Glossary

B

• Blue Chip Stocks Large, credit-worthy company well known for the quality and wide acceptance of its products or services and its ability to make money and often pay dividends.  
• Board of Directors The composition of the Board of Directors is particularly critical for an IPO. Typically, a board is composed of Directors who are also shareholders and independent directors. Independent directors have no underlying financial or personal relationship with the company that could create a conflict of interest and are on the board for their experience, business judgment and contacts. Independent directors may own the shares of the company but are not large shareholders. Investors should look for a board that has at least two independent directors. Typically, IPOs add their first outside directors at or immediately after the offering.
• Book Running Lead Manager (BRLM) In the pre-issue process, the Lead Manager (LM) takes up the due diligence of company’s operations/ management/ business plans/ legal etc. Other activities of the LM include drafting and design of Offer documents, prospectus, statutory advertisements and memorandum containing salient features of the prospectus. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization Prospectus and RoC filing. Appointment of other intermediaries viz., Registrar(s), Printers, Advertising Agency and Bankers to the Offer is also included in the pre-issue processes. The LM also draws up the various marketing strategies for the issue The post issue activities including management of escrow accounts, coordinate non-institutional allocation, intimation of allocation and dispatch of refunds to bidders etc are performed by the LM. The post Offer activities for the Offer will involve essential follow-up steps, which include the finalization of trading and dealing of instruments and dispatch of certificates and demat of delivery of shares, with the various agencies connected with the work such as the Registrar(s) to the Offer and Bankers to the Offer and the bank handling refund business. The merchant banker shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company.  
• Book Building Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. Only the retail investors have the option of bidding at ‘cut-off’. After the bidding process is complete, the ‘cut-off’ price is arrived at on the lines of Dutch auction. The basis of allotment is then finalized and letters allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process  
• Bottom-up Investing Bottom-up investing is a strategy in which investor concentrates only on a specific stock or a company irrelevant of in which industry/ sector the investment takes place. They consider only those stocks whose fundamentals are very strong regardless of macro economic variables.
• Bought Out Deal   An underwriter has a commitment to buy all the shares, from a company and becomes financially responsible for selling them. Also called firm allotment.
• Bullion The generic word for gold and silver.
• Butterfly A recognized option strategy, which involves, in one single transaction, the simultaneous purchase (sale) of a call (put) at one exercise price, the sale (purchase) of two calls (puts) at a higher exercise price and the purchase (sale) of a call (put) at an equally higher exercise price.
• Buy Back Companies, which have surplus of cash to invest, can offer to buy back shares from shareholders, thereby investing back into the company.
• Buyer The investor who wants to purchase security and has placed the order to that effect.