IPO Glossary A to Z — Key Terms Explained

Q: What is GMP in IPO?

GMP (Grey Market Premium) is the premium at which IPO shares are traded in the unofficial grey market before official listing. A positive GMP indicates the market expects the stock to list above the issue price.

Q: What is the difference between QIB and RII in IPO?

QIB (Qualified Institutional Buyer) refers to large institutional investors like mutual funds and banks, who get 50% reservation in book-built IPOs. RII (Retail Individual Investor) refers to individual investors applying up to Rs 2 lakh, who get 35% reservation and allotment by lottery in oversubscribed IPOs.

Q: What is ASBA in IPO?

ASBA (Application Supported by Blocked Amount) is a payment mechanism where your bid amount is blocked in your bank account rather than debited. The funds are only debited if you receive allotment, and released immediately if you don't.

Q: What is lot size in IPO?

Lot size is the minimum number of shares an investor must apply for in an IPO. Retail investors must apply in multiples of the lot size. Lot sizes are set so that the minimum application value is approximately Rs 15,000.

Allotment

The process of distributing IPO shares to successful applicants. For retail investors in oversubscribed IPOs, allotment is done via a computerized lottery system.

Anchor Investor

A qualified institutional buyer who applies for shares worth at least Rs 10 crore in a book-built IPO. Anchor investors are allotted shares one day before the IPO opens.

ASBA (Application Supported by Blocked Amount)

A method of applying for IPOs where the application money is blocked in your bank account (not debited) until allotment. If you don't get shares, the block is released automatically.

Basis of Allotment

A document published by the registrar showing how shares were allotted across different investor categories, including the ratio and lottery details for retail investors.

Book Building

A price discovery mechanism where the issue price is determined based on investor demand within a price band. Most mainboard IPOs in India use the book building process.

BRLM (Book Running Lead Manager)

The investment bank that manages the IPO process including marketing, pricing, and allotment. Also called the lead manager or merchant banker.

Cut-off Price

The final issue price determined after the book building process. Retail investors can bid at the cut-off price, meaning they agree to pay whatever price is finalized.

Demat Account

An electronic account that holds shares and securities in dematerialized (digital) form. Required for applying for and holding IPO shares. Managed by depository participants (DP) like Zerodha, CDSL, NSDL.

DRHP (Draft Red Herring Prospectus)

A preliminary prospectus filed with SEBI before an IPO. It contains all information about the company except the issue price and number of shares. SEBI reviews the DRHP before approving the IPO.

Face Value

The nominal or par value of a share as stated in the company's charter. Typically Rs 1, Rs 2, Rs 5, or Rs 10 for IPOs. Different from the issue price.

Fixed Price Issue

An IPO where the issue price is fixed upfront (no price band). Common for SME IPOs. Investors must apply at the stated price.

FPO (Follow-on Public Offer)

An issuance of additional shares by a company that is already publicly listed. Not to be confused with an IPO which is the first issuance.

Fresh Issue

New shares issued by the company in an IPO to raise capital. The proceeds go to the company. Contrast with Offer for Sale (OFS) where existing shareholders sell their shares.

GMP (Grey Market Premium)

The premium at which IPO shares trade in the unofficial grey market before listing. A positive GMP indicates expected listing above issue price. Learn more about GMP.

HNI (High Net-worth Individual)

Investors who apply for more than Rs 2 lakh in an IPO. They fall under the NII (Non-Institutional Investor) category. Allotment is proportional, not by lottery.

Issue Price

The final price per share at which the IPO shares are offered. In book-built issues, this is determined after the bidding process ends.

Listing Date

The date when IPO shares begin trading on the stock exchange (BSE/NSE). Usually T+6 working days after the IPO closes.

Listing Gain

The difference between the listing price and the issue price. A positive listing gain means the stock opened higher than the issue price. Track listing gains on our Performance Tracker.

Lock-in Period

A period after listing during which certain shareholders (promoters, anchor investors) cannot sell their shares. Promoter lock-in is typically 18 months for 20% of pre-issue holding.

Lot Size

The minimum number of shares an investor must apply for in an IPO. Retail investors must apply in multiples of the lot size. Lot sizes are set so that the minimum application is around Rs 15,000.

NII (Non-Institutional Investor)

Individual investors applying for more than Rs 2 lakh. Includes HNIs and corporate bodies. Gets proportional allotment (not lottery). Sub-categories: sNII (Rs 2-10 lakh) and bNII (above Rs 10 lakh).

OFS (Offer for Sale)

Existing shareholders (promoters, PE investors) selling their shares in the IPO. The proceeds go to the selling shareholders, not the company.

Oversubscription

When demand for IPO shares exceeds the number of shares offered. Expressed as a multiple (e.g., "10x subscribed" means demand is 10 times the supply).

Price Band

The range of prices within which investors can bid in a book-built IPO. For example, Rs 100-105 means you can bid at any price between Rs 100 and Rs 105.

QIB (Qualified Institutional Buyer)

Large institutional investors like mutual funds, banks, insurance companies, and foreign institutional investors. They get 50% reservation in book-built IPOs.

Registrar (to the Issue)

The agency responsible for processing IPO applications, conducting the allotment lottery, and managing refunds. Common registrars in India include Link Intime, KFin Technologies, and Bigshare Services.

RHP (Red Herring Prospectus)

The final prospectus filed with the Registrar of Companies before the IPO opens. It includes all information from the DRHP plus the price band and other finalized details.

RII (Retail Individual Investor)

Individual investors who apply for shares worth up to Rs 2 lakh. They get 35% reservation in book-built IPOs and allotment by lottery in oversubscribed issues.

SEBI (Securities and Exchange Board of India)

The regulatory body that oversees the securities market in India, including IPOs. SEBI reviews the DRHP and ensures compliance with regulations.

SME IPO

IPOs by Small and Medium Enterprises listed on BSE SME or NSE Emerge platforms. They have smaller issue sizes, higher lot sizes, and different regulatory requirements compared to mainboard IPOs.

Subscription Status

Real-time data showing how many times each investor category (RII, NII, QIB) has subscribed to the IPO. Available during the bidding period from BSE/NSE.

UPI (Unified Payments Interface)

A payment system used for IPO applications. Investors enter their UPI ID in the IPO application, and the mandate is sent to their UPI app for approval. Funds are blocked (not debited) until allotment.

IPO Glossary (A-Z)

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