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  • What is IPO Grading?

    IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date. The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities in India. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below.

    IPO grade 1: Poor fundamentals

    IPO grade 2: Below-average fundamentals

    IPO grade 3: Average fundamentals

    IPO grade 4: Above-average fundamentals

    IPO grade 5: Strong fundamentals

    IPO grading has been introduced as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO
  • Who are the intermediaries in an issue?

    Merchant Bankers to the issue or Book Running Lead Managers (BRLM), syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries. In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.
  • What is Commercial Paper?

    Commercial paper is a money market instrument issued normally for tenure of 90 days. It is a short term promise to repay a fixed amount that is placed on the market either directly or through a specialized intermediary. It is usually issued by companies with a high credit standing in the form of a promissory note redeemable at par to the holder on maturity and therefore, doesnt require any guarantee.
  • What is a Preferential Issue?

    A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP) guidelines which inter-alia include pricing, disclosures in notice etc.
  • What details are required to be mentioned on the Contract note issued by the Stock Broker?

    A broker has to issue a contract note to clients for all transactions in the form specified by the stock exchange. The contract note inter-alia should have following:

    Name, address and SEBI Registration number of the Member broker.
    Name of partner /proprietor /Authorised Signatory.
    Dealing Office Address/Tel No/Fax no, Code number of the member given by the Exchange.
    Unique Identification Number
    Contract number, date of issue of contract note, settlement number and time period for settlement.
    Constituent (Client) name/Code Number.
    Order number and order time corresponding to the trades.
    Trade number and Trade time.
    Quantity and Kind of Security brought/sold by the client.
    Brokerage and Purchase /Sale rate are given separately.
    Service tax rates and any other charges levied by the broker.
    Securities Transaction Tax (STT) as applicable.
    Appropriate stamps have to be affixed on the original contract note or it is mentioned that the consolidated stamp duty is paid.
    Signature of the Stock broker/Authorized Signatory.

    Contract note provides for the recourse to the system of arbitrators for settlement of disputes arising out of transactions. Only the broker can issue contract notes.
  • What are CRR and SLR with respect to banks?

    CRR or cash reserve ratio is the minimum proportion / percentage of a banks deposits to be held in the form of cash. Banks actually dont hold these as cash with themselves, but deposit the same with RBI / currency chests, which is considered equivalent to holding cash with themselves.

    When a banks deposits increase by Rs. 100 crore, and considering the present cash reserve ratio of 6%, bank will have to hold additional Rs. 6 crore with RBI and will be able to use only Rs. 94 crore for investments and lending. Therefore, higher the CRR, lower the amount that banks can lend. Thus RBI can control the liquidity by changing the CRR i.e. increase CRR to reduce the lendable amount and vice-versa.

    SLR or statutory liquidity ratio is the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities. It is the ratio of liquid assets (cash and approved securities) to the demand and term liabilities / deposits.

    RBI is empowered to increase this ratio up to 40%. An increase in SLR restricts the banks leverage position to pump more money into the economy, thereby regulating credit growth.

  • What is dividend payout ratio?

    Dividend Payout ratio, or simply payout ratio, is the percentage of a companys earnings paid as dividends to the shareholders. It indicates how well the companys earnings support the dividend payment.

    Dividend Payout ratio = Dividend per equity share X 100

    Earnings per share (EPS)

    E.g.: For FY10, a company had EPS of Rs. 10. It paid dividend of 20% (Rs. 2 per equity share of Rs. 10 each) for the year.

    Dividend payout ratio = Rs. 2 X 100

    Rs. 10

    Dividend payout ratio = 20%

  • Who is a 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.
  • What is an Abridged Prospectus?

    Abridged Prospectus means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.
  • What is an IPO?

    An Initial Public Offer (IPO) is a means of collecting money from the public by a company for the first time in the market to fund its projects. In return, the company gives the share to the investors in the company.

stocks glossary

  • Acid Test Ratio

    It is the ratio indicated by dividing a company\'s current assets by current liabilities. It reflects the financial strength of a company and hence called Acid test ratio.
  • Alpha

    Alpha measures the difference between a fund\'s actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure indicates the fund has performed better than its beta would predict. In contrast, a negative alpha indicates a fund has underperformed, given the expectations established by the fund\'s beta. Some investors see alpha as a measurement of the value added or subtracted by a fund\'s manager. There are limitations to alpha\'s ability to accurately depict a manager\'s added or subtracted value. In some cases, a negative alpha can result from the expenses that are present in the fund figures but are not present in the figures of the comparison index. Alpha is dependent on the accuracy of beta: If the investor accepts beta as a conclusive definition of risk, a positive alpha would be a conclusive indicator of good fund performance. Of course, the value of beta is dependent on another statistic, known as R-squared.
  • Annual Fund Operating Expenses

    The expenses incurred, during a particular year, by Asset Management Company for managing the funds.
  • Asset Allocation

    The process of diversifying the investments in different kinds of assets such as stocks, bonds, real estate, cash in order to optimize risk.
  • Asset Allocation Fund

    A fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change.
  • Asset Management Company (AMC)

    A Company registered with SEBI, which takes investment/divestment decisions for the mutual fund, and manages the assets of the mutual fund.
  • Automatic Investment Plan

    A plan offered by most mutual funds where a small fixed amount is automatically deducted monthly from an investor\'s bank account and invested in the mutual fund of their choice.
  • Automatic Reinvestment

    An investment option for mutual fund unit holders in which the proceeds from either the fund\'s dividends or capital gains, or both, are automatically used to buy more units of the funds.