1) PATENT

A government license that gives the holder exclusive rights to a process,

design or new invention for a designated period of time. Application for
patents are usually handled by a government agency.
2)COPYRIGHT
Copyright is a form of protection provided to the authors of "original works of
authorship" including literary, dramatic, musical, artistic and certain other
intellectual works, both published and unpublished. The 1976 Copyright Act
generally gives the owner of copyright the exclusive right to reproduce the
copyrighted work, to prepare derivative works, to distribute copies, to
perform the copyrighted work publicly or to display the copyrighted work
publicly.
The copyright protects the form of expression rather than the subject matter
of the writing. For example, a description of a machine could be copyrighted,
but this would only prevent others from copying the description; it would not
prevent others from writing a description of their own or from making and
using the machine. Copyrights are registered by the Copyright Office of the
Library of Congress.
3)TRADEMARK
A trademark is a word, name, symbol or device which is used in trade with
goods to indicate the source of the goods and to distinguish them from the
goods of others. A service mark is the same as a trademark except that it
identifies and distinguishes the source of a service rather than a product.
Trademark rights may be used to prevent others from using a confusingly
similar mark, but not to prevent others from making the same goods or from
selling the same goods or services under a clearly different mark.
4) PRIVATE EQUITY
In finance, private equity is an asset class consisting of equity securities in
operating companies that are not publicly traded on a stock exchange.
A private equity investment will generally be made by a private equity firm,
a venture capital firm or an angel investor. Each of these category of investor
has its own set of goals, preferences and investment strategies; each
however providing working capital to a target company to nurture expansion,

new product development or restructuring of the companys operations,

management or ownership.
Among the most common investment strategies in private equity
are: leveraged
buyouts, venture
capital, growth
capital, distressed
investments. In a typical leveraged buyout transaction, a private equity firm
buys majority control of an existing or mature firm. This is distinct from a
venture capital or growth capital investment, in which the investors (typically
venture capital firms or angel investors) invest in young or emerging
companies and rarely obtain majority control.
5) LEVERAGED BUYOUT
Leveraged buyout, LBO refers to a strategy of making equity investments as
part of a transaction in which a company, business unit or business assets is
acquired from the current shareholders typically with the use of financial
leverage. The companies involved in these transactions are typically mature
and generate operating cash flows.
Leveraged buyouts involve a financial sponsor agreeing to an acquisition
without itself committing all the capital required for the acquisition. To do
this, the financial sponsor will raise acquisition debt which ultimately looks to
the cash flows of the acquisition target to make interest and principal
payments.
6) GROWTH CAPITAL
Growth Capital refers to equity investments, most often minority
investments, in relatively mature companies that are looking for capital to
expand or restructure operations, enter new markets or finance a major
acquisition without a change of control of the business.
7) VENTURE CAPITAL
Venture capital is a broad subcategory of private equity that refers to equity
investments made, typically in less mature companies, for the launch, early
development or expansion of a business. Venture investment is most often
found in the application of new technology, new marketing concepts and new
products that have yet to be proven.

Distressed or Special Situation is a broad category referring to investments

in equity or debt securities of financially stressed companies.
Versus hedge funds
Typically private equity investment groups are geared towards long-hold,
multiple-year investment strategies in illiquid assets (whole companies,
large-scale real estate projects or other tangibles not easily converted to
cash) where they have more control and influence over operations or asset
management to influence their long-term returns.
Hedge funds usually focus on short or medium term liquid securities which
are more quickly convertible to cash and they do not have direct control over
the business or asset in which they are investing.
Both private equity firms and hedge funds often specialize in specific types
of investments and transactions. Private equity specialization is usually in
specific industry sector asset management while hedge fund
specialization is in industry sector risk capital management.

TPG CAPITAL
GOLDMAN SACHS CAPITAL PARTNERS
THE CARLYLE GROUP
THE BLACKSTONE GROUP
BAIN CAPITAL

8) INVESTMENT BANKING
JP MORGAN CHASE

BANK OF AMERICA
MORGAN STANLEY
GOLDMAN SACHS
DEUTSCHE BANK
CITIGROUP
BARCLAYS (ANTHONY JENKINS)
WELLS FARGO
IN INDIA:
BARCLAYS CAPITAL
BANK OF AMERICA
CITI
DEUTSCHE
J.P.MORGAN
KOTAK MAHINDRA BANK
YES BANK LIMITED
9) MERGER AND ACQUISITION

An acquisition or takeover is the purchase of one business or company by

another company or other business entity. Such purchase may be of 100%,
or nearly 100%, of the assets or ownership equity of the acquired entity.
A merger happens when two firms agree to go forward as a single new
company rather than remain separately owned and operated. This kind of
action is more precisely referred to as a "merger of equals". The firms are
often of about the same size. Both companies' stocks are surrendered and
new company stock is issued in its place.
10) ACCRUAL (accumulation):
For example, a company delivers a product to a customer who will pay for it
30 days later in the next fiscal year, which starts a week after the delivery.
The company recognizes the proceeds as revenue in its current income
statement still for the fiscal year of the delivery, even though it will get paid
in cash during the following accounting period. The proceeds are also
an accrued income (asset) on the balance sheet for the delivery fiscal year,
but not for the next fiscal year when cash is received.
Similarly, a salesperson, who sold the product, earned a commission at the
moment of sale (or delivery). The company will recognize the commission as
an expense in its current income statement, even though the salesperson
will actually get paid at the end of the following week in the next accounting
period. The commission is also an accrued expense (liability) on the balance
sheet for the delivery period, but not for the next period the commission
(cash) is paid out to the salesperson.
ACCRUED EXPENSES:
An expense which has been incurred but not yet paid for. Salaries are a good
example. Employees earn or accrue salaries each hour they work. The
salaries continue to accrue until payday when the accrued expense of the
salaries is eliminated.
ACCRUED INTEREST:
A term used to describe an accrual accounting method when interest that is
either payable or receivable has been recognized, but not yet paid or
received.

For example, accrued interest receivable occurs when interest on an

outstanding receivable has been earned by the company, but has not yet
been received. A loan to a customer for goods sold would result in interest
being charged on the loan.
11) CONVERTIBLE NOTE is a type of bond that the holder can convert into
shares of common stock in the issuing company or cash of equal value, at an
agreed-upon price. It is a hybrid security with debt- and equity-like
features. Although it typically has a coupon rate lower than that of
similar, non-convertible debt, the instrument carries additional value
through the option to convert the bond to stock, and thereby participate in
further growth in the company's equity value.
From the issuer's perspective, the key benefit of raising money by selling
convertible bonds is a reduced cash interest payment. The advantage for
companies of issuing convertible bonds is that, if the bonds are
converted to stocks, companies' debt vanishes.

12) SHORT SALE

A market transaction in which an investor sells borrowed securities in
anticipation of a price decline and is required to return an equal number of
shares
at
some
point
in
the
future.
A short seller will make money if the stock goes down in price, while a long
position makes money when the stock goes up. The profit that the investor
receives is equal to the value of the sold borrowed shares less the cost of
repurchasing
the
borrowed
shares.
Suppose 1,000 shares are short sold by an investor at $25 apiece and
$25,000 is then put into that investor's account. Let's say the shares fall to
$20 and the investor closes out the position. To close out the position, the
investor will need to purchase 1,000 shares at $20 each ($20,000). The
investor captures the difference between the amount that he or she receives
from the short sale and the amount that was paid to close the position, or
$5,000.
13) ANGEL INVESTOR is an affluent individual who provides capital for a

business start-up, usually in exchange for convertible debtor ownership

equity.
14) VULTURE CAPITALIST is an investor who used the clauses of the terms
of an investment deal in a company to seize ownership of the company or
valuable parts of it outright. Whereas a venture capitalist invests in a
company likely to succeed in the marketplace and hence show a profit to the
investor, a vulture capitalist looks to invest in a firm likely to fail to show a
profit in the near term, triggering the takeover clauses, resulting in forfeiture
of some or all the assets of the company, with an eye towards selling off the
constituent parts, hence showing a profit while destroying or hobbling the
company.

15) SWEAT EQUITY

Contribution to a project or enterprise in the form of effort and toil. Sweat
equity is the ownership interest, or increase in value, that is created as a
direct result of hard work by the owner(s).
For example, consider an entrepreneur who has invested $100,000 in her
start-up. After a year of developing the business and getting it off the
ground, she sells a 25% stake to an angel investor for $500,000. This gives
the business a valuation of $2 million (i.e. $500,000/0.25), of which the
entrepreneur's share is $1.5 million. Subtracting her initial investment of
$100,000, the sweat equity she has built up is $1.4 million.

16) DIVIDEND DISCOUNT MODEL

A procedure for valuing the price of a stock by using predicted dividends and
discounting them back to present value. The idea is that if the value
obtained from the DDM is higher than what the shares are currently trading
at, then the stock is undervalued.

17) JOINT VENTURE

The cooperation of two or more individuals or businesses in which each

agrees to share profit, loss and control in a specific enterprise.
Sony-Ericsson is a joint venture by the Japanese consumer electronics
company Sony Corporation and the Swedish telecommunications
company Ericsson to make mobile phones. The stated reason for this
venture is to combine Sony's consumer electronics expertise with Ericsson's
technological leadership in the communications sector. Now, Sony has
acquired the stake and completely gained the company as of now.
Virgin Mobile India Limited is a cellular telephone service provider
company which is a joint venture between Tata Tele service and Richard
Branson's Service Group.
DOW CHEMICAL AND CORNING (LARGEST)
CORPORATION) - SILICON BASED TECH

(DOW

CORNING

18) REMITTANCE
The process of sending money to remove an obligation. This is most often
done through an electronic network, wire transfer or mail. The term also
refers to the amount of money being sent to remove the obligation.
When a person sends a check to the government to pay for a tax bill, the
check is remittance to remove the tax obligation.
REDEMPTION
The return of an investor's principal in a fixed income security, such as a
preferred stock or bond; or the sale of units in a mutual fund. A redemption
occurs, in a fixed income security at par or at a premium price, upon
maturity or cancellation by the issuer.

19) REVENUE
The amount of money that a company actually receives during a specific
period, including discounts and deductions for returned merchandise. It is the
"top line" or "gross income" figure from which costs are subtracted to
determine
net
income.

Revenue is calculated by multiplying the price at which goods or services are

sold
by
the
number
of
units
or
amount
sold.
Revenue is the amount of money that is brought into a company by its
business activities.
20) PREFERENCE SHARES
Company stock with dividends that are paid to shareholders before common
stock dividends are paid out. In the event of a company bankruptcy,
preferred stock shareholders have a right to be paid company assets
first. Preference shares typically pay a fixed dividend, whereas common
stocks do not. And unlike common shareholders, preference share
shareholders usually do not have voting rights.
In case of preference shares rate of dividend is fixed while equity
shareholders get dividend on the basis of performance of company,
sometimes when company make loss then they are not paid any dividend.
While preference shares can be converted into equity shares after some
years, if the terms of issue provide so while equity share cannot be
converted.
Preference shares can be redeemed, while equity share cannot be redeemed,
though company can buy back equity shares from the shareholders.

21) PUBLIC COMPANY

A company that has issued securities through an initial public offering (IPO)
and is traded on at least one stock exchange or in the over the counter
market.
Public companies have inherent advantages over private companies,
including the ability to sell future equity stakes and increased access to the
debt markets. With these advantages, however, comes increased regulatory
scrutiny and less control for majority owners and company founders.
22) PRIVATE COMPANY

A company whose ownership is private. As a result, it does not need to meet

the strict Securities and Exchange Commission filing requirements of public
companies.
Private companies may issue stock and have shareholders. However, their
shares do not trade on public exchanges and are not issued through an initial
public
offering.

23) ASSURANCE
Coverage of an event that is certain to happen. Assurance is similar to
insurance (and sometimes the terms are interchangeable) except that
insurance protects policyholders from events that might happen.
For example, a person can choose to purchase life assurance or term life
insurance. The event in question is the death of the person the policy covers.
Since the death of this person is certain, a life assurance policy results in
payment to the beneficiary when the policyholder dies. A term life insurance
policy, however, will cover a set period of time, such as 30 years, from the
time the policy was bought. If the policyholder dies during that time, the
beneficiary receives money, but if the policyholder dies after the 30 years,
no money is received. The assurance policy covers an event that will happen
no matter what, while the insurance policy covers a event that might
happen.
24) BOARD OF DIRECTORS is a body of elected or appointed members
who jointly oversee the activities of a company or organization.
In a stock corporation, the board is elected by the stockholders and is the
highest authority in the management of the corporation. In a non-stock
corporation with no general voting membership, e.g., a typical university, the
board is the supreme governing body of the institution; its members are
sometimes chosen by the board itself.
Typical duties of boards of directors include:

governing
objectives

the

organization

by

establishing

broad

policies

and

selecting, appointing, supporting and reviewing the performance of

the chief executive

ensuring the availability of adequate financial resources

approving annual budgets

accounting to the stakeholders for the organization's performance

setting the salaries and compensation of company management.

Typically the board chooses one of its members to be the chairman.

The directors of an organization are the persons who are members of its
board.
An inside director is a director who is also an employee, officer,
major shareholder or someone similarly connected to the organization. Inside
directors represent the interests of the entity's stakeholders and often have
special knowledge of its inner workings, its financial or market position.
Typical inside directors are:

A Chief Executive Officer (CEO) who may also be Chairman of the

Board

Other executives of the organization, such as its Chief Financial

Officer (CFO) or Executive Vice President

Large shareholders (who may or may not also be employees or

officers)

Representatives of other stakeholders such as labor unions, major

lenders, or members of the community in which the organization is
located

An inside director who is employed as a manager or executive of the

organization is sometimes referred to as an executive director.
An outside director is a member of the board who is not otherwise
employed by or engaged with the organization, and does not represent any

of its stakeholders. A typical example is a director who is president of a firm

in a different industry.

non-executive director - a director who is not an executive with the

organization

shadow director - an individual who is not a named director but who

nevertheless directs or controls the company.

Theoretically, the control of a company is divided between two

bodies: the board of directors, and the shareholders in general
meeting. In practice, the amount of power exercised by the board
varies with the type of company.
In small private companies, the directors and the shareholders are
normally the same people, and thus there is no real division of
power.
In large public companies, the board tends to exercise more of a
supervisory role, and individual responsibility and management
tends to be delegated downward to individual professional
executives (such as a finance director or a marketing director) who
deal with particular areas of the company's affairs.
Another feature of boards of directors in large public companies is that the
board tends to have more de facto power. Many shareholders grant proxies
to the directors to vote their shares at general meetings and accept all
recommendations of the board rather than try to get involved in
management, since each shareholder's power, as well as interest and
information is so small.
An Independent
Director (also
sometimes
known
as
a outside
director or non-executive director) is a director (member) of a board of
directors who does not have a material or pecuniary relationship with
company or related persons, except sitting fees.
Independent Directors do not own shares in the company. Some sources
state non-executive directors are different from independent ones in
that non-executive director are allowed to hold shares in the firm while
independent directors are not.
26) SINKING FUND

A means of repaying funds that were borrowed through a bond issue. The
issuer makes periodic payments to a trustee who retires part of the issue by
purchasing the bonds in the open market.
From the investor's point of view, a sinking fund adds safety to a corporate
bond issue: with it, the issuing company is less likely to default on the
repayment of the remaining principal upon maturity since the amount of the
final
repayment
is
substantially
less.
27) PUBLIC SECTOR is the part of the economy where goods and services
are provided by the government or local authorities. The aim of public sector
activity is to provide services that benefit the public as a whole. This is
because it would be difficult to charge people for the goods and services
concerned or people may not be able to afford to pay for them. The public
sector accounts for about 40% of all business activity.
28) PRIVATE SECTOR consists of business activity that is owned, financed
and run by private individuals. These businesses can be small firms owned
by just one person, or large multi-national businesses that operate around
the world (globally). In the case of large businesses, there might be many
thousands of owners involved. The goal of businesses in the private sector is
to make a profit.
29) PARTNERSHIP FIRM
This type of entity is suitable for team of people rendering
professional services such as lawyers, charted accountants,
management consultancies, doctors etc.
It does not require compulsory registration of firms. It is optional for
partners to register the firm and there are no penalties for nonregistration. A partner of an unregistered firm cannot file a suit in any court
against the firm or other partners for the enforcement of any right conferred
by a contract or the Partnership Act. Likewise the unregistered firm cannot
seek legal action in the court of law against any third party howsoever it
does not limit a third party from suing the firm. In order to avail legal
privileges a partnership firm must be registered with the Registrar of Firms. A
firm may be registered at any time by filing an application with the local
Registrar of Firms.

Partnership Firms in India can have a minimum of two partners and a

maximum of 20 partners, notably the banking businesses are allowed
a maximum of 10 partners only. Like proprietorship the firm also does not
have a separate identity, the partners and the firm is one and the same. In
the event of the assets and property of the firm is insufficient to meet the
debts of the firm, the creditors can recover their loans from the personal
property of the individual partners.
There are restrictions on transfer of rights; no partner can transfer his
individual rights to another third party without the unanimous consent of all
the partners. The firm must be dissolved on the retirement, lunacy,
bankruptcy, or death of any partner.
All partners have a right in management of the activities of the business and
the extent of the rights of each partner may be clearly determined in an
agreement. When the written agreement is duly stamped and registered, it is
known as Partnership Deed. Generally a partnership deed contains the
following particulars:

Name of the firm

Nature of the business to be carried out
Names of the partners
The town and the place where business will be carried on
The amount of capital to be contributed by each partner
Loans and advances by partners and the interest payable on them
The amount of drawings by each partner and the rate of interest
allowed thereon
Duties and powers of each partner
Any other terms and conditions to run the business
30) LIMITED LIABILITY PARTNERSHIP (LLP)
Limited Liability partnership provides all the benefits of an incorporated
company as well as the flexibility of a partnership. In an LLP, all partners
have limited liability, similar to that of the shareholders of a limited company
and are relieved from the liability for the acts of other partners. Unlike the
shareholder of a company, the partners have the right to manage
the business directly.

Unlike a partnership firm there is no restriction on the number of

partners. At least one of the partners should be an Indian resident.
It has a unique legal identity and is separate from the partners. It also has
perpetual succession. The liability of the partners is limited to their agreed
contribution in the LLP.
31) PRIVATE LIMITED COMPANY
The minimum paid up capital at the time of incorporation of a Private Limited
Company is INR 100,000. A Private Limited Company must have a
minimum of two and a maximum of 50 members as its shareholders. It
must have minimum of two directors and maximum of 12 directors.
32) PUBLIC LIMITED COMPANY
The regulatory provisions for this type of entity are contained in The
Companies Act, 1956. A Public Limited Company must be registered with
ROC.
A Public Limited Company is a Company limited by shares in which there is
no restriction on the maximum number of shareholders, transfer of shares
and acceptance of public deposits. The minimum paid-up capital for a public
limited company is INR 500,000. A Public Limited Company must have a
minimum of seven shareholders and have a minimum of three directors and
maximum of 12 directors.
The liability of each shareholder is limited to the extent of the unpaid amount
of the shares face value and the premium thereon in respect of the shares
held by him. However, the liability of a Director / Manager of such a
Company can at times be unlimited. The shares of a company are freely
transferable and that too without the prior consent of other
shareholders or without subsequent notice to the company.
A company is a legally independent body therefore is perpetual
irrespective of death, retirement or insolvency of any of its
shareholders. The shareholders do not have a right in managing the
activities of the company there is a clear separation of management and
ownership and the companys Board of Directors are vested with the decision
making power as per the rule of majority.

33) DEEMED PUBLIC COMPANIES

Certain private companies are deemed to be public companies when

25% or more of its paid up share capital is held by one or more body
Corporate
Its average Annual turnover exceeds INR. 250 million.
It holds 25% or more of paid up capital of a public company or it
accepts or renews deposits from public after making an invitation by an
advertisement.
34) CORPORATION
An incorporated entity is a separate legal entity that has been incorporated
through a legislative or registration process established through legislation.
Incorporated entities have legal rights and liabilities that are distinct from
its shareholders and
may
conduct
business
for
either profitseeking business or not for profit purposes.
37) APPROPRIATION
The act of setting aside money for a specific purpose. A company or
a government appropriates funds in order to delegate cash for the
necessities of its business operations. This may occur for any of the
functions of a business, including setting aside funds for employee
salaries, research and development, dividends and all other uses of
cash.
In business use, may also be known as "capital allocation."
38) ASSET
Things of value owned by a business. An asset may be a physical property
such as a building, or an object such as a stock certificate, or it may be a
right, such as the right to use a patented process.
Current Assets are those assets that can be expected to turn into cash within
a year or less. Current assets include cash, marketable securities, accounts
receivable, and inventory.
Fixed Assets cannot be quickly turned into cash without interfering with
business operations. Fixed assets include land, buildings, machinery,
equipment, furniture, and longterm investments.

Intangible Assets are items such as patents, copyrights, trademarks,

licenses, franchises, and other kinds of rights or things of value to a
company, which are not physical objects.
39) DEFERRED INCOME
A liability that arises when a company is paid in advance for goods
or services that will be provided later. For example, when a
magazine subscription is paid in advance, the magazine publisher is
liable to provide magazines for the life of the subscription. The
amount in deferred income is reduced as the magazines are
delivered.
40) DEFERRED REVENUE EXPENDITURE
Sometimes, some expenditure is of revenue nature but its benefit likely to be
derived over a number of years. Such expenditure is called deferred
revenue expenditure.

Example 1:
When a new firm enters in to market, it undertakes special advertising
campaign on which it spends heavy amount. The benefit of this expenditure
will certainly come in some future years. Hence it will not be justified to
charge this expenditure only in the profit and loss account of the year in
which it incurred. This expenditure must be spread over the period over
which the benefit is likely to lose. Suppose this expenditure will cover 3
years. Hence 1/3 of the expenditure must be charged to each year Profit and
Loss Account.
It may be noted here that the amount which has not been charged off to the
profit and loss account is shown in the balance sheet as a sort of asset.
41) EXPENDITURE
An expenditure occurs when something is acquired for a business an asset
is purchased, salaries are paid, and so on. An expenditure affects the balance
sheet when it occurs. However, an expenditure will not necessarily show up
on the income statement or affect profits at the time the expenditure is
made.
42) EXPENSE

An expenditure which is chargeable against revenue during an accounting

period. An expense results in the reduction of an asset. All expenditures are
not expenses. For example, a company buys a truck. It trades one asset
cash to acquire another asset. An expenditure has occurred but no expense
is recorded. Only as the truck is depreciated will an expense be recorded.
43) RETAINED EARNING
The profits not distributed to shareholders as dividends, the accumulation of
a company's profits less any dividends paid out.
44) WRITEDOWN
The partial reduction in the value of an asset, recognizing obsolescence or
other losses in value.
45) WRITEOFF
The total reduction in the value of an asset, recognizing that it no longer has
any value. Writedowns and writeoffs are noncash expenses that affect
profits.
46) STOCK SPLIT
Increase in the number of shares of a company's COMMON STOCK
outstanding that result from the issuance of additional shares proportionally
to existing stockholders without additional capital investment. The PAR
VALUE of each share is reduced proportionally.
A corporate action in which a company's existing shares are divided into
multiple shares. Although the number of shares outstanding increases by a
specific multiple, the total dollar value of the shares remains the same
compared to pre-split amounts, because no real value has been added as a
result
of the
split.
For example, in a 2-for-1 split, each stockholder receives an additional share
for
each
share
he
or
she
holds.
One reason as to why stock splits are performed is that a company's share
price has grown so high that to many investors, the shares are too expensive
to
buy
in
round
lots.
For example, if a XYZ Corp.'s shares were worth $1,000 each, investors
would need to purchase $100,000 in order to own 100 shares. If each share
was worth $10, investors would only need to pay $1,000 to own 100 shares.
47) DISCRETIONARY ACCOUNT

An account in which the customer gives the broker or someone else

discretion to buy and sell securities or commodities, including selection,
timing, amount, and price to be paid or received.
48) EX-DIVIDEND
A synonym for "without dividend."
49) INDENTURE
A written agreement under which bonds and debentures are issued, setting
forth maturity date, interest rate and other terms.
50) LIQUIDATION
The process of converting securities or other property into cash. The
dissolution of a company, with cash remaining after sale of its assets and
payment of all indebtedness being distributed to the shareholders.

52) TICKER
A telegraphic system that continuously provides the last sale prices and
volume of securities transactions on exchanges. Information is either printed
or displayed on a moving tape after each trade.
53) UP TICK
A term used to designate a transaction made at a price higher than the
preceding transaction. Also called a "plus" tick.
54) INDEX
An Index shows how a specified portfolio of share prices are moving in order
to give an indication of market trends. It is a basket of securities and the
average price movement of the basket of securities indicates the index
movement, whether upwards or downwards.
55) DEMATERIALIZATION
Dematerialization is the process by which physical certificates of an investor
are converted to an equivalent number of securities in electronic form and
credited to the investors account with his Depository Participant (DP).
56) DRAFT OFFER DOCUMENT
Offer document means Prospectus in case of a public issue or offer for sale
and Letter of Offer in case of a rights issue which is filed with the Registrar of

Companies (ROC) and Stock Exchanges (SEs). An offer document covers all
the relevant information to help an investor to make his/her investment
decision.
Draft Offer document means the offer document in draft stage. The draft
offer documents are filed with SEBI, atleast 30 days prior to the registration
of red herring prospectus or prospectus with ROC. SEBI may specify changes,
if any, in the draft Offer Document and the issuer or the lead merchant
banker shall carry out such changes in the draft offer document before filing
the Offer Document with ROC. The Draft Offer Document is available on the
SEBI website for public comments for a period of 21 days from the filing of
the Draft Offer Document with SEBI.
57) ABRIDGED PROSPECTUS
Abridged Prospectus is a shorter version of the Prospectus and contains all
he salient features of a Prospectus.
58) LOCK-IN
Lock-in indicates a freeze on the sale of shares for a certain period of time.
SEBI guidelines have stipulated lock-in requirements on shares of promoters
mainly to ensure that the promoters or main persons, who are controlling the
company, shall continue to hold some minimum percentage in the company
after the public issue.
59) PAY-IN AND PAY-OUT
Pay-in day is the day when the securities sold are delivered to the exchange
by the sellers and funds for the securities purchased are made available to
the exchange by the buyers.
Pay-out day is the day the securities purchased are delivered to the buyers
and the funds for the securities sold are given to the sellers by the exchange.
At present the pay-in and pay-out happens on the 2nd working day after the
trade is executed on the stock exchange.

60) CAPITAL RESERVE

A type of account on a municipality's or company's balance sheet that is
reserved for long-term capital investment projects or any other large and
anticipated expense(s) that will be incurred in the future. This type of reserve

fund is set aside to ensure that the company or municipality has adequate
funding to at least partially finance the project.
61) MARGIN OF SAFETY
A principle of investing in which an investor only purchases securities
when the market price is significantly below its intrinsic value. In other
words, when market price is significantly below your estimation of the
intrinsic value, the difference is the margin of safety. This difference allows
an investment
to
be
made
with
minimal
downside
risk.
MARGIN OF SAFETY=ACTUAL SALES - BREAK EVEN SALES
62) PLACEMENT DOCUMENT
Document prepared by Merchant Banker for the purpose of Qualified
Institutions placement and contains all the relevant and material disclosures
to enable QIBs to make an informed decision.

THE IPO PROCESS IN INDIA

Appointment of merchant banker and other intermediaries

Registration of offer document

Marketing of the issue

Post- issue activities

Appointment of Merchant Banker and Other Intermediaries

One of the crucial steps for successful implementation of the IPO is the
appointment of a merchant banker. A merchant banker should have a valid
SEBI registration to be eligible for appointment.
A merchant banker can be any of the following lead manager, comanager, underwriter or advisor to the issue.
The number of co- managers should not exceed the number of lead
managers.
There can only be one advisor/consultant to the issue.
There is no limit on the number of underwriters.
Other Intermediaries
Registrar to the Issue: Registration with SEBI is mandatory to take on
responsibilities as a registrar and share transfer agent. The registrar provides
administrative support to the issue process. The registrar of the issue assists
in everything from helping the lead manager in the selection of Bankers to
the Issue and the Collection Centres to preparing the allotment and
application forms, collection of application and allotment money,
reconciliation of bank accounts with application money, listing of issues and
grievance handling.
Bankers to the Issue: Any scheduled bank registered with SEBI can be
appointed as the banker to the issue. There are no restrictions on the
number of bankers to the issue. The main functions of bankers involve
collection of application forms with money, maintaining a daily report,
transferring the proceeds to the share application money account maintained
by the controlling branch, and forwarding the money collected with the
application forms to the registrar.
Underwriters to the Issue: Underwriting involves a commitment from the
underwriter to subscribe to the shares of a particular company to the extent
it is under subscribed by the public or existing shareholders of the corporate.
Broker To the Issue: Any member of a recognized stock exchange can
become a broker to the issue .A broker offers marketing support,
underwriting support, disseminates information to investors about the issue
and distributes issue stationery at retail investor level.

Registration Of The Offer Document

For registration,10 copies of the draft prospectus should be filed with SEBI.
The draft prospectus filed is treated as a public document. The lead manger
also files the document with all listed stock exchanges. Similarly, SEBI
uploads the document on its website www.sebi.com. Any amendments to be
made in the prospectus should be done within 21days of filing the offer
document. Thereafter the offer document is deemed to have been cleared by
SEBI.
Promoters Contribution: In the public issue of an unlisted company, the
promoters shall contribute not less than 20% of the post issue capital.
Lock-in Requirement
The minimum promoters contribution will be locked in for a period of 3 years.
The lock-in period commences from the date of allotment or from the date of
commencement of commercial production, whichever is earlier.
Marketing of the Issue

Timing of the Issue

Retail distribution

Reservation of the Issue

Advertising Campaign

Timing of the Issue

An appropriate decision regarding the timing of the IPO should be made,
keeping in mind the general sentiments prevailing in the investor market.
Retail distribution
Retail distribution is the process through which an attempt is made to
increase the subscription. Normally, a network of brokers undertakes retail
distribution. The issuer company organises road shows in which conferences
are held, which are attended by high networth investors, brokers and sub-

brokers. The company makes presentations and solves queries raised by

participants. This is one of the best ways to raise subscription.
Reservation in the Issue
Sometimes reservations are tailored to a specific class of investors. This
reduces the amount to be issued to the general public. The following are the
classes of investors for whom reservations are made:

Mutual Funds

Banks and Financial Institutions; Non-resident Indians (NRI) and

Overseas Corporate Bodies (OCB) The total reservation for NRI/OCB
should not exceed 10% of the post-issue capital, and individually it
should not exceed 5% of the post issue capital.

Foreign Institutional Investors (FII): The total reservation for FII cannot
exceed 10% of the post-issue capital, and individually it should not
exceed 5% of the post issue capital.

Employees: Reservation under this category should not exceed 10% of

the post issue capital.

Group Shareholders: Reservation in this category should not exceed

10% of the post issue capital.

The net offer made to the public should not be less then the 25% of the total
issue at any point of time.
Post-Issue Activities

Principles of Allotment: After the closure of the subscription list, the

merchant banker should inform, within 3 days of the closure, whether
90% of the amount has been subscribed or not. If it is not subscribed
up to 90%, then the underwriters should bring the shortfall amount
within 60 days. In case of over subscription, the shares should be
allotted on a pro-rata basis, and the excess amount should be refunded
with interest to the shares holders within 30 days from the date of
closure.

Formalities Associated With Listing: The SEBI lists certain rules

and regulations to be followed by the issuing company. These rules and
regulations are laid down to protect the interests of investors. The
issuing company should disclose to the public its profit and loss
account, balance sheet, information relating to bonus and rights issue
and any other relevant information.

Definition of 'Bridge Financing'

In investment banking terms, it is a method of financing used by companies
before their IPO, to obtain necessary cash for the maintenance of operations.
Bridge financing is designed to cover expenses associated with the IPO and
is typically short-term in nature. Once the IPO is complete, the cash raised
from the offering will immediately payoff the loan liability.
These funds are usually supplied by the investment bank underwriting the
new issue. As payment, the company acquiring the bridge financing will give
a number of shares to the underwriters, at a discount of the issue price that
equally offsets the loan. This financing is, in essence, a forwarded payment
for
the
future
sales
of
the
new
issue.

Definition of 'Eurobond'
A bond issued in a currency other than the currency of the country or market
in which
it is
issued.
Usually, a eurobond is issued by an international syndicate and categorized
according to the currency in which it is denominated. A eurodollar bond
that is denominated in U.S. dollars and issued in Japan by an Australian
company would be an example of a eurobond. The Australian company in
this example could issue the eurodollar bond in any country other than the
U.S.
Eurobonds are attractive financing tools as they give issuers the flexibility to
choose the country in which to offer their bond according to the country's
regulatory constraints. They may also denominate their eurobond in their
preferred currency. Eurobonds are attractive to investors as they have small
par
values
and
high
liquidity.

Definition of 'Leverage'
1. The use of various financial instruments or borrowed capital, such as
margin,
to
increase
the
potential
return
of
an
investment.
2. The amount of debt used to finance a firm's assets. A firm with
significantly more debt than equity is considered to be highly leveraged.
Leverage is most commonly used in real estate transactions through the use
of
mortgages
to
purchase
a
home.

Definition of 'Finance'
The science that describes the management, creation and study of money,
banking, credit, investments, assets and liabilities. Finance consists of
financial systems, which include the public, private and government
spaces, and the study of finance and financial instruments, which can relate
to countless assets and liabilities. Some prefer to divide finance into three
distinct categories: public finance, corporate finance and personal finance.
All
three
of
which
would
contain
many
sub-categories.