Glossary

P

• Price Band The red herring prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the Cap should not be more than 120% of the floor price. The price band can have are vision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members. In case the priceband is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.
• Price discovery The role of these entities is important. Both the lead managers and underwriters have the implicit responsibility of raking up enough investment for the issue. The first has its income attached to the applications and second bears the market risk failing which it has to cough up the amount which it may not recover in case of a below average market response as this is the factor that decides the scrip's performance in secondary market. Therefore, both play an important role in the price determination of the issue. The issuing company obviously wants to raise as much money as possible by selling as less number of securities possible. This is definitely in the interest of shareholders of the company as the dilution of equity is tried to be kept at minimum. Some of the general aspects by which the issuing company decides the price are the company image, project's strengths, business prospects and the incremental cash flows that are expected to accrue as a result of the project. But the lead managers and underwriters vet the price judging by the general market sentiment at that point of time. This basic interlocution of different opinion is what leads ultimately to price discovery for the issue.
• Price sensitive information Price sensitive information is information about a company's trading or other affairs having an influence on its share price.
• Primary market It refers to the market place where companies from the investors raise fresh money. The money raised may be utilized in paying for expansion or paying off debt etc.
• Private Placement The allotment of an issue is below 50 persons is called Private Placement.  
• Proceeds Companies go public to raise money. The money raised is referred to as proceeds. In every prospectus there is a section entitled "Use of proceeds". Investors should read this section to find out why the company plans to raise money from the public.  
• Promoter The promoter has been defined as a person or persons who are in over-all control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as promoters(s). It may be noted that a director / officer of the issuer company or person, if they are acting as such merely in their professional capacity are not be included in the definition of a promoter.  
• Promoter Group Promoter group includes the promoter, an immediate relative of the promoter (i.e. any spouse of that person, or any parent, brother, sister or child of the person or of the spouse). In case promoter is a company, a subsidiary or holding company of that company; any company in which the promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the Promoter; any company in which a group of individuals or companies or combinations thereof who hold 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company. Incase the promoter is an individual, any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member; any company in which a company specified in (i) above, holds 10% or more, of the share capital; any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10%of the total, and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group"  
• Put option An option that conveys to the option buyer the right but not the obligation to sell a predefined quantity of the underlying asset, e.g., 1,00shares, at a fixed price at any time during the life of the option.
• Put Spread The simultaneous purchase (sale) of a put at one exercise price and the sale (purchase) of a put at a lower exercise price