What Is IPO GMP (Grey Market Premium)?

Grey market premium (GMP) is one of the most-quoted numbers in Indian IPO discussions — and one of the least understood. This guide explains what it is, how it is quoted, the related terms kostak and subject to sauda, and why it must be treated as unofficial information.

The grey market

Between the time an IPO opens and the time its shares list, the shares cannot be traded on an exchange. The grey market is an informal, unregulated network of dealers who make deals on IPO shares and applications during that window. Deals are made on trust, in cash, with no exchange, clearing house or regulator involved. SEBI does not recognise or regulate these deals, and they are not legally enforceable in the way exchange trades are.

What GMP means

GMP is the premium over the issue price at which grey market dealers say they will buy an IPO's shares once they are allotted. If the upper end of the price band is ₹148 and the quoted GMP is ₹20, dealers are indicating a price of about ₹168 per share.

• Positive GMP: dealers quote above the issue price.
• Zero or negative GMP: dealers quote at or below the issue price.

“GMP-implied price” = upper price band + GMP. This is arithmetic on an informal quote, not an estimate by any official body.

Kostak and subject to sauda

These arrangements involve an applicant agreeing to hand over the economic benefit of their application to a dealer. They carry counterparty risk — the dealer may not pay — and there is no legal protection if the deal goes wrong.

Where GMP figures come from

There is no official source. GMP numbers circulate through dealer networks, and several websites compile and publish them. Different sources can show different figures for the same IPO at the same time. On Niva Market Watch, GMP is collected from InvestorGain's public report and shown with the date we recorded it — see our methodology.

How GMP is used — and misused

People follow GMP as a gauge of sentiment around an issue. The problem is that it is often treated as a prediction of the listing price, which it is not. The reasons are covered in detail in why GMP can be unreliable; in short:

• the market is thin and opaque, and quotes are easy to influence;
• it moves quickly, often several times a day;
• the actual listing price is discovered by the exchange from real orders — see how the listing price is determined.

How we present GMP

• Always labelled “unofficial”, with the date of the reading.
• Shown as an amount and, where possible, as a percentage of the upper price band.
• Never used in our written market summaries, never described as good or bad, and never presented as an expected listing price.

You can see the latest recorded figures on our GMP page.