Complete IPO Glossary — Every Term Explained Simply

IPO terminology can be confusing, especially with grey market slang mixed in alongside formal SEBI terms. Here's every common term you'll come across, explained in plain language, in one place.

Grey Market Terms

GMP (Grey Market Premium)

The unofficial premium at which an IPO share trades in the informal grey market, above the issue price, before official listing.

Kostak Rate

The price paid for an entire IPO application in the grey market, regardless of whether the applicant gets allotment.

Subject to Sauda (STS)

Similar to Kostak, but the payment only happens if the applicant actually receives allotment — higher risk for the seller, so typically a higher rate than Kostak.

Subscription & Investor Categories

QIB (Qualified Institutional Buyer)

Large institutional investors — mutual funds, banks, insurance companies, FPIs — who get a reserved portion of IPO shares.

NII (Non-Institutional Investor)

Individual investors applying above the ₹2 lakh retail limit; split into SHNI and BHNI sub-categories.

SHNI / BHNI (Small / Big HNI)

SHNI covers applications between ₹2–10 lakh; BHNI covers applications above ₹10 lakh.

RII (Retail Individual Investor)

Investors applying up to ₹2 lakh — the category most first-time IPO applicants fall into.

Anchor Investor

A qualified institutional buyer who commits to shares one day before the IPO opens to the public, subject to a mandatory lock-in period.

Pricing & Issue Terms

Price Band

The price range (e.g. ₹265–280) within which investors can bid for shares in a book-built IPO.

Cut-off Price

The final price at which shares are actually allotted, decided after the book-building process closes — retail investors typically bid "at cut-off" to ensure their bid remains valid regardless of the final price within the band.

Face Value

The nominal value of a share as stated in company records — typically ₹1, ₹2, ₹5 or ₹10 — distinct from the issue price investors actually pay.

Lot Size

The minimum number of shares you must apply for in one lot — you can apply for multiples of this, but not less.

Documents & Process

DRHP (Draft Red Herring Prospectus)

The preliminary document a company files with SEBI before an IPO, containing business details, financials and risk factors — everything except the final price and issue size.

RHP (Red Herring Prospectus)

The final version of the prospectus, filed just before the IPO opens, including the price band and issue size.

ASBA (Application Supported by Blocked Amount)

The system where your IPO application amount is blocked (not debited) in your bank account until allotment is finalised — now largely handled via UPI mandates.

Book Building

The process of determining an IPO's final price based on demand collected across the price band during the subscription period.

Fresh Issue vs OFS (Offer for Sale)

A Fresh Issue raises new capital for the company. An OFS lets existing shareholders (promoters, early investors) sell their existing shares — the company itself doesn't receive OFS proceeds.

Listing & Post-IPO Terms

Listing Gain

The percentage return from issue price to the price at which the stock opens trading on listing day.

Market Maker

An entity mandatorily appointed for SME IPOs to provide buy/sell liquidity for a minimum period after listing, since SME stocks otherwise trade thinly.

Green Shoe Option

An option allowing the company to sell additional shares beyond the original issue size if demand is strong, used partly to help stabilise the stock price post-listing.

Frequently Asked Questions