Glossary
The vocabulary of Indian IPOs, one short definition each, with a little more detail underneath.
- Kostak rate
- Price paid for an entire IPO application, allotment or not.
- In a Kostak deal the seller hands over their application for a fixed sum and keeps that sum whether or not shares are allotted. The buyer bears the allotment risk.
- Subject to Sauda
- Application deal that pays out only if shares are allotted.
- Like Kostak, but conditional: the agreed amount changes hands only when the application receives allotment. Because the buyer carries less risk, Sauda rates are usually higher than Kostak rates.
- Estimated listing price
- Upper price band plus current GMP.
- A simple arithmetic estimate used across IPO trackers. It assumes the grey market is right, which it frequently is not; treat it as an indication of mood rather than a forecast.
- Price band
- Floor and cap between which bids are accepted.
- Book-built issues announce a range; retail investors can bid at the cut-off price to accept whatever price is finally discovered within the band.
- Lot size
- Minimum number of shares in one bid.
- Bids must be in multiples of the lot. Retail applications are capped at ₹2 lakh. For SME issues the minimum application is two lots, so that it is at least ₹2 lakh.
- QIB, NII, RII
- The three main bidder categories.
- Qualified institutional buyers (mutual funds, insurers, FPIs), non-institutional investors (applications above ₹2 lakh, split into small and big NII), and retail individual investors (up to ₹2 lakh). Each has a reserved share of the offer.
- sNII and bNII
- Small and big non-institutional buckets.
- Small NII covers applications between ₹2 lakh and ₹10 lakh and gets one-third of the NII portion; big NII covers applications above ₹10 lakh and gets two-thirds. When oversubscribed, sNII allotment is by lottery at the minimum bid size.
- Anchor investor
- Large institution allotted shares a day before the issue opens.
- Anchor bids signal institutional confidence. Half the anchor allotment is locked in for 30 days and the other half for 90 days from allotment.
- ASBA and UPI mandate
- Money is blocked, not debited, until allotment.
- Applications Supported by Blocked Amount keep the bid money in your own bank account. UPI investors approve a mandate; the amount is debited only for shares actually allotted and unblocked otherwise.
- T+3 listing
- Shares list three working days after the issue closes.
- Under SEBI's timeline, allotment is finalised on T+1, refunds and demat credit follow on T+2, and trading begins on T+3, where T is the closing day of the issue.
- Basis of allotment
- How shares are distributed when a category is oversubscribed.
- The registrar publishes the allocation method after the issue closes. In an oversubscribed retail category, each successful applicant receives one lot, with winners picked by computerised draw.
- Offer for sale (OFS)
- Existing shareholders selling, not the company raising money.
- Proceeds from the OFS portion go to the selling shareholders rather than into the business. A large OFS component is worth noting when reading the objects of the issue.
- Tender-offer buyback
- Company buys back shares from holders at a fixed price.
- Shareholders on the record date can tender shares in proportion to their entitlement. If more shares are tendered than the company will accept, the acceptance ratio determines how many are bought. At least 15% of a tender buyback is reserved for small shareholders (holdings up to ₹2 lakh by market value).