American Depository Receipt (ADR)
It is a type of convertible bond issued in a currency different than the issuer’s
domestic currency. It is the money being raised by the issuing company in the form
of foreign currency. It is a combination of both debt and equity investment by making
regular coupon and principal payments and also giving an option to convert the bond
into stock.
Approved Securities
It refers to the scrips which are being approved by the lender of funds on which
the margin benefit will be given to the borrower.
Bill Discounting
It refers to the scrips which are being approved by the lender of funds on which
the margin benefit will be given to the borrower.
Bonus Issue
It is the offer given by the company of free additional shares to existing shareholders
without any extra cost. It is a mean to distribute the retained profits to the shareholders.
Corporate Debt
Corporate Debt is securities - short and long term debt issued by Corporate. Short
term debt is issued in form of commercial paper. Long term debt is issued in form
of bonds/notes.
Collateral Security
It means a security or a guarantee given in the form of bonds, debentures, shares
which is pledged for the repayment of a loan if the lender can’t procure enough
funds to repay. It is used to establish and secure lender’s interest until fulfillment
of loan obligation.
Credit Appraisal
It is the process by which the lender assesses the credit worthiness of the borrower.
It revolves around character, collateral capability and capacity. It takes into
account various factors like income of the applicants, number of dependents, monthly
expenditure, repayment capacity, employment history, number of years of service
and other factors which affect credit rating of the borrower.
Dividend
This is the amount paid to the shareholders out of the profits of the company.
Drawing Power
It is the loan taking ability of the borrower. It is adjusted daily taking into
considerations the fresh margin supplied by the borrower.
External Commercial Borrowing (ECB)
When the Corporate sector access funds from abroad, it is known as external commercial
borrowings. It is defined to include commercial bank loans, buyer’s credit, supplier’s
credit, securitized instruments such as floating rate notes & fixed rate bonds and
various forms of Euro bonds & syndicated loans.
Financial Planning
It is assessing your business’ financial situation, determining its objectives and
formulating financial strategies of how to achieve them.
Foreign Currency Convertible Bond (FCCB)
It is a type of convertible bond issued in a currency different than the issuer’s
domestic currency. It is the money being raised by the issuing company in the form
of foreign currency. It is a combination of both debt and equity investment by making
regular coupon and principal payments and also giving an option to convert the bond
into stock.
Global Depository Receipt (GDR)
It is a financial instrument used by private markets to raise capital denominated
in either U.S. dollars or euros. It is a negotiable certificate held in the bank
of one country representing the number of shares of a stock traded on the exchange
of another country.
Haircut
The margin is taken in two forms: namely stock & money. The stock is revalued by
applying certain cuts called haircuts which reduce the said stock valuation vis-à-vis
market price. It is based on the practice of eliminating market risk associated
with the stock.
Inter Corporate Deposits
It is an unsecured loan extended by one corporate to another. The rates are high
than the market rates and the risk inherent is also very high.
Interest Rate Swap
It is a contractual agreement entered into between two parties under which, each
agrees to make periodic payments to the other for an agreed period of time based
upon a notional amount of principal. It is a kind of a hedging technique.
IPO (Initial Public Offering)
An Initial Public Offering (IPO) is the first sale of a company shares to public
investors. The main purpose of an IPO is to raise capital for the expansion and
diversification of the company.
Liquity
The degree to which an asset or security can be bought or sold in the market without
affecting the asset’s price. In other words, it is the ease and speed with which
an investment can be converted into cash.
Loan Recall
The lender reserves the right to call back for repayment the amount of loan currently
being utilized by the client from the sanctioned limit.
Margin Call
It is a requirement call by the lender to the borrower to furnish more funds / security
towards margin in order to maintain the outstanding borrowings position. In case,
the borrower fails to furnish fresh margin, the lender may dispose off the security
of the borrower and apply the proceeds towards the realization of the outstanding
loan balance.
Maintenance Margin
It is the minimum amount calculated as a percentage of the market value of the securities
after adjusting for applicable haircut, calculated with respect to the last trading
day’s closing price to be maintained by the client.
Margin Money
It is the difference between the total value of position that the client may want
to take and the loan amount sanctioned to him. This has to be provided in form of
stock or money prior to the release of loan amount.
Oversubscription
Oversubscription of shares in case of IPO means that there was more demand than
the supply of shares offered to public for subscription.
Portfolio
A portfolio is a collection of investments held by an individual or an institution.
It may include stocks, bonds, options, warrants, gold certificates, real estate,
futures contracts to diversify the risk.
POA DEMAT Account
It is a special purpose Demat account under which the borrower gives the power of
attorney to the lender of the funds to operate his account.
POA Bank Account
A special purpose bank account is opened with a designated bank and the power to
operate the account is vested in the lender by the borrower of funds to route all
the funds movement through this account. The borrower gives the power of attorney
to the lender to operate this account and moreover the borrower cannot use this
account for their personal transactions.
Private Equity
It refers to any type of equity investment in an asset in which the equity is not
freely tradable on any stock exchange, in other words these are the securities which
have not been made public tradable.
Pledge
In case of pledge, the goods/documents in the form of share certificates, book debts,
and insurance policies, etc. which are provided as security will be in possession
of the bank /lender. In the event of default by the borrower, the lender can sue
the borrower and sell the items of security to realize the amount due, on giving
the pledger reasonable notice of sale.
Single Scrip Lending
This means the lending of the amount for investment in one single scrip rather than
a combination of scrips.
Stock
The capital raised by a corporation through the issue of shares entitling holders
to an ownership interest (equity). A stock is commonly referred to as a share.
Stock Market
This is the market in which shares are issued and traded either through exchanges
or over the counter markets. It provides companies with access to capital base and
investors with ownership in the company.
Swaps
A contract to exchange a periodic stream of payments with counterparty, like floating
rate payments for fixed interest payments.
Under-Subscription
A situation in which the demand for an initial public offering of securities is
less than the number of shares issued, also known as an "under booking".