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WHAT do the new terms mean:

Cut-off price: 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".

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.

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 the case of proportionate allotment. In the case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.

Qualified institutional buyer: Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets.

In terms of clause 2.2.2B (v) of DIP Guidelines, a `Qualified Institutional Buyer' shall mean:

* Public financial institution as defined in section 4A of the Companies Act, 1956;

* Scheduled commercial banks;

* Mutual funds;

* Foreign institutional investor registered with SEBI;

* Multilateral and bilateral development financial institutions;

* Venture capital funds registered with SEBI.

* Foreign Venture capital investors registered with SEBI.

* State Industrial Development Corporations.

* Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA).

* Provident Funds with minimum corpus of Rs 25 crore

* Pension Funds with minimum corpus of Rs 25 crore.

These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.

Green-shoe option: 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 stabilising mechanism for a period not exceeding 30 days. This Permission is granted to a company to be exercised 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 finalized 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 limited up to a maximum of 1000 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.

www.sebi.gov.in

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