Reference
Glossary
54 terms from the exchange, depository and IPO worlds, each defined once in the sense this site uses it, with a link to where you will meet it.
A
- Allotment
- The issue of shares by a company to a subscriber, for example in an IPO or a rights issue. The allotment date starts the holding period for tax purposes.
- Anchor investor
- A large institutional investor allotted shares in an IPO a day before the issue opens. Anchor allocations are locked in for a period after allotment and are disclosed publicly.
- Audited / provisional
- Audited figures have been signed off by the company's statutory auditor. Provisional figures have not, and may change. Every financial year on a company page here is marked one or the other.Trust & transparency →
B
- Bid-ask spread
- The gap between the price a buyer will pay and the price a seller wants. In the unlisted market it is wide for thinly traded names, which is why a confirmed price can differ from the indicative one.
- Bonus issue
- Free additional shares given to existing shareholders in a fixed ratio, such as 1:1. The share count rises and the price per share falls proportionally; the cost of bonus shares for tax is nil.Corporate events →
- Book value
- Shareholders' equity on the balance sheet divided by the number of shares. Used in the price-to-book ratio.
- Buyback
- A company buying its own shares from shareholders, usually at a stated price. Unlisted companies sometimes use buybacks to give employees and early investors an exit.
C
- CDSL / NSDL
- India's two depositories, which hold shares in electronic form. Your demat account sits with one of them through a depository participant; transfers between the two work normally.
- Client ID
- The 8-digit number identifying your demat account within your depository participant. Together with the DP ID it tells a seller where to deliver shares.
- Client Master List (CML)
- A document from your depository participant listing your demat account details: name, PAN, DP ID, Client ID and bank. It is the standard proof of a demat account in an off-market transfer.How buying works →
- Corporate action
- An event decided by a company that changes what a shareholder holds: bonus, split, rights issue, buyback, dividend, merger or demerger.Corporate events →
D
- Delivery instruction slip (DIS)
- The instruction a seller gives their depository participant to move shares out of their demat account, now usually submitted online. The shares reach the buyer only when it is executed.
- Demat account
- An account that holds shares electronically. Unlisted shares are transferred between demat accounts exactly like listed ones; you need one to buy.
- Depository participant (DP)
- The bank or broker through which you hold a demat account with CDSL or NSDL.
- Dilution
- The fall in an existing shareholder's percentage ownership when a company issues new shares, for example in a fund raise or an ESOP pool.
- DP ID
- The code identifying your depository participant. For NSDL it begins with IN; for CDSL it is an 8-digit number that forms the first half of a 16-digit account number.
- DRHP
- Draft Red Herring Prospectus: the first offer document a company files with SEBI when it plans an IPO. It sets out the business, financials, risks and the proposed issue, but not the price.DRHP-filed companies →
E
- EBITDA
- Earnings before interest, tax, depreciation and amortisation: operating profit before financing and non-cash charges. Used in the EV/EBITDA multiple.
- ESOP
- Employee stock option plan: the right given to an employee to buy company shares at a fixed exercise price once the options vest.ESOP liquidity →
- Exercise
- Paying the exercise price to convert vested options into shares. The gap between fair value and exercise price is taxed as salary at that moment.Taxation guide →
- EV / EBITDA
- Enterprise value (market capitalisation plus debt minus cash) divided by EBITDA. Useful for comparing companies with different amounts of debt.
F
- Face value
- The nominal value printed on a share, such as ₹1, ₹2 or ₹10. It has no bearing on what the share is worth but matters for splits, bonus ratios and dividend percentages.
- Fair market value (Rule 11UA)
- The value of unquoted shares worked out under the Income-tax Rules, used when shares change hands below value or as a gift.Taxation guide →
G
I
- Indicative price
- Our estimate of where a share could change hands, built from recent dealer quotes and transactions. It is not an offer, and the price you can actually transact at is confirmed separately.Trust & transparency →
- IPO
- Initial public offering: the first sale of a company's shares to the public, after which they list on an exchange.
- ISIN
- International Securities Identification Number: the 12-character code that identifies a security in the depository system. Every unlisted share that can be held in demat has one.
K
- KYC
- Know your customer: verification of identity, address, bank account and demat account before a transaction settles.
L
- Liquidity
- How easily a share can be sold without moving its price. Unlisted shares are illiquid by nature: there may be no buyer when you want one.
- Listing
- Admission of a company's shares to trading on a stock exchange, usually straight after an IPO.
- Lock-in
- A period during which shares cannot be sold. Pre-IPO shares held by investors other than promoters are normally locked in for six months from IPO allotment.Taxation guide →
- LTCG / STCG
- Long-term and short-term capital gains. For unlisted shares a gain is long-term only after more than 24 months.Taxation guide →
M
- Market capitalisation
- Share price multiplied by the number of shares in issue. For an unlisted company it uses the indicative price, so it is an estimate, not a market print.
- Minimum quantity
- The smallest number of shares a seller will deal in. Many unlisted names change hands in fixed lots rather than single shares.
O
- Off-market transfer
- A transfer of shares directly between two demat accounts, outside a stock exchange. It is how unlisted shares settle: no clearing corporation and no STT, with stamp duty paid by the buyer.
- Offer for sale (OFS)
- The part of an IPO in which existing shareholders sell their shares to the public. The money goes to them, not to the company.
P
- P/B
- Price-to-book: share price divided by book value per share.
- P/E
- Price-to-earnings: share price divided by earnings per share for the latest year. Not meaningful for a loss-making company, where it is shown as not applicable.
- PAT
- Profit after tax: what is left for shareholders after every expense, interest and tax.
- Promoter
- The person or group in control of a company, named as such in its filings. Promoter holdings face longer lock-ins after an IPO.
R
- RHP
- Red Herring Prospectus: the updated offer document filed after SEBI's observations, shortly before an IPO opens. It includes the price band and issue dates.RHP-filed companies →
- Rights issue
- An offer of new shares to existing shareholders in proportion to their holding, usually at a discount to the market price.
- ROCE
- Return on capital employed: how well a business uses all the money invested in it. On this site it is EBITDA divided by net worth plus debt, because depreciation is not recorded for every company.
- ROE
- Return on equity: profit after tax divided by shareholders' equity.
- RTA
- Registrar and transfer agent: the firm that keeps a company's register of shareholders and processes corporate actions.
S
- Secondary transaction
- A sale of existing shares from one holder to another. The company receives nothing; compare a primary issue, where new shares are created.
- Stamp duty
- A tax of 0.015% of the consideration on a delivery-based transfer of shares, paid by the buyer.
- Stock split
- Dividing each share into several of a lower face value, for example one ₹10 share into ten ₹1 shares. The value of a holding does not change.
- STT
- Securities transaction tax, charged on trades through a stock exchange. Not charged on an off-market transfer of unlisted shares.
U
V
- Vesting
- The point at which ESOP options become yours to exercise, usually in instalments over several years.