IPO or Initial Public Offering is the first sale of stock by a company to the public. It is a way for the company to raise money from investors for its future projects or the selling of securities to the public in the primary stock market. IPOs are often issued by small companies seeking capital to expand but can also be done by large privately owned companies looking to become publicly traded. It's basically a way through which a company can raise its equity capital from the capital markets.

Price band indicates the different price levels within a given range in which the investor can enter his / her bid.

The lower limit of the price band is known as Floor Price.

The upper limit of the price band is known as Cap Price.

The offer document is the prospectus in case of a public issue, which is filed with the Registrar of companies (ROC) and stock exchanges. The offer document contains all relevant details pertaining to the issue upon which the investors can make his / her decision.

Draft Offer Document is the offer document in the draft stage, which is filed with Securities and Exchange Board of India (SEBI) for its observations. The draft offer documents are filed with SEBI at least 21 days prior to filing the offer document with ROC and Exchange.

IPOs are basically of two types: 'Book Building' and 'Fixed Price IPO'. In a book building public issue the bids are received at different price levels and the demand for the issue is built up over a period of time. Depending upon the bids received at different price levels the issue price is ascertained. In a fixed price issue, the issue price is pre-ascertained by the issuer.

Any company making a public issue or a listed company making a rights issue of value that's more than Rs. 50 Lakhs is required to file a draft offer document with SEBI for its observations. The company can only proceed further after receiving observations from SEBI. The validity of SEBI's observation lasts for 3 months only which means the company has to open its issue within the 3 month period.

In case of public issues the actual discovered price/ issue price can be anything between a given price band. The discovered issue price is called the cut-off price.

The allotment in case of QIB category is on a discretionary basis and in case of Retail and Non-QIB (HNI) category the allotment is on a proportionate basis.