Coming across a lot of new terms? What do they mean?

Green-shoe Option: A Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days through a Stabilising Agent. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15 per cent of the issue size. From an investor's perspective, an issue with green-shoe option provides more probability of getting shares and also that post-listing price may show relatively more stability as compared to market.

e-IPO: A company proposing to issue capital to public through the on-line system of the stock exchange for offer of securities can do so if it complies with the specified requirements. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process.

Safety Net: Any safety net scheme or buy-back arrangements of the shares proposed in any public issue shall be finalised by an issuer company with the lead merchant banker in advance and disclosed in the prospectus. Such buy-back or safety net arrangements shall be made available only to all original resident individual allottees up to a maximum of 1,000 shares per allottee and the offer is kept open for a period of 6 months from the last date of dispatch of securities.

Syndicate Member: The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an `Underwriter' as syndicate members. The syndicate members are mainly appointed to collect and entire the bid forms in a book built issue.

Open book/closed book: At present, in issues made through book building, Issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is the Open book system of book building.

Here, the investor can be guided by the movements of the bids during the period in which the bid is kept open.

Under closed book building, the book is not made public and the bidders will have to take a call on the price at which they intend to make a bid without having any information on the bids submitted by other bidders.

Cut-Off Price: In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called "Cut off price". This is decided by the issuer and Lead Manager after considering the book and investors' appetite for the stock. Only retail individual investors to have an option of applying at cut off price.

Differential pricing: Pricing of an issue where one category is offered shares at a price different from the other category is called differential pricing. Differential pricing is allowed only if the securities to applicants in the firm allotment category is at a price higher than the price at which the net offer to the public is made. The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters' contributions.

Source: www.sebi.gov.in

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