Note for Investors: A high IPO premium indicates that investors are bullish on the company and expect the share price to rise when the company lists on the stock exchange. A low IPO premium indicates that investors are bearish on the company and expect the share price to fall when it lists. The demand will lead to a positive or negative listing of the respective IPO.

IPO GMP Disclaimer

• The IPO GMP displayed on the IPOBytes portal is for informational purposes only.
• We do not trade in the grey market.
• Do not apply the IPO based on the IPO GMP.
• A thorough analysis of the company’s financials, promoters’ data, and the company’s business will help the investor.
• The grey market is based on the IPO demand in the market, which shows in the subscription numbers.
• The GMP numbers are based on the estimated subscription and demand for the particular IPO.
• The stock market investments are subject to market risk. Make your decision wisely.

  Former SEBI chairperson Madhabi Puri Buch announced at the start of 2025 that the market regulator might develop a “when-listed” platform. It will help investors to trade the IPO shares before the official IPO Listing. This move will limit the grey market trading and ensure better price discovery for the investors. This will offer trade in a regulated manner.

  
  
  What is IPO GMP?

  The IPO GMP, also known as IPO Grey Market Premium, refers to the difference between the issue price and its estimated listing price in the grey market. Before an IPO officially hits the stock exchanges for public trading, investors engage in unofficial trading of the IPO shares during a period called grey market or unofficial market trading. The grey market is an over-the-counter market where shares are bought and sold without the involvement of the stock exchanges.

  The IPO premium is the difference between the price at which investors trade shares of an Initial Public Offering (IPO) in the grey market. The grey market allows investors to buy and sell shares before the company lists on a stock exchange. Investors can use the IPO GMP price as a gauge of their sentiment toward an IPO to decide whether to invest.

  The GMP price isn’t always an accurate predictor of how the share price will perform when the IPO is listed on the stock exchange. There are a number of factors that can affect the share price on the listing, such as the level of demand from institutional investors and the overall market conditions. The GMP is simply a reflection of investor sentiment at a particular point in time. The actual performance of the shares will depend on several factors, including the company’s performance, general market conditions, and other factors. One key aspect that captures the interest of potential investors is the IPO Grey Market Premium.

  The IPO listing might vary from the estimated listing price suggested by the grey market due to the bull/bear market or the demand for the company’s shares. We have witnessed a vice versa movement on the listing day against the grey market predictions. Some IPOs have high grey market premiums, but they are listed below the expectations, and in other cases, there are some IPOs that have low grey market premiums, but they are listed at a higher price on the listing day. As we have mentioned, the grey market is always one of the strong factors for the IPO listing gain calculation, but we highly recommend investors use the grey market rates for just information, or for educational purposes only. The IPO investment should not be traded based on a prediction.

  
  
  Important Points to Consider about IPO GMP:

  • The grey market transactions are unofficial, and that involves IPO investors and the stockbrokers. It depends on the trust between both parties.
  • Read our IPO analysis before applying for an IPO.
  • The grey market rates are calculated and provided or sourced from market research or experts.
  • We do not recommend trading in the Grey Market as it’s illegal.
  • Kostak Rate is the IPO premium one gets by selling his/her IPO application (in an off-market transaction) to someone else even before allotment or listing of the issue.
  • Do not subscribe to the IPO at the premium given above. It may change anytime before listing.
  • Subscribe only considering the Fundamentals of the companies.

  
  
  What is Grey Market Premium?

  The IPO grey market premium refers to the IPO premium or additional price at which IPO shares are traded unofficially before their official listing on a stock exchange. It represents the market’s perception of the potential value and demand for the shares.

  The IPO GMP is a term people use in the IPO market to check what is the estimated price at which the IPO might list. It is unofficial, but investors look at an IPO’s grey market price to get the stock’s fixed gain. It works before the IPO listing and during the days from the IPO start date to the allotment date. The grey market premium indicates how the IPO might react on a listing day with an estimated price.

  Let’s see how the IPO GMP calculation goes. If the company comes up with an IPO of ₹100 and the grey market premium is around ₹20, then we can assume that the IPO might list at around ₹120 on its listing day. But the fact is, there is no reliability. In most cases, IPO GMP works, but in some cases, it doesn’t. We have observed that if the IPO is in demand and the estimated HNI and QIB subscription is on the higher side, the IPO list is around the given price with an estimated IPO GMP.

  
  
  What Factors are Influencing IPO GMP?

  Several factors contribute to the IPO Grey Market Premium, including:

  • Company Fundamentals: Strong financials, growth prospects, and a reputable management team can positively impact the GMP.
  • Market Conditions: Overall market sentiment, sector performance, and economic factors influence investor appetite for IPOs.
  • Demand and Supply Dynamics: The number of shares available and the level of investor interest play a crucial role in determining the GMP.

  
  
  What is the Kostak Rate?

  The Kostak rate is the amount that one investor pays to the seller of an IPO application before the IPO listing. As the grey market reacts, the Kostak rates also react that way. One can buy and sell their full IPO application on Kostak rates outside the market and fix their profit. The Kostak rates apply whether the investor gets the IPO allotment or not; the buyer should pay the Kostak rates for the IPO.

  If the investor did 5 applications for one IPO and sold the same at ₹1000 per application, it means they secured the IPO profit at ₹5000. If the investor gets the allotment in 2 applications, still his profit will be ₹5000. Now, if the investor sells the stock and gets a profit of around ₹10000, then he or she needs to give the remaining profit of ₹5000 to the investor who bought the application. This is the secure way to sell your application in the IPO grey market.

  What is Subject to Sauda?

  As per the Kostak rate, the Subject to Sauda on the application is the amount decided when the investors get the firm allotment on their IPO Application. If one buys or sells the IPO application on the subject to sauda, it means one can get the said amount if one gets the allotment; otherwise, sauda will be canceled. In this, one can not fix their profit as it depends on the allotment. If the investor gets an allotment and sells the application for around ₹10000 and the profit goes high on listing day, around ₹15000, then one should pay ₹5000 to the investor who bought the application.

  How to Calculate Grey Market Premium?

  The IPO GMP is a price that is traded in the grey market before the IPO listing process. The calculation is done based on the company’s performance, its demand in the grey market, and the probability of the subscription. Let’s assume that if the X IPO price is fixed at ₹200 and the grey market is showing the rate of ₹100, it means the IPO might list at ₹300 (ie, ₹200+₹100). Still, this is an assumption, but the actual listing might vary from the grey market price.

  Are Grey Market Stocks Safe?

  It depends on the broker or the trading person, and we suggest it is not safe. If you are trading in the grey market, it will be at your own risk. There might be fluctuations on the higher side, so one needs to do it with precautions. As we suggest, just refer to the IPO GMP for the listing gain purpose. Be wise and trade in the primary market after listing only.

  How Do I Buy / Sell IPO Application in the Grey Market?

  There are no official people or businesses associated with the grey market. Some brokers buy and sell IPO applications on Kostak Rates or Subject to Sauda Rates based on the IPO GMP. One should find local brokers who stay between buyers and sellers and do the grey market trading of IPO applications. Be aware of the rates and then do the buying or selling.

  Significance of IPO GMP

  The IPO Grey Market Premium serves as an indicator of market sentiment and the perceived value of the IPO shares. It allows potential investors to gauge the level of demand and the IPO premium they may have to pay if they wish to purchase shares during the IPO. However, it’s essential to note that the GMP doesn’t guarantee future performance and is subject to change.