The grey market premium aka IPO GMP is information calculated based on the demand of a company that is coming up with an IPO. The grey market starts unofficially in the unregulated market after the IPO date and price band announcements. IPO Investors always look at the Upcoming IPO GMP before investing in an IPO but it might vary according to market conditions, demand, and subscription numbers.

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.

Past IPO Grey Market Premium of IPO 2024

Get daily updates about the IPO grey market premium

Important Points

1. IPO Grey Market Premium (IPO GMP) are the prices for the particular date only. We try to update it 2-3 times every single day. Also, the date is mentioned in the table title.
2. This is only the current GMP price, we try to show the trend for a particular IPO. We do not buy, sell, or do any transaction in the IPO Grey Market.
3. The IPO Grey Market Premium changes daily and every hour. This is just an indicator. Don’t blindly follow IPO GMP and take your decision about its subscription.
4. Kindly consult your Stock Broker or Financial Advisor for more information about the IPO.

What is IPO GMP (IPO Grey Market Premium)?

IPO GMP is the per share premium an IPO commands in the grey market before the listing of shares. In simple terms, this IPO premium indicates the price gray market buyers are willing to pay over and above the allotment price asked by the company. As such, GMP indicates that the offer is likely to list at higher prices and reward successful applicants. On the other hand, an IPO grey market discount indicates that the offer is likely to list at lower rates.

The IPO grey market is an informal setup and it operates even before the IPO start date and goes on till the listing date. The IPO premium fluctuates daily on the basis of IPO demand and in this regard, there is little difference between the primary and secondary markets. It is observed that GMP goes up with wider markets and similarly, comes down in subdued conditions. If you feel the need to keep a close watch on IPOs, look no further than IPO Central.

What is Kostak’s rate?

Kostak rate is the amount an investor gets by selling his/her IPO application in the grey market. This is the amount an investor stands to get, irrespective of IPO allotment status. As an example, a Kotak rate of INR 300 indicates that an investor selling his application will receive this amount even if there is no allotment and even if the stock is listed at a discount to the allotment price.

What is Subject to Sauda?

‘Subject to’ is another term frequently used in the grey market to denote a sauda for buying a firm allotment application. In other words, this is the amount buyers are ready to pay for an application that has been allotted shares. Naturally, this amount is much bigger than Kostak. A seller in this case gets this amount even if the stock lists at lower rates than the allotment price. The risk of a discounted listing is borne by the buyer.

In case of no allotment, the sauda stands canceled. As one can see, there is a trade-off between Kostak and Subject to Sauda trades and while investors can make big money in the second one, s/he gets nothing in case of no allotment. In contrast, s/he can lock a small profit by selling the application at Kostak rates.

How do market conditions influence the IPO GMP?

Market conditions play a significant role in determining the Grey Market Premium (GMP) of  Mainline and SME IPOs. The overall sentiment, sector performance, and economic factors can significantly impact investor appetite for IPOs, which in turn affects the GMP.

1. Bullish Market Sentiment:

When the overall market sentiment is bullish, investors are more likely to be optimistic about the prospects of IPOs. This increased confidence leads to higher demand for IPO shares in the grey market, resulting in a higher GMP.

2. Favourable Sector Performance

If the sector in which the IPO company operates is performing well, investors are more likely to be bullish on the company’s prospects. This positive sentiment can drive up the GMP, as investors are willing to pay a premium for the shares. For example, if a particular sector is experiencing strong growth or disruptive innovation, investors may be more willing to pay a premium for IPO shares in that sector.

3. Strong Economic Conditions

Robust economic conditions, such as high GDP growth, low inflation and stable interest rates, can create an environment conducive for IPOs. Investors are more likely to be confident in the long-term prospects of companies going public, leading to higher GMPs.

4. Volatility and Uncertainty

Conversely, market volatility and economic uncertainty can dampen investor appetite for IPOs. In such scenarios, investors may be more cautious and less willing to pay a premium for IPO shares, resulting in lower GMPs.

Investors should carefully analyse market conditions and sector-specific factors when assessing the potential performance of an IPO.

Why is IPO GMP crucial for investors considering new offerings?

The Grey Market Premium (GMP) serves as an early indicator of market sentiment and investor interest in an IPO. A high GMP suggests strong demand and positive sentiment, which can be a valuable signal for investors.

Monitoring the Mainline/SME IPO GMP can help investors manage risk by identifying potential trends and market sentiment shifts, allowing them to adjust their investment strategies accordingly.

What risks should investors be aware of when relying on IPO GMP?

Relying solely on GMP can lead to a short-term focus. GMP primarily reflects immediate market sentiment and demand during an IPO’s launch, overlooking the company’s long-term potential. Investors may miss out on assessing a firm’s prospects beyond its initial listing, which could result in overlooking fundamental factors crucial for making sound, long-term investment decisions.

At IPOTrend, we try to provide comprehensive analysis of the company’s historical financial performance, evaluation of the stock’s valuation and returns relative to its listed peers, and assessment of both the company’s and the industry’s future growth drivers and potential risks are essential for making informed investment decisions.

Which strategies can investors adopt to effectively leverage IPO GMP information?

Investors conduct thorough research on the company going public, its financials, business model, and industry trends. Combine this information with the GMP to gain a holistic view of the IPO’s potential performance. They can use the GMP as a risk assessment tool. A positive GMP of Mainline/SME IPO may indicate lower immediate risks, while a negative or low GMP could signal caution. Also, investors can monitor the subscription levels of the IPO. If the IPO is oversubscribed, it indicates strong investor demand and the possibility that the IPO is undervalued.

Income tax implications of grey market trades

Since the grey market is informal, all profits will be in the name of the IPO applicant who sold his/her application. IPO grey market trades are mostly settled in cash which means that actual trades happen in the applicant’s account. This directly puts the tax liability on the applicant.

IPO Central is the best IPO research, recommendation, and discussion platform for retail and HNI investors. Investors can also make use of our service to gain insight into brokerage house reports and analysts’ minds. Get a detailed examination, grey market premium, and a study of all upcoming IPO GMPs in India.

Participate in lively IPO discussions and benefit from the perspective of other readers. Here is a list of the current, forthcoming, and recently closed mainboard and SME IPOs in India. Click on the respective IPO and scroll down to the comments section.

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 the time before listing.
• Subscribe only when 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’s 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 only in the primary market after listing.

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 is an unofficial and informal market where the IPO shares are traded before they are officially listed on the stock exchange. IPO Grey Market is an unregulated and operated market, but its presence is important for every IPO as it gives potential investors an idea of the share market sentiment and demand for the IPO.

The premium price which an investor is willing to pay over and above the IPO issue price in the grey market is known as the Grey Market Premium. Kostak Rate or Subject to Sauda are the price at which IPO applications/lots are sold in Grey Market.

In this chapter, we will understand the basic concept of grey market trading and basic terms and strategies used in its dealing.

IPO Grey Market Premium Meaning

Grey Market Premium, commonly known as GMP, is the difference between the price at which IPO shares are traded in the grey market and the IPO issue price. For example, if the IPO issue price is Rs 850 and an investor is willing to pay an additional Rs 300 to get the IPO share. This means that the GMP of the IPO is Rs 300 per share.

IPO GMP helps predict listing prices. In the example above, investors anticipate a listing price of Rs 1,150 (IPO issue price plus GMP i.e 850 + 300). Although there is no guarantee that the IPO listing price will exactly match the GMP, the GMP is one of the most important indicators that generally help investors predict the IPO price and make an investment decision accordingly.

IPO Grey Market Dealers

Grey market traders are unauthorized individuals who buy/sell IPO shares on an unofficial market (over-the-counter market). In certain cases, the grey market dealers are also required to underwrite a certain % of the IPO.

Since the IPO grey market is an unregulated and unofficial market, you cannot find registered traders. You need to check with local dealers to see if they operate in the grey market and can help you find buyers/sellers for your transactions. You can also try posting a message on the IPO Grey Market discussion page of InvestorGain.com to check for any buyer/seller or any discussion.

Trading in Grey Market

Trading in the IPO grey market begins with the announcement of the IPO issue price until the shares are listed on the exchange. The following are some of the key features of IPO grey market trading:

• Unofficial and unregulated market.
• Trading in the grey market takes place usually via telephone calls.
• Settlement of trade happens only in cash, generally using services of Angadia.
• Transactions in the grey market are based on mutual trust.
• Round the clock market that works 24*7.
• No regulatory body governs IPO grey market trading.
• No official or registered dealers are involved.
• No formal contracts are issued for transactions conducted in the grey market.

Grey market trading usually involves three parties: the buyer, the seller, and the dealer. Grey market trading takes place either through the trading of IPO shares or IPO applications.

To trade in the grey market, as a very first step, an investor needs to find a grey market dealer. Since the grey market dealing happens solely on trust, the dealer builds clientele through references. Thus, an investor can start trading in the grey market when he is referred to a dealer through a good and reliable contact.

Once an investor finds the dealer, he can place the order over a phone call. The trading in the grey market starts as soon as there is any news of an IPO in the market till the previous day of listing. The settlement happens on the listing day at 9.45 am. Once the listing takes place, the grey market window for the said IPO gets closed. There is also a 90-day expiry period for the grey market trades. If an IPO does not take place within 90 days from the grey market transaction date, the deal gets canceled.

On the listing date, the dealers punch in their buy/sell orders as per their net delivery position at equilibrium price.

The accounting of the trades is done using Excel sheets or simple Tally tools. On the settlement day, the angadia goes door-to-door to recover/deliver cash as the case may be.

In case of any default by either of the counterparties, there is nothing anyone can do. Thus, trading in the grey market is risky.

IPO Grey Market Rate Types

1. IPO Grey Market Premium (GMP)

The IPO GMP price can be positive or negative.

• If the GMP value is positive or very high, this indicates that the IPO may perform better on listing or bumper listing. Example: If the IPO issue price is Rs 500 and the GMP is Rs 150, the listing is likely to be at Rs 650 (30% gain).
• If the premium is low or negative, investors may be uncertain whether the stock will be successful after the listing and expect the listing to be at a discount. Example: If the IPO issue price is Rs 500 and the GMP is Rs – 200, the listing is expected at Rs 300.

Example of GMP with listing gain

If the IPO issue price is Rs 500 and the GMP is Rs 300. It means that buyer A in the grey market is willing to purchase the share at Rs 800.

Suppose an IPO applicant i.e. seller B of IPO shares in the Grey market has 15 shares. He has submitted an application of Rs 7,500 (15*500).

The grey market buyer A will pay Rs 12,000 (15 * 800) against the IPO application value of Rs 7,500 (15 * 500).

Now let us say if the listing happens at Rs 1,200, the buyer and seller will earn below profits:

• Profit for seller B of the IPO shares: Rs 4,500 (12,000-7,500)
• Profit for buyer A of the IPO shares: Rs 6,000 (18,000 – 12,000)

Example of GMP with listing loss

Continuing the above example, if the listing happens at Rs 600, the profit/loss for both parties will be as below :

 As per the listing price of Rs 600, the application amount for 15 bids will be 15*600 = Rs 9,000.

Profit for seller B of the IPO shares: Rs 4,500 (12,000 – 7,500)

Loss for buyer A of the IPO shares: Rs 3,000 (9,000 – 12,000)

The amount of profit for the seller remains the same. However, the buyer incurs a loss of Rs 3,000 because the listing was below the GMP.

2. Kostak Rate

The IPO Kostak price is an agreed-upon price at which IPO applications are sold and purchased, regardless of their allotment status. The Kostak Price is the fixed price paid by the buyer of the IPO Application to the seller of the IPO Application.

The Kostak rate is the price for the entire IPO application and not per share. It is a price mutually agreed between the buyer and seller.

For example, an investor has applied for 15 shares at Rs 500 in an IPO amounting to Rs 7500. Now there is another investor who is bullish about this upcoming IPO and agrees to pay Rs 1,000 as the premium to purchase the entire IPO application. In this case, the seller of the IPO application secures a fixed profit of Rs 1,000 irrespective of whether he secures an allotment or not.

If the seller receives allotment and the listing happens at a premium, the seller is required to pass the listing gains to the buyer or credit the shares to the purchaser against Rs 8,500 (7,500 +1,000).

If the seller does not receive the allotment, still the buyer of the IPO application needs to pay Rs 1,000 to the seller of the IPO application.

3. Subject to Sauda

Subject to Sauda price is an extension to the IPO Kostak rate. In subject to Sauda, the buyer of the application agrees to pay a fixed price against the IPO application only if the seller of the IPO application receives allotment in the IPO. The subject-to-Sauda rates are generally higher than the Kostak rates.

Considering the above example, the buyer of the applicant agrees to pay an additional Rs 4,000 for the entire application provided the IPO applicant receives the allotment.

In this case, if the applicant secures no allotment, the deal gets canceled. However, if the IPO applicant receives the allotment the buyer of the IPO application pays Rs 4,000 as the premium. The seller of the applicant either passes the listing gains to the seller or shares to the buyer of the IPO application for Rs 11,500 (7,500 + 4,000).

Note: Rs 7,500 is the amount for 15 shares bought at Rs 500. Rs 4000 is the premium the buyer paid for the entire application.

IPO Grey Market Premium Vs Kostak

Grey Market Premium vs Listing price

Grey Market Trading Pros and Cons

Advantages

• Increases the chances of making a profit from the IPO.
• Availability of IPO shares for trading even before listing or subscription.
• Ability to purchase IPO shares even after the IPO subscription window closes.
• No limit on the number of IPO applications for trading.

Disadvantages

• A high amount of risk is involved as the market is unregulated.
• No grievance forum in case of any fraud or issues.
• Chances of losses in case of listing at a discount.
• No written or official agreement to buy or sell; hence no proof to serve.

Grey Market Premium is Good or Bad

Grey Market is beneficial if used in the right way. It is one of the indicators that help to predict the listing price. Grey Market can be used as an effective hedging tool and not for gambling. GMP is based on market sentiment and demand and supply of IPO shares and gives a fair idea of IPO listing.

Although the GMP is not always accurate, investors should keep an eye on the GMP as it can help them evaluate their investment decisions and the performance of an IPO on listing.

You can have a look at the IPO GMP live data or the IPO GMP performance tracker on Chittorgarh.com under the GMP tab of every IPO.

Page Glossary

Note: Angadia is an age-old traditional form of courier service that deals in the transfer of valuable items like cash, jewelry, etc. Generally, anadians are used for money transfer services. They are the informal intermediaries who deal in cash. Angadias play a very important role in Grey Market which operates on a cash basis. It is a very risky service and is based purely on trust. Angadias offers doorstep delivery for cash pickup or delivery.

IPO Grey Market Premium aka IPO GMP FAQs: