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Finance GlossaryBasis Of Allotment
Basis Of Allotment
Definition of Basis Of Allotment
The basis of allotment is the criteria to allocate shares to investors, most commonly during IPOs. Criteria or basis for allotment lays out the following information:
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
- Share allocation ratio
- Bids
- Demand
- Final price
The basis of allotment can vary based on the type of investor in question. Bidders during an IPO for whom a different basis of allotment applies include:
- Retail Individual Investors (RII)
- Qualified Institutional Buyer (QIB)
- Non-Institutional Buyers (NIBs)
- High Net-worth Individuals (HNIs)
- Anchor Investors
Related Terms
Par Value
Par value, also known as face value or nominal value, is the stated, fixed amount on a financial instrument (such as a stock or bond) fixed at the time of issuance, the minimum amount for accounting and legal purposes. For bonds, it's the amount repaid at maturity, and used to calculate interest; for stocks, it's the minimum price the company can sell shares for initially. Market price is different from par value.
Paid-Up Capital
Paid-Up Capital is the amount of money that the company has received from its shareholders in exchange for the company's stock. It is thus the portion of the authorised capital which has actually been subscribed by the investors and paid for. Paid-up capital of the company appears in the balance sheet.
Government Bonds
Government bonds are debt instruments that allow the central banks to raise capital to finance operations. The types of government bonds are:
- Treasury Bills
- Fixed Rate Bonds
- Floating Rate Bonds
- State Development Loans
- Sovereign Gold Bonds
- Zero Coupon Bonds
Every government bond has a credit rating that’s based on the financial health of the country. The government is the apex institution of any country, which is why their credit rating is the high.
In India, you’ll notice government bonds with the credit rating SOV. This is known as a sovereign rating.
In India, you’ll notice government bonds with the credit rating SOV. This is known as a sovereign rating.
Lock In
Lock-in is the period during which you can not sell shares or other financial instruments. The purpose of a lock-in is to ensure that the price and liquidity of the instrument do not take a sudden nosedive. Lock-in is commonly applied to shares held by promoters or major shareholders. You may have heard the term while investing in mutual funds as well, where it is used in reference to close-ended funds and ELSS funds.
Differential Pricing
Differential pricing is a strategy that involves setting different prices for the same product or service based on the type of customer or tming.
For example, a zoo ticket may cost Rs. 10 for domestic visitors and Rs. 100 for international visitors. Or, when buying a product gets costlier as and when the last date for the sale approaches.
That’s why differential pricing is also known as discriminatory pricing and variable pricing.
For example, a zoo ticket may cost Rs. 10 for domestic visitors and Rs. 100 for international visitors. Or, when buying a product gets costlier as and when the last date for the sale approaches.
That’s why differential pricing is also known as discriminatory pricing and variable pricing.
Annual General Meeting
An Annual General Meeting or AGM is an event where a company’s board of directors presents the annual report, future outlook, and strategy to shareholders. AGMs serve as one of the few occasions when shareholders get to interact with a company’s board of directors.
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