

As the name suggests, a “Draft” Red Herring Prospectus (DRHP) is a preliminary document submitted by a company to the Securities and Exchange Board of India for its observations before launching an IPO. It contains important details about the company, its promoters, financial information, and the proposed issue.

Companies planning to launch an IPO typically submit a DRHP to SEBI. For example this is a DRHP of Vivid Electromech Limited.

The DRHP is an important document that helps investors understand the company’s business, financial position, and overall fundamentals.

22. Red Herring Prospectus (RHP)

Red Herring Prospectus (RHP) is a document filed by a company with the Securities and Exchange Board of India before opening an IPO for subscription. It is an updated version of the DRHP that incorporates the observations made by SEBI. You can find RHP of the companies at BSE, NSE , SEBI. Here is the link to check RHP at BSE. 

The RHP contains detailed information about the company, its financials, promoters, and the issue, except for the final price and the exact number of shares to be issued.

23. Prospectus

Prospectus is the final offer document of an IPO that contains complete details about the company, including the final issue price, total number of shares offered, and allocation for QIBs, NIIs, and RIIs.

It is an updated version of the RHP that includes the final price and other issue details.

The prospectus provides comprehensive information about the company for investors.

24. Abridged Prospectus

As the name suggests, an abridged prospectus is a brief and concise version of the prospectus that contains the key information about the company and the IPO.

It is much shorter than the DRHP, RHP, or the full prospectus and is designed to help investors quickly understand the important details of the issue.

25. Risk Factors

Risk factors are a section in IPO offer documents such as the RHP and DRHP where the company outlines the various risks that could impact its business, financial condition, or future prospects.

This section contains detailed disclosures of company-specific and industry-related risks.

Risk factors are often presented in a question-and-answer format to clearly highlight possible concerns. 

Investors should carefully review this section before investing, as it helps in understanding the potential uncertainties and downsides of the investment.

26. Objects of the Issue

Objects of the Issue (or Offer) refer to the purpose for which a company is raising funds through an IPO and how the proceeds will be used.

This section explains whether the funds will be used for expansion, debt repayment, working capital, or general corporate purposes.

In the case of an Offer for Sale (OFS), the proceeds go to the existing shareholders selling their stake, and not to the company.

27. Capital Structure

Capital structure in an IPO document provides details of the company’s share capital, including the types of shares, their face value, and the shareholding pattern before and after the IPO. 

It helps investors understand how ownership of the company will change after the issue.

4. IPO Participants

28. Promoters

29. Anchor Investors

30. Qualified Institutional Buyers (QIB)

31. Non-Institutional Investors (NII) / High Net Worth Individuals (HNI)

32. Retail Individual Investors (RII)

33. Merchant Banker

34. Book Running Lead Manager (BRLM)

35. IPO Registrar

36. Underwriters

37. Market Maker

5. IPO Application Process

38. Application Supported by Blocked Amount (ASBA)

39. UPI Mandate

40. Cut-Off Price

41. Bid Price

42. Bid Lot

43. Lot Size

44. Minimum Investment

45. Maximum Retail Application

46. Multiple Bids

6. IPO Timeline

IPO Opening Date

47. IPO Closing Date

48. Basis of Allotment

49. Allotment Date

50. Refund Initiation

51. Demat Credit

52. Listing Date

7. IPO Demand Metrics

54. Subscription Status

55. Oversubscription

56. Undersubscription

57. Retail Subscription

58. QIB Subscription

59. HNI Subscription

60. Total Subscription

8. Grey Market Terms

61. Grey Market Premium (GMP)

62. Kostak Rate

63. Subject to Sauda

64. GMP Trend

9. Post-Listing Terms

65. Lock-In Period

66. Promoter Holding

67. Shareholding Pattern

68. Price Discovery

69. Circuit Limits (Upper Circuit / Lower Circuit)

70. Free Float Market Capitalization

10. SME IPO Specific Terms

71. SME IPO

72. SME Platform

73. Market Maker Portion

74. Migration to Mainboard

11. Valuation & Financial Metrics

75. Price-to-Earnings Ratio (P/E Ratio)

76. Earnings Per Share (EPS)

77. Return on Net Worth (RoNW)

78. Net Asset Value (NAV)

79. Debt-to-Equity Ratio

80. EBITDA

81. Revenue Growth

82. Profit After Tax (PAT)

83. Peer Comparison (Comparable Companies)

12. Investment Decision Terms

84. Listing Gain Strategy

85. Long-Term Investment

86. Overvaluation

87. Undervaluation

88. Fair Valuation

89. Margin of Safety

90. Risk-Reward Ratio

13. Allotment & Probability Terms

91. IPO Allotment Probability

92. Retail Quota

93. HNI Funding

94. Lottery System

95. Proportionate Allotment

14. Costs & Charges

96. Brokerage Charges

97. Securities Transaction Tax (STT)

98. Capital Gains Tax (Short-Term / Long-Term)

99. Listing Charges

15. Post-Listing Behavior & Market Dynamics

100. Listing Day Volatility

101. Profit Booking

102. Price Stabilization

103. Anchor Lock-in Expiry Impact

16. Advanced Institutional Terms

104. Anchor Book

105. Institutional Allocation

106. Retail Quota Percentage

107. Greenshoe Option

17. Risk-Related Terms

108. Business Risk

109. Market Risk

110. Valuation Risk

111. Liquidity Risk

Frequently Asked Questions On: IPO Glossary

1. What is IPO in simple words?

IPO means Initial Public Offerings.

2. What is GMP in IPO?

3. What is issue size in IPO?

4. How IPO allotment works?

5. What is DRHP in IPO?

6. What is price band in IPO?

7. How to check IPO subscription status?

Conclusion

Important IPO Resources:

1. Updates on Latest IPOs.

2. GMP Updates on Latest IPOs.

3. Daywise IPO Subscription Details.

4. IPO allotment Details of Live and Closed IPOs.

5. IPO Research & Market Analytics