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  • What is dividend payout ratio?

    Dividend Payout ratio, or simply payout ratio, is the percentage of a companyís earnings paid as dividends to the shareholders. It indicates how well the companyís 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%

  • Does SEBI tag make my money safe?

    For a public issue, you can know the status by calling the registrar (you will know about the registrar on the Highlights Page of the issue) after 30 to 40 days from the closing date of the issue. However, in a book building issue, you can know the status by calling the registrar after 20 days from the closing date.
  • Does SEBI approve the contents of the issue?

    It is to be distinctly understood that submission of offer document to SEBI should not in any way be deemed or construed that the same has been cleared or approved by SEBI. The Lead manager certifies that the disclosures made in the offer document are generally adequate and are in conformity with SEBI guidelines for disclosures and investor protection in force for the time being. This requirement is to facilitate investors to take an informed decision for making investment in the proposed issue.
  • What are the dos and doníts for bidding / applying in the issue?

    The investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. They are strongly warned against any Ďtipsí or relying on news obtained through unofficial means.
  • What are the prescribed pay-in and pay-out days for funds and securities for Normal Settlement?

    The pay-in and pay-out days for funds and securities are prescribed as per the Settlement Cycle. A typical Settlement Cycle of Normal Settlement is given below:

    Activity Day
    Trading Rolling Settlement Trading T

    Clearing Custodial Confirmation T+1 working days
    Delivery Generation T+1 working days

    Settlement Securities and Funds pay in T+2 working days
    Securities and Funds pay out T+2 working days

    Post Settlement Valuation Debit T+2 working days
    Auction T+3 working days
    Bad Delivery Reporting T+4 working days
    Auction settlement T+5 working days
    Close out T+5 working days
    Rectified bad delivery pay-in and pay-outT+6 working days
    Re-bad delivery reporting and pickup T+8 working days
    Close out of re-bad delivery T+9 working days

    Note: The above is a typical settlement cycle for normal (regular) market segment. The days prescribed for the above activities may change in case of factors like holidays, bank closing etc. You may refer to scheduled dates of pay-in/pay-out notified by the Exchange for each settlement from time-to-time.
  • What are CRR and SLR with respect to banks?

    CRR or cash reserve ratio is the minimum proportion / percentage of a bankís deposits to be held in the form of cash. Banks actually donít 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 bankís 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 bankís leverage position to pump more money into the economy, thereby regulating credit growth.

  • What is Return on Equity (RoE)?

    Return on Equity, also known as Return on Networth or Return on Shareholders Funds, indicates profitability of a company by measuring how much the shareholders earned for their investment in the company. The higher the percentage, the more efficiently equity base has been utilized, indicating better return to investors.

    RoE is ratio of net income (available for equity shareholders) to average shareholders' equity.

    RoE = ___________________Profit After Tax___________________

    Equity Share capital + Free Reserves Ė Miscellaneous Expd.

    E.g. If net profit is Rs.100 crore, Equity share capital is Rs.100 crore, Reserves and Surplus is Rs.900 crore, Miscellaneous Expd. Nil

    RoE = 100___

    100 + 900

    Return on Equity is 10%.

  • What is Basis of Allocation/Basis of Allotment?

    After the closure of the issue, the bids received are aggregated under different categories i.e., firm allotment, Qualified Institutional Buyers (QIBs), Non-Institutional Buyers (NIBs), Retail, etc. The oversubscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. Then, the number of successful allottees is determined. This process is followed in case of proportionate allotment. In case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.
  • What is a draft prospectus?

    A draft prospectus provides the information on the financials of the company, promoters, background, tentative issue price etc. It is filed by the Lead Managers with the Securities & Exchange Board of India (SEBI) to provide issue details. Overview of the draft prospectus can be seen on (SEBIís web site). The final prospectus is printed after obtaining the clearance from SEBI and the Registrar of Companies (ROC).
  • What is SEBI's Role in an Issue?

    Any company making a public issue or a listed company making a rights issue of value of more than Rs.50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBIís observation letter is three months only ie. the company has to open its issue within three months period.

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.