IPO Glossary: 100+ Important Terms Every Investor Should Know
Updated on 30.04.2026| 3:45 PM
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
Promoters are the individuals or entities who have founded the company or have control over its affairs. They usually hold a significant stake and are responsible for the company’s management and strategic decisions.
29. Anchor Investors
Anchor investors are institutional investors from the Qualified Institutional Buyers (QIB) category who are allotted shares in an IPO one day before it opens for public subscription.
Their participation helps build confidence in the IPO, and strong anchor investment can attract other investors. However, their participation does not guarantee the success of the IPO.
30. Qualified Institutional Buyers (QIB)
Qualified Institutional Buyers (QIBs) are a category of investors, as defined by Securities and Exchange Board of India, that include institutional entities such as mutual funds, banks, insurance companies, and foreign portfolio investors (FPIs).
QIBs are an important category of investors in an IPO, as a significant portion of shares is reserved for them. Healthy participation from QIBs is generally considered a positive sign for an IPO. In a book-built IPO, up to 50% of the net offer is reserved for QIBs, making them a key category of investors in the issue.
For example, the Central Mine Planning & Design Institute Limited IPO was subscribed only 0.57 times overall, but the QIB portion was fully subscribed at 1.72 times.
31. Non-Institutional Investors (NII) / High Net Worth Individuals (HNI)
Non-Institutional Investors (NIIs), also known as High Net Worth Individuals (HNIs), are investors who apply for shares in an IPO with an application size above ₹2 lakh and do not fall under the QIB or retail category.
In a book-built IPO, at least 15% of the net offer is reserved for NIIs.
For example, the Central Mine Planning & Design Institute Limited IPO was subscribed 0.57 times overall, while the NII portion was subscribed only 0.29 times.
Strong participation from NIIs can support overall subscription levels, but it does not guarantee IPO success.
32. Retail Individual Investors (RII)
Retail Individual Investors (RIIs) are individual investors who apply for shares in an IPO with an application size of up to ₹2 lakh.
In a book-built IPO, at least 35% of the net offer is reserved for retail investors.
For example, the Central Mine Planning & Design Institute Limited IPO was subscribed 0.57 times overall, while the RII portion was subscribed only 0.22 times.
Retail participation indicates interest from individual investors.
33. Book Running Lead Manager (BRLM)
Book Running Lead Manager (BRLM) is an institution or investment banker that manages and leads the IPO process of a company.
The important tasks of a BRLM are:
- Helps decide the price band and final issue price
- Markets the IPO to different investor categories to ensure adequate subscription
- Collects bids and facilitates the book building process
- Recommends allocation of shares based on demand from different investor categories
- Assists in preparing key documents like DRHP and RHP for regulatory compliance under Securities and Exchange Board of India
A company may hire more than one BRLMs for its IPO, for example, IDBI Capital Markets & Securities Limited and SBI Capital Markets Limited were the BRLMs of Central Mine Planning & Design Institute Limited IPO.
34. IPO Registrar
An IPO registrar is an agency that maintains the records of investors participating in an IPO and handles the processing of applications, share allotment, and refunds.
For example, MUFG Intime India Private Limited was the registrar of Om Power Transmission Limited IPO.
Similarly, KFin Technologies Limited was the registrar of Central Mine Planning & Design Institute Limited (CMPDIL), and Bigshare Services Private Limited was the registrar of PNGS Reva Diamond Jewellery Limited.
35. Underwriters
Underwriters in IPOs are institutions that agree to subscribe to the portion of shares that remain unsubscribed after the subscription period ends, thereby reducing the risk of undersubscription.
This obligation exists only if there is a formal underwriting agreement. In many cases, Book Running Lead Managers (BRLMs) may also act as underwriters, but this is not guaranteed.
36. Market Maker
Market makers are institutions that provide liquidity in a stock by continuously quoting both buy and sell prices on the stock exchange.
In the context of IPOs, they are mainly associated with SME IPOs and operate after the shares are listed. Their role is to ensure that investors can easily buy or sell shares, especially in newly listed stocks where trading activity may initially be low.
By providing two-way quotes, market makers help improve liquidity and facilitate smoother trading, but they do not guarantee price movement or returns.
5. IPO Application Process
37. Bid Price
Bid price in an IPO is the price at which an investor chooses to apply for shares within the given price band. In a book-building IPO, investors can select any price within this range while placing their application.
For example, in the IPO of Amir Chand Jagdish Kumar (Exports) Limited, the price band was ₹201–₹212, so investors could choose any price within this range as their bid price.
However, allotment is not guaranteed and shares are usually allotted at the final issue price decided by the company.
38. Bid Lot
Bid lot in an IPO refers to the number of lots an investor applies for in a single application, where each lot consists of a fixed number of shares (lot size). Applications must be made in multiples of the lot size.
For example, in the IPO of Amir Chand Jagdish Kumar (Exports) Limited, the lot size was 70 shares. If an investor applies for 140 shares, it means they are applying for 2 lots (i.e., 2 bid lots).
Investors cannot apply for arbitrary quantities like 100 or 120 shares; they must apply in multiples of the lot size.
39. Lot Size
Lot size in an IPO refers to the minimum number of shares an investor must apply for in a single application. For example, in the IPO of Amir Chand Jagdish Kumar (Exports) Limited, the lot size was 70 shares.
This means investors cannot apply for any random number of shares like 1, 2, or 10. Applications must be made in multiples of the lot size as specified in the IPO.
40. Minimum Investment
Minimum investment in an IPO refers to the minimum amount required to apply for one lot of shares in a single application. It is calculated as:
Lot Size × Issue Price (usually the upper price band or cut-off price).
Every investor must apply for at least one lot, and the investment amount increases with the number of lots applied.
For example, in the IPO of Amir Chand Jagdish Kumar (Exports) Limited, the lot size was 70 shares and the upper price band was ₹212, so the minimum investment was ₹14,840.
41. Maximum Retail Application
Maximum retail application in an IPO refers to the upper limit of ₹2 lakh up to which an investor can apply under the retail category (RII).
Investors applying within this limit are categorized as Retail Individual Investors.
Retail investors must apply for at least one lot and can apply for multiple lots, provided the total application value does not exceed ₹2 lakh.
42. Multiple Bids
Multiple bids in an IPO refer to placing more than one bid within a single application at different price and/or quantity levels within the price band.
In a book-building IPO, investors can submit up to three bids in one application, specifying different bid prices and/or quantities.
For example, in the IPO of Amir Chand Jagdish Kumar (Exports) Limited, with a price band of ₹201–₹212, an investor can place bids such as:
– 1 lot at ₹205
– 2 lots at ₹210
– 1 lot at ₹212
These are considered multiple bids within a single application.
43. Application Supported by Blocked Amount (ASBA)
This is a process to apply for the subscription of an IPO.
In this process, an amount equivalent to the IPO application amount is blocked in the investor’s bank account until the allotment process is completed.
This amount is not debited immediately but remains in the account with a lien marked by the bank.
Once the allotment is done, if the investor is allotted shares, the required amount is debited from his/her bank account. If no shares are allotted, the blocked amount is released (unblocked).
For example, if the total application cost of an IPO is ₹14,600, the same amount is blocked in the bank account, and the investor cannot use this amount until the allotment process is completed.
The good thing of ASBA is that the blocked amount continues to remain in the bank account and may earn interest as per bank terms.
44. UPI Mandate
Unified Payments Interface (UPI) mandate is a process to apply for an IPO through UPI.
In this process, the investor has to approve a mandate request to block the IPO application amount through a UPI app.
This is a manual step where the investor must approve the request via the UPI interface, unlike ASBA where there is no separate mandate approval step after submitting the application.
Once the approval is done, the amount is blocked in the bank account until the allotment process is completed. If shares are allotted, the equivalent amount is debited from the bank account; otherwise, the blocked amount is released (unblocked).
The amount remains in the bank account during this period and may continue to earn interest as per bank terms.
6. IPO Timeline
45. IPO Opening Date
IPO open date is the date on which an IPO opens for subscription to investors such as retail investors (RII), non-institutional investors (NII/HNI), and qualified institutional buyers (QIBs).
For example, the Central Mine Planning & Design Institute Limited IPO opened for subscription on 20th March 2026.
46. IPO Closing Date
IPO closing date is the date on which an IPO closes for subscription to investors.
For example, the Central Mine Planning & Design Institute Limited IPO closed for subscription on 24th March 2026.
47. Basis of Allotment
Basis of allotment in the IPO process refers to the method or process by which shares are allocated to investors after the subscription period ends.
It is finalized on a specific date, where the company determines how shares are distributed among investors based on different categories such as retail, NII, and QIB.
48. Allotment Date
This is the date on which the allotment of shares is finalized for investors in an IPO. It determines which investors are allotted shares based on the basis of allotment.
49. Refund Initiation
This is the process in an IPO that takes place after the basis of allotment is finalized, where funds are released to investors who did not receive shares.
During this stage, the blocked amount under ASBA is unblocked, and the UPI mandate for blocking the amount is also revoked.
In simple terms, this is when the application amount becomes available again to investors who were not allotted shares in the IPO.
50. Demat Credit
This is the process in an IPO where shares are credited to the demat accounts of investors who have been allotted shares.
51. Listing Date
This is the date on which the company’s shares are listed on stock exchanges like National Stock Exchange of India and Bombay Stock Exchange, or both.
On the listing date, investors can buy or sell the shares on the stock exchange. Both investors who received allotment and those who did not can trade the shares once the stock is listed.
7. IPO Demand Metrics
52. Subscription Status
Subscription status in an IPO shows how much the IPO has been subscribed by investors during the subscription period.
There is a fixed time frame during which the IPO remains open for applications from categories such as QIBs, NIIs, and RIIs. The number of times each category has subscribed, along with the overall cumulative subscription, is updated in the subscription status.
Subscription status may change daily or several times during the day as fresh applications are received from different investor categories during the IPO period.
Subscription status is an important parameter for investors, as it helps indicate the level of demand for the IPO among different investor categories. For more details check our IPO subscription status page.
53. Oversubscription
Oversubscription in an IPO refers to a situation where the IPO receives applications for more shares than the number of shares offered for subscription.
An IPO may be oversubscribed in one category and undersubscribed in another category, because each investor category has a separate quota of shares available for subscription.
An oversubscribed IPO generally indicates strong investor demand for the issue.
54. Undersubscription
Undersubscription in an IPO refers to a situation where the IPO receives applications for fewer shares than the number of shares available for subscription.
An IPO may be undersubscribed in one category while being fully subscribed or oversubscribed in another category, as each investor category has a separate quota of shares.
Undersubscription generally indicates weak investor demand for the IPO.
55. Retail Subscription
Retail subscription in an IPO refers to the number of applications received from the retail investor category. Most IPOs have separate categories such as QIBs, NIIs, and Retail investors.
56. QIB Subscription
QIB subscription in an IPO shows the demand received from the Qualified Institutional Buyers (QIB) category.
57. NII Subscription
NII subscription in an IPO refers to the subscription received from the NII category, which stands for Non-Institutional Investors.
58. Total Subscription
Total subscription in an IPO refers to the cumulative subscription received across all investor categories, such as QIBs, NIIs, RIIs, and employees.
For example, in the IPO of Amir Chand Jagdish Kumar (Exports) Limited, the total subscription was 2.37x, with category-wise subscription as follows: QIB – 0.95x | NII – 10.38x | RII – 1.04x.
Here, the QIB category was undersubscribed, as it received applications for less than the shares reserved. The NII category was oversubscribed, showing strong demand. The RII category was also oversubscribed.
8. Grey Market Terms
59. Grey Market Premium (GMP)
Grey Market Premium (GMP) is the premium or discount over the IPO issue price at which shares are traded in the grey market, which is unofficial and unregulated. GMP may be positive (premium) or negative (discount), depending on sentiment and demand in the grey market. You can track daily movement of gmps in our gmp today hub page.
60. Kostak Rate
Kostak rate is an unofficial and unregulated premium amount quoted in the grey market for an IPO application.
It refers to the fixed amount at which a person who has applied for an IPO may informally transfer the benefit of their application to another person before allotment or listing, depending on grey market practices.
Kostak rate is unofficial and is not regulated by Securities and Exchange Board of India, National Stock Exchange of India, or Bombay Stock Exchange.
Since kostak rate transactions take place in the unofficial grey market, settlement depends on private arrangements and carries counterparty risk.
62. Subject to Sauda
Subject to Sauda is an unofficial grey market term used in IPOs, where a deal is generally made based on the allotment of shares rather than the IPO application itself.
In this arrangement, the buyer agrees to purchase only if IPO shares are allotted to the seller. If no shares are allotted, the deal usually does not proceed.
The premium amount is typically decided in advance and may depend on expected listing demand and grey market sentiment.
Subject to Sauda is unofficial and unregulated, and is not regulated by Securities and Exchange Board of India, National Stock Exchange of India, or Bombay Stock Exchange.
Since such transactions take place in the grey market, settlement depends on private arrangements and carries counterparty risk.
63. GMP Trend
GMP trend refers to the movement of the Grey Market Premium over a period of time. It shows whether the GMP is rising, falling, or remaining stable at a particular time.
GMP is highly dynamic and may change frequently based on market sentiment, demand, supply, and overall IPO interest. It does not always move in one direction. A positive GMP may decline, and a falling GMP may rise again.
For example, in the IPO of Innovision Limited, the GMP started at ₹0, later moved up to ₹64, then declined to -₹95, and continued moving up and down. This shows how volatile and unpredictable GMP trends can be.
As already stated, GMP is unofficial and is not regulated by Securities and Exchange Board of India, National Stock Exchange of India, Bombay Stock Exchange, or any other government authority.
GMP trend should never be treated as the sole indicator of listing gains. Investors should also consider fundamentals, valuation, financial performance, and long-term prospects.
9. Post-Listing Terms
64. Lock-In Period
Lock-in period in an IPO is a period during which shares held by certain investors are not allowed to be sold.
These investors may include:
- Promoters
- Pre-IPO investors
- Anchor investors
- Employees (in certain cases)
- Other categories as specified in the offer documents or applicable regulations
Lock-in periods are mainly designed to prevent sudden selling pressure, support market stability, and ensure orderly trading of the shares after listing.
However, retail investors who receive IPO allotment generally do not have such restrictions and can buy or sell shares once trading begins on the listing day.
65. Promoter Holding
Promoter holding refers to the percentage of shares owned by the promoters of a company. Promoters are the individuals, founders, families, or entities that started the business or are in control of the company.
Promoter holding shows how much ownership stake the promoters have in the company.
Usually, a higher promoter holding is considered a positive sign, as it may indicate the promoters’ continued interest, confidence, and long-term commitment toward the growth of the company.
However, promoter holding should be evaluated along with corporate governance, financial performance, and overall business fundamentals.
66. Shareholding Pattern
Shareholding pattern shows how the ownership of shares in a company is distributed among different categories of shareholders.
It generally includes details of promoters, promoter group, public shareholders, institutional investors, non-institutional investors, and other shareholder categories as disclosed by the company.
It also shows the shareholding structure before the IPO and the expected shareholding pattern after the IPO. This helps investors understand ownership distribution, promoter stake, and the impact of the IPO on the company’s shareholding structure.
67. Price Discovery
Price discovery in an IPO is the process of determining the final issue price of the IPO based on investor demand, bids received, market conditions, and valuation factors.
In a book-built IPO, investors place bids within the price band, and the final price is decided through this process.
68. Circuit Limits (Upper Circuit / Lower Circuit)
Circuit limits apply during daily trading in a stock. They define how much a stock price can rise or fall in a single trading day.
If a stock price falls to the defined lower limit, it is called the Lower Circuit. If a stock price rises to the defined upper limit, it is called the Upper Circuit.
The upper and lower circuit limits are fixed by National Stock Exchange of India and Bombay Stock Exchange. These limits may vary from 2% to 20% or more depending on the stock and applicable exchange rules.
Circuit limits help control extreme price movements and support orderly trading in the market.
69. Free Float Market Capitalization
There are generally two types of market capitalization often referred to in the stock market: total market capitalization and free float market capitalization.
Total market capitalization includes the value of all outstanding shares of the company. This includes shares held by promoters, strategic investors, and shares available for public trading.
Free float market capitalization includes only those shares that are readily available for trading in the market, generally excluding promoter holdings and certain restricted or strategic holdings.
In simple terms:
Free Float Market Capitalization = Free Float Shares × Current Market Price of the Stock. For example, as on 23.04.2026, Groww had a Free Float Market Capitalization of ₹13,393.77 crore, while its Total Market Capitalization was ₹1,37,937.57 crore, at a share price of ₹220.62.
10. SME IPO Specific Terms
70: SME IPO
SME stands for Small and Medium Enterprises, and IPO means Initial Public Offering.
When a small or medium-sized company raises capital from the public and lists its shares on a dedicated SME platform of a stock exchange, it is called an SME IPO.
In India, SME IPOs are generally listed on platforms such as National Stock Exchange of India Emerge (NSE Emerge) and Bombay Stock Exchange SME (BSE SME).
Generally, SME IPOs tend to raise smaller amounts of capital compared with mainboard IPOs, while mainboard IPOs often involve larger fundraises.
71. SME Platform
Small and Medium Enterprises can raise capital and list their shares on dedicated SME platforms of stock exchanges. In India, National Stock Exchange of India Emerge and Bombay Stock Exchange SME are SME platforms designed for eligible small and medium enterprises.
72. Market Maker Portion
In an SME IPO, a fixed portion of shares is often reserved for market makers, which is known as the market maker portion.
A market maker is an intermediary appointed to provide buy and sell quotes after listing, helping improve liquidity and smoother trading in the shares.
SME stocks and newly listed companies may sometimes witness lower trading volumes or liquidity constraints. Therefore, the market maker mechanism is intended to support trading activity in such shares.
73. Migration to Mainboard
Migration to mainboard refers to the process where a company listed on an SME platform moves to the mainboard segment of a stock exchange after meeting applicable eligibility criteria.
This usually happens when the company grows in size, operations, compliance standards, or market capitalization and becomes eligible for mainboard listing.
11. Valuation & Financial Metrics
74. Price-to-Earnings Ratio (P/E Ratio)
Price-to-Earnings Ratio (P/E Ratio) is the ratio of the share price to the earnings per share (EPS) of a company, usually based on trailing twelve months earnings.
This ratio helps investors understand how much price they are paying for each rupee of earnings.
P/E ratio is an important parameter used to assess the valuation of an IPO. A lower P/E ratio compared with industry peers may sometimes indicate relatively lower valuation, while a higher P/E ratio may indicate richer valuation.
However, P/E ratio should not be used alone, as listing performance and long-term returns also depend on business fundamentals, growth prospects, market sentiment, and overall demand.
75. Earnings Per Share (EPS)
Earnings Per Share (EPS) is a financial value calculated by dividing a company’s net profit attributable to shareholders by the total number of outstanding shares. It shows how much earnings the company has generated for each share.
76. Return on Net Worth (RoNW)
Return on Net Worth (RoNW) measures how effectively a company converts its shareholders’ funds into profit.
It is calculated as:
RoNW = (Net Profit ÷ Net Worth) × 100
A higher RoNW may indicate stronger efficiency in generating returns from shareholders’ capital. Investors often review this ratio while assessing profitability and management performance.
RoNW is commonly used while evaluating IPO valuations and company efficiency. A higher RoNW generally indicates that the company is utilizing shareholders’ funds effectively, which may be considered a positive sign.
However, it should be analysed along with debt levels, earnings quality, and future growth prospects.
77. Debt-to-Equity Ratio
Debt-to-Equity Ratio is a financial ratio that shows how much debt a company has compared with shareholders’ equity.
It is calculated as:
Debt-to-Equity Ratio = Total Debt ÷ Shareholders’ Equity
A higher debt-to-equity ratio generally indicates greater financial leverage and may increase risk, while a lower ratio may indicate a stronger balance sheet. However, the ideal ratio can vary by industry.
Debt-to-Equity Ratio is an important parameter used to assess a company’s financial health, capital structure, and growth prospects.
It should be analysed along with P/E Ratio, order book, net profit margin, management quality, and revenue growth.
While analysing this ratio, investors should also consider the mix of current debt and long-term debt.
78. EBITDA
The full form of EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization.
It means the earnings of a company before deducting:
- Interest payable by the company
- Taxes payable by the company
- Depreciation of tangible assets
- Amortization of intangible assets
EBITDA is an important financial parameter used to assess the operating performance and profitability of a company.
A higher EBITDA may indicate stronger operating earnings. However, it should be analysed along with debt, margins, cash flow, and net profit.
Amortization is similar for intangible or non-physical assets, as depreciation is for physical assets. It refers to spreading the cost of intangible assets over time.
79. Revenue Growth
Revenue growth refers to the increase in a company’s revenue over a period of time. It is usually expressed as a percentage.
It is an important parameter used to assess business expansion and may indicate growing demand for the company’s products or services.
It is calculated as:
(Current revenue- previous year revenue/previous year revenue)*100
Generally, higher revenue growth may be considered a positive sign, as it shows increasing sales over time. However, it should be analysed along with profitability, margins, and sustainability of growth.
80. Profit After Tax (PAT)
PAT stands for Profit After Tax. It represents the profit earned by a company after deducting all expenses, interest, and taxes.
In simple terms, it can be understood as:
PAT = Total Income − Total Expenses − Taxes
PAT is an important financial parameter used to assess the overall profitability of a company. A higher PAT is generally considered positive, as it may indicate stronger earnings performance.
However, PAT should be analysed along with revenue growth, margins, cash flow, and debt levels.
81. Peer Comparison (Comparable Companies)
Peer Comparison means comparing a company with other companies operating in the same or similar industry on key parameters such as P/E Ratio, RoNW, Revenue Growth, margins, and other financial metrics.
It helps investors assess valuation, profitability, growth potential, and competitive position.
82. Fair Valuation
Fair Valuation means a stock price that reasonably reflects the company’s earnings, growth prospects, assets, risks, and overall business fundamentals.
In simple terms, it means the stock is neither significantly overvalued nor significantly undervalued based on available information.
83. Margin of Safety
Margin of safety is an investment concept where an investor buys a stock at a price significantly below its estimated fair or intrinsic value.
This discount provides a buffer against errors in valuation, market volatility, or unexpected business challenges, thereby reducing downside risk.
If the stock performs well and moves closer to its fair value over time, the investor may benefit from potential upside.
Margin of safety is commonly used in value investing while selecting stocks and IPO opportunities.
13. Allotment & Probability Terms
84. IPO Allotment Probability
IPO Allotment Probability is a term used to describe the estimated chances of getting shares in an IPO after applying.
When you apply for an IPO during the subscription period, allotment is not guaranteed. Simply applying for an IPO does not ensure that shares will be allotted.
The chances of allotment depend on several factors, such as the number of applications received, the investor category in which you apply, demand and supply of shares, and the basis of allotment process.
This is not any official term.
85. Retail Quota
Retail quota refers to the portion of shares reserved for retail individual investors in an IPO.
In many book-built IPOs, shares are allocated among categories such as Retail Individual Investors (RII), Qualified Institutional Buyers (QIB), and Non-Institutional Investors (NII).
The portion reserved for retail investors is known as the retail quota.
In many Indian book-built IPOs, the retail portion is commonly around 35% of the net offer, subject to applicable regulations and issue structure.
86. HNI Funding
HNI Funding in IPO is a financing facility through which High Net Worth Individuals (HNI) or Non-Institutional Investors (NII) use borrowed funds to increase the size of their IPO applications.
This funding is generally provided subject to predefined interest rates, terms, and eligibility conditions.
HNI funding is often used by investors who expect attractive risk-reward opportunities based on allotment prospects or potential post-listing performance.
However, allotment results, financing costs, and listing performance can significantly affect overall returns. If allotment is low or the stock lists below expectations, gains may be reduced or losses may occur.
87. Lottery System
Lottery system is an informal term used for the computerized draw of lots or selection process in IPO allotment when applications exceed the shares available in a category.
When an IPO is oversubscribed, all valid applicants may not receive shares. In such cases, allotment may be decided through a draw of lots or proportionate basis, depending on the investor category and applicable rules.
In the retail category, this process is commonly referred to as the lottery system, as it helps allocate shares fairly without favouritism.
88. Proportionate Allotment
Proportionate Allotment means an IPO allotment method where available shares are distributed among applicants broadly in proportion to the quantity applied for, subject to category-wise rules, lot size, and rounding adjustments.
This method is often used when the total shares available are less than the total shares applied for in a particular category.
The purpose of proportionate allotment is to distribute shares fairly among eligible applicants in accordance with the quantity applied for and applicable rules and regulations.
14. Costs & Charges
89. Brokerage Charges
Broker charges are the fees paid to a broker for facilitating the buying and selling of securities such as stocks and IPO applications.
Investors access the stock market through brokers, who act as intermediaries between investors and stock exchanges.
These charges may include brokerage fees, transaction charges, and other applicable costs depending on the broker and type of transaction.
90. Securities Transaction Tax (STT)
STT is a tax charged by the government on buying and selling securities in the stock market. STT is automatically collected by the broker at the time of the transaction.
91. Capital Gains Tax (Short-Term / Long-Term)
Capital gains tax is the tax applicable on the profit earned from the sale of investments such as stocks, mutual funds, or other capital assets.
For listed equity shares in India:
- Short-term capital gain (STCG) applies when the asset is sold within 12 months of purchase.
- Long-term capital gain (LTCG) applies when the asset is sold after 12 months of purchase.
The applicable tax rates and rules may vary depending on the type of asset and prevailing regulations.
15. Post-Listing Behavior & Market Dynamics
92. Listing Day Volatility
Listing day volatility refers to sharp price fluctuations in a stock on its first day of trading after listing on the stock exchange.
On the listing day, stock prices may move significantly upward or downward due to high demand, supply imbalances, investor sentiment, and market conditions, making price movements unpredictable.
93. Profit Booking
Profit booking is an informal term used to describe selling an investment to realize gains after its price has increased from the purchase price. Investors book profits when they believe the current price is favourable or when they want to lock in gains.
Price Stabilization
- Anchor Lock-in Expiry Impact
16. Advanced Institutional Terms
Anchor Book
Institutional Allocation
Retail Quota Percentage
Greenshoe Option
17. Risk-Related Terms
Business Risk
Market Risk
Market Risk means the risk of losses in investments due to overall movements in the financial markets. Markets are volatile and do not always move in one direction.
Because of market risk, the value of stocks, mutual funds, and other investments may rise or fall over time. At certain points, the market value of an investment may be lower than the amount originally invested.
Market risk can arise due to economic events, interest rate changes, inflation, geopolitical developments, or changes in investor sentiment.
Valuation Risk
Liquidity Risk
Liquidity risk means the risk of difficulty in buying or selling a stock quickly at a fair price due to low trading activity or limited buyers and sellers.
If a stock has low trading volume, investors may face difficulty while selling because there may be fewer buyers, or while buying because there may be fewer sellers.
Such stocks may also experience wider price movements and higher volatility.
Frequently Asked Questions On: IPO Glossary
1. What is IPO in simple words?
IPO means Initial Public Offering.
2. What is GMP in an IPO?
GMP in the IPO is grey market premium.
3. What is the issue size in an IPO?
Issue Size in an IPO is the total amount of money a company plans to raise through the IPO.
4. What is DRHP in IPO?
DRHP in an IPO stands for Draft Red Herring Prospectus.
5. What is the price band in an IPO?
Price Band in an IPO is the price range within which investors can bid for shares during the subscription period.
6. How to check IPO subscription status?
You can check IPO subscription status on our day-wise IPO Subscription Status Hub page. It can also be checked on the respective stock exchanges where the IPO is open for subscription.
Conclusion:
Important IPO Resources:
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
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