Important Terminologies Around IPO

Here are some important terminologies related to Initial Public Offerings (IPOs)

• Underwriter: Underwriters are financial institutions responsible for supporting the IPO process. They purchase the shares from the company and then sell them to the public.
• Abridged Prospectus: The IPO prospectus is broken down in the Abridged Prospectus, which includes all the key elements of the original prospectus. The shorter version is required to accompany every IPO prospectus in accordance with the Companies Act of 1961. As a result, if you are considering investing in an IPO, this is the first document you should review.
• Red Herring Prospectus: An initial prospectus issued before the main prospectus, providing key information about the IPO without disclosing the final share price.
• Price Band: The price Band in which you can make a bid for the company’s shares is known as the price band. You cannot bid lower than 200 or more than 250, for example, if the price band is 200-250. The price range for various investor groups, such as high-net-worth individuals, retail investors, and qualified institutional purchasers, is decided by the firm and the underwriter.
• Book Building Process: A price discovery system used in IPOs where the price of shares is determined based on investor demand and bids
• Issue Price: The issue price refers to the price at which a company allots its shares to investors. varied investor classes have varied issue prices; individual investors have the lowest issue prices.
• Floor Price: The floor price is the lowest amount an investor may provide when submitting an IPO application. The floor price is the bottom end of the price band for initial public offerings that use the book building process. 
• Offer Date: The offer date or opening date of the IPO is the first day on which investors can submit applications for shares in an IPO. 
• Minimum Subscription: For an IPO to be successful, there must be a certain minimum number of retail investor subscriptions. A minimum subscription is the name given to this required proportion. The current minimum subscription is 90%. The company must return the whole subscription price if the SEBI-mandated level is not reached. 
• Bid Lot: The Bid Lot is the bare minimum of shares that a bidder must purchase in an IPO. The investor must bid in multiples of the bid lot if he wishes to purchase more shares. If an IPO’s bid lot is 100, for instance, you have the option of bidding for 100 or multiples of 100, such as 200, 300, etc. 
• Allotment: The process of allocating shares to investors who have applied for them during the IPO. Oversubscribed IPOs can result in limited allotments.
• Grey Market: An unofficial market where investors can buy and sell IPO shares before they are officially listed on stock exchanges.
• Lock-in Period: A set time during which confident shareholders, like promoters, cannot sell their shares after the IPO to ensure stability and confidence in the company’s stock.
• Listing: The process of a company’s shares becoming tradable on a stock exchange after a successful IPO.
• Anchor Investor: Prominent institutional investors who invest in an IPO before its opening to provide confidence to other investors.
• Oversubscription: When the number of shares applied for in an IPO exceeds the number of shares available for allocation.