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.

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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.
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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.

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

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.
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.
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Conditional Offer
An offer to purchase securities depending on the effectiveness of a registration statement
and the pricing of an IPO.
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.
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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 (SEBIs web
site). The final prospectus is printed after obtaining the clearance from SEBI and Registrar
of Companies (ROC).
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.
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.
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Rights Issues
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.
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.
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.
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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 aftermarket.
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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.
Secondary Offering
The sale of newly issued securities by an issuer which already has publicly traded 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.
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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.
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
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.
Issuer
An entity, like a company, municipality or government, that has the power to issue and
distribute securities.
Impersonation
A person who
a) uses fictitious names for acquiring or subscribing shares
b) induces the company to allot or register any transfer of
shares to him or any other person in a fictitious name
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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.
Listing
The process of making the securities officially quoted on the notified stock exchange for the
trade.

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.
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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.
Oversubscription
Any extra amount received by the company more than the proposed issued capital.
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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
Marketing
Preparing the offer document
Listing
Allotment/Refund
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
resources, Complying with SEBI guidelines.

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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.
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.

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.
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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.
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.
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.
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External Risk Factors
The external factors that influence the companys 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.
Internal Risk Factors

The internal factors that influence the companys 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 companys internal operations and management which are within the
control of the company.
Management Perception of Risk Factors
The managements 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.
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Rights Issue
In order to avoid dilution of stake of existing shareholders, company issues "rights"
shares in proportion to their current holding. This is done when the company plans to tap
the market after their IPO.

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.
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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.
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.
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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.