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Firm Allotment

Definition of Firm Allotment

Firm Allotment is the process of allocating shares during an IPO to investors who are not considered to be retail public investors. The firm allotment is done as per SEBI guidelines, which dictate that a portion of the IPO can be allocated to the likes of Mutual Funds, regular employees (permanent), and others.

The complete list of firm allotments for investors by allocation is as follows.

  • Foreign Institutional Investors (FIIs): 30%
  • Development Financial Institutions (DFIs): 20%
  • Mutual Funds: 20%
  • Regular Employees (permanent): 10%
  • Employee of Promoting Company: 10%
  • Lead Bankers: 5%

Any leftover percentage can be allocated to promoters.

Related Terms

Brokerage

Brokerage is the fee that an investor or trader must pay to a brokerage in exchange for its services. Brokerage varies from platform to platform. But, broadly speaking, brokerage on intraday, futures, and options trading is known to be higher than equity delivery (investing).

Authorized Capital

Authorized capital or authorized share capital is the maximum amount of capital for which shares can be issued by a company to its shareholders.

Or in other words, authorized capital denotes all the shares across all the categories that a company could issue if it wanted to raise money.

After Hours Trading

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

After hours trading is allowed from 3.40 PM to 4 PM. Around the world, stocks are known to suffer from a lack of liquidity during after hours trading.

Liquidity Ratio

The Liquidity Ratio is a tool in financial analysis for measuring a company’s ability to fulfil short-term debt obligations without the need to secure external financing. The key term here is liquidity.

Accrued Expenses

An accrued expense is the cost that is incurred in the current accounting period but is due to be paid in the future.

More simply, an accrued expense is an unpaid bill due in the future for goods or services that have already been received by a company.

Accrued expenses show up as liabilities on a company’s books.

Cash Ratio

A cash ratio measures a company’s ability to fulfill short-term debt obligations using only its cash and cash equivalents, which are known to have high liquidity. The formula for calculating cash ratio is:

Cash Ratio: Cash + Cash Equivalents / Current Liabilities



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