IPO Grey Market Premium and Discussion

IPO GMP (IPO Grey Market Premium) indicates the price grey market operators are willing to pay for a given stock. Grey market (also called gray market) is an informal setup used by traders to buy and sell shares and is not recognized by stock exchanges. Since IPO GMP tells us about the premium someone is willing to pay, it is often used to forecast listing price of public offers. GMP of several IPOs has correctly predicted eventual listing prices, although it is not always accurate. Recent positive listings of Ami Organics and Vijaya Diagnostics point in this direction. Subsequently, Paras Defence and Space Technologies and even some SME IPOs have garnered strong demand in the informal market.

Latest IPO GMP rates (24 September 2021, in INR)

IPO CompanyPrice BandGMPKostakSubject to Sauda
Aditya Birla AMC
(29 September – 1 October)
695 – 71250400
Paras Defence
(21 – 23 September)
165 – 17525025012,000
Ruchi Soya
(Coming soon)
Jainam Ferro Alloys
(28 – 30 September)
70
Getalong Enterprise
(27 – 30 September)
69
QuadPro ITeS
(20 – 22 September)
20
Prevest Denpro
(15 – 17 September)
82 – 84
Markolines Traffic Controls
(15 – 17 September)
78

A gray market transaction involves the unofficial agreement between an IPO investor and a stock broker which allows investors to lock profits before the stock lists. Under this system, shares allotted to IPO applications are sold by brokers without transferring the shares to their accounts. Since this is an unwritten accord between two parties, it entirely depends on the trust between the investor and broker.

Important points about IPO GMP and grey market: 

  • IPO grey market movements may change very quickly and rates may be volatile. It is risky to base an investment decision on gray market IPO rates alone. Please refer to our research and analysis section for more details.
  • Research has shown that retail investors are strongly influenced by market sentiment and as a result, are prone to overreaction, especially when it comes to IPO investing. Place your bets wisely!
  • IPO GMP rates are provided as sourced from market intelligence. Please note these IPO GMP rates may be different for you depending on geographies, markets and dates.
  • We don’t trade into grey market nor do we facilitate buying or selling of IPO forms. 

What is IPO GMP (IPO Grey Market Premium)?

IPO GMP is the rate of premium an IPO commands in grey market. In simple terms, this premium indicates the price grey 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, 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 between IPO start date and listing date. The premium fluctuates daily on the basis of IPO demand and situations in the secondary market. It is observed that GMP goes up with wider markets and similarlly, comes down in subdued conditions.

What is Kostak rate?

Kostak rate is the amount an investor gets by selling his/her IPO application in grey market. This is the amount an investor stands to get, irrespective of allotment status. As an example, a kostak rate of INR300 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 allotment price.

What is Subject to Sauda?

‘Subject to’ is another term frequently used in 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 which 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 cancelled. 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.

Income tax implications of grey market trades

Since grey market is an informal market, all profits will be in the name of 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 for gaining an insight into brokerage house reports and analysts’ minds. Get detailed examination, grey market premium, and study of all upcoming IPOs in India.

Participate in lively IPO discussion 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.

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If you spot a new IPO and wish to nudge us about it, just drop us a comment below the text. Alternatively, you can write to us at admin at ipocentral.in. Here are some more resources for you:

Alternatively, you can check out our dedicated sections on IPO NewsSEBI approval statusIPO Review and Buybacks. If you are new to IPOs, you might want to go through our resources section which contains lot of information about the best practices to follow when it comes to primary markets.

48 COMMENTS

    • “Kostak rate is the amount an investor gets by selling his/her IPO application in grey market. This is the amount an investor stands to gain, irrespective of allotment status.”

      It is mentioned in the article! Please see below the table. In short, you will need a broker who will buy your application and sell it to a wealthy HNI.

  1. when kostak application is sold to broker how it is settled? Is it off market or applicant sells on exchange and then settlement takes place.

  2. when kostak application is sold to broker ,how settlement takes place in case of allotment.Does it off market or applicant sells the allotted share in exchange and then settled? If that be the case who bear the tax burden?

  3. Tum log duniya ke pichhe rah jaoge.kyuki ipo ka gmp apne date to date update nai kar rahe ho.apse investor ka vishvas tutega.

  4. Good listing for Amber but nowhere close to the fake GMP many websites were claiming. IPOcentral was the closet to the actual listing price.

  5. Dear Sir/Madam,

    I hope you are having a good day. I am Raju Modhavadiya, a Retail Investor from Rajkot. I have done 2 application (600 shares x 2) for MMP Industries SME IPO with cut off price from my and my wife’s demat accounts.

    Now there were 1496250 shares for retail investor segment. For this segment, 726000 shares bid came with cut off price (i.e. Rs.188/-) and 1042200 shares bid came with price bids (i.e. Rs.186/- & Rs.187/-).

    According to my knowledge, if there is not 100% subscription with cut off price, all cut off price bidders should get allocation of shares and in this case, for MMP industries SME IPO, retail segment quota was not fully subscribed with cut off price according to information available from NSE website. Still there was no allocation of shares in both accounts.

    Please clarify on this.

    Thanks
    Raju A Modhavadiya

  6. I hope you are having a good day. I am vaishu patel a marketing scenario from ahmedabad.
    i m also interested in this website.so this website can also be usefull. i also like that.

  7. An IPO grey market is an OTC (over-the-counter) market where stocks and IPO applications are bought and sold even before they are available on stock exchanges. IPO grey market is based on utmost trust but is neither backed by stockbrokers nor SEBI.

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