What is IPO GMP (grey market premium)?

What the grey market premium is, how people read it, and the limits that matter before anyone relies on it.

The short version

An IPO's grey market premium (GMP) is the amount above the issue price at which people informally trade the IPO's shares before they list on the exchange. If the upper price band is ₹100 and the GMP is ₹20, the grey market is implying a listing price of about ₹120, a 20% gain.

Where the grey market happens

It is informal. Deals are struck between individuals and dealers, often over phone or chat groups. There is no exchange, no regulator, no contract note and no investor protection. SEBI does not recognise it. What the public sees as "GMP" are numbers that tracker websites and channels collect from that market and publish.

Kostak and Subject-to-Sauda

You will often see two other terms next to GMP:

• Kostak rate: a fixed amount paid for an IPO application before allotment, whether or not the application gets shares.
• Subject-to-Sauda: a fixed amount paid for an application only if it actually gets shares.

Both are grey-market deals with the same lack of protection as GMP itself. We explain them so the terms make sense; we do not quote them.

How to read a GMP number

• Estimated listing price = upper price band + GMP.
• Implied gain = GMP ÷ upper price band.
• GMP moves. It can change several times a day, especially around subscription figures and in the last days before listing.
• A GMP of zero usually means no premium is being quoted. It does not mean the share will list at the issue price.

Limits worth knowing

• It is thin. For many SME IPOs, very few quotes exist, and one trade can move the number.
• Numbers are often copied between websites, so seeing the same GMP in several places is weaker evidence than it looks.
• Listing prices regularly miss the GMP, in both directions. Our reliability guide and track record show by how much.

How we use it

We average several public trackers into one estimate, label how settled that number is, and publish how accurate the estimate turned out to be after every listing. The method page has the details.