Grey Market is an unregulated market to trade IPO applications and IPO shares before listing of the stock. An investor may not want to trade in the grey market, but getting an idea of the GMP can be used to estimate the listing gain on the IPO share. GMP or Grey Market Premium adding to issue price gives the estimated listing price of the IPO share.
Here we are reporting the GMP of all upcoming and current SME and Mainboard IPOs along with Subject 2 Sauda price. Estimated Listing Price is also calculated by adding up GMP and IPO cap price.
| IPO Name | IPO GMP | IPO Price | Listing Gain | Subject Rates |
|---|---|---|---|---|
Premier Energies  27-29 Aug | ₹420 | ₹450 | 93% | ₹5,500 |
| Baazar Style Retail 30-3 Sept | ₹125 | ₹389 | 32% | ₹- |
| Gala Precision Engineering Ltd IPO 28-30 Aug | ₹150 | ₹334 | 45% | ₹- |
| Paramatrix Technologies IPO 27-30 Aug | ₹- | ₹110 | -% | ₹- |
| Orient Technologies 21-23 Aug | ₹82 | ₹206 | 40% | ₹- |
| ECOS Mobility 28-30 Aug | ₹150 | ₹334 | 45% | ₹ |
| Bajaj Housing Finance | ₹40 | ₹- | -% | ₹- |
What is GMP (GREY MARKET PREMIUM)?
Whenever an IPO comes for listing on the stock exchange, the amount of money investors are willing to pay over the offer price of the IPO before listing is called GMP i.e. Grey Market Premium. For example if the issue price of a share is Rs.100 and it is trading at Rs.150 in the grey market, the GMP of that IPO would be Rs.50.
The grey market is an unofficial market over which the government or SEBI has no control. Trading in the grey market is done only on the basis of mutual trust. Based on the demand of the grey market premium, it is estimated what kind of listing the IPO may have.
How is GMP calculated?
Actually the grey market premium is based on the demand for the shares. Investors look at how many shares are being offered by the company. If more shares are available for sale and the demand is low then the grey market premium can be flat or even negative. If the number of shares is less and the demand is high, then there is a jump in the grey market premium. You should understand that you will see higher GMP of that IPO in which fewer shares are available and the demand for the IPO is high. The higher the subscription of the IPO, the more is the increase in the GMP of that IPO.
How correct and how wrong is GMP?
As we told you earlier that grey market premium only indicates the demand of the IPO and we get an idea about the price at which the IPO can get listed. But you cannot depend 100% on the grey market premium. No one has control over the grey market, so there is a possibility of manipulation with GMP. One should not invest in an IPO only on the basis of GMP. You should look at GMP only after getting information about the company’s financial information, company’s debt, company’s future plans, company’s promoters. You can only guess from GMP how the listing of the IPO can be.
Disclaimer
- The estimated IPO Grey Market Premium mention is valid for the specific date.
- We are not buying and selling IPO forms on IPO Grey Market.
- Due to stock market conditions, the IPO listing might differ from the estimated IPO GMP price.
- We strongly recommend that the IPO GMP rates are for education purposes only. Do not subscribe for IPO by just considering the premium price as it may change time before listing. Subscribe to IPO only considering the fundamentals of the companies.
What is IPO GMP?
The IPO GMP (IPO Grey Market Premium) refers to the difference between the IPO’s issue price and its trading price in the grey market. Before an IPO officially hits the stock exchanges for public trading, there is a period during which unofficial trading of the IPO shares takes place in the grey market. The grey market is an over-the-counter market where the buying and selling of shares happen without the involvement of the stock exchanges.
An IPO grey market premium (IPO GMP) is the difference between the price at which shares of an Initial Public Offering (IPO) are traded in the grey market and the issue price set by the company. The grey market is an unofficial market where shares can be bought and sold before they are listed on a stock exchange. GMP can be used as a gauge of investor sentiment toward an IPO. A high GMP suggests that investors are bullish on the company and expect the share price to rise when it is listed on the stock exchange. A low GMP indicates that investors are bearish on the company and expect the share price to fall when it lists.
It is important to note that the GMP is not always an accurate predictor of how the share price will perform when the IPO lists 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 (GMP). This article aims to provide a comprehensive understanding of IPO GMP, IPOs, and their significance in the IPO grey market.
The IPO GMP gives an indication of market sentiment towards the IPO. If the GMP is positive, it means that the shares are being traded at a higher price than the issue price, indicating strong demand for the IPO. Conversely, a negative GMP means the shares are being traded below the issue price, suggesting weak demand.
Let’s see how to calculate the estimated listing price after adding a premium. If the grey market shows the rate of an IPO is ₹100 and the IPO price is around ₹200 then the estimated listing price will be around ₹300. Based on the calculation the listing gain will be 50% against the IPO price.
The listing of an IPO might vary against the estimated listing price suggested by the grey market due to the bull/bear market or the demand for the company shares. We have witnessed that some of the IPOs had lower grey markets but listed with higher gains while a few IPOs in 2021 were a grey market was on the higher side but the listing was at the lower levels. As 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, do not trade based on the numbers.
Important Points to Consider about IPO GMP:
- The grey market transactions are unofficial and that is an involvement of 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 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 on 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 (IPO GMP) refers to the 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 “grey market premium” aka “IPO GMP” is a term people use in the IPO market to check what is the estimated price 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 on. 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’s not. 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 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 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 one did 5 applications for one IPO and sold the same at ₹1000 per application it means he or she secured the IPO profit at ₹5000 rupees. If he gets the allotment in 2 applications still his profit will be ₹5000. Now if he 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. Again if one gets an allotment and he or she sold the application for around ₹10000 and the profit goes high on listing day around ₹15000 then one should pay ₹5000 to the guy who bought the application.
How to Calculate Grey Market Premium?
The IPO GMP aka grey market premium 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 a 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 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 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.
IPO Grey Market Premium aka IPO GMP FAQs:
What is Grey Market Premium aka IPO GMP?
The IPO Grey Market Premium (IPO GMP) refers to the 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 in the market.
What is Kostak Rate?
The Kostak rates apply whether the investor gets the IPO allotment or not, the buyer should pay the Kostak rates for the IPO.
What is Subject to Sauda?
The Subject to sauda apply whether the investor gets the IPO allotment, the buyer should pay the rates decided on the deal for the IPO.
DISCLAIMER: The information related to GMP of IPO is available to the visitors of this blog only through news. STOCKWALE blog never recommends to trade in grey market or invest in IPO. Never invest in IPO or Stock without consulting your financial advisor. GMP prices are shown in this blog only through news related to grey market. We do not trade or deal in it and neither advise anyone to trade in it.