IPO Grey Market Premium and Discussion

IPO GMP (IPO Grey Market Premium) indicates the price grey market operators are willing to pay for shares of a given IPO before listing. The 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 upcoming IPO GMP tells us about the premium investors are willing to pay for the corresponding IPO, it is often used to forecast the listing price of public offers. GMP of several IPOs has correctly predicted eventual listing prices, although it is not always accurate. Lately, the SME segment has started witnessing immense interest with massive SME IPO GMP figures and subsequent positive listings. This year, we have also seen record subscriptions in SME IPOs. The latest stock exchange rule to limit listing price variance to 90% of allotment price has also failed to curb the excitement in SME IPOs.

Latest Upcoming IPO GMP Today (26 Apr, Prices in INR)

Mainboard IPO	Price*	IPO GMP	GMP %	Subject to^
Ather Energy (28 – 30 Apr)	321	5	1.6	0
Avanse Financial (Coming soon)	–	0	0.0	0
ArisInfra Solutions (Coming soon)	–	0	0.0	0
NSDL (Coming soon)	–	0	0.0	0

* Upper price band
^ Subject to rate for INR 2 lakh application

Latest SME IPO GMP Today (26 Apr, Prices in INR)

SME IPO	Price*	IPO GMP	GMP %	Subject to#
Wagons Learning (2 – 6 May)	82	0	0.0	0
Kenrik Industries (29 Apr – 6 May)	25	0	0.0	0
Arunaya Organics (29 Apr – 2 May)	58	0	0.0	0
iWare Supplychain (28 – 30 Apr)	95	0	0.0	0
Tankup Engineers (23 – 25 Apr)	140	3	2.1	5,000
Virtual Galaxy (Coming soon)	–	0	0.0	0

* Upper price band
# Subject to rate for INR 10 lakh application

Read Also: Upcoming Tata Group IPOs – Seven IPOs Lined-Up

An IPO 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 regulatory developments related to IPO grey market are currently underway. SEBI chairperson Madhabi Puri Buch has indicated that the regulator is working on developing a “when-listed” platform that will allow investors to trade shares immediately after they are allotted, even before listing on stock exchanges. The move is aimed at curbing grey market activities.

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 upcoming IPO GMP rates may be different for you depending on geographies, markets, and dates.
• We don’t trade in the grey market nor do we facilitate buying or selling of IPO forms. 

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 kostak 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.

Income tax implications of grey market trades

Since the grey market is an informal market, 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.

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 News, SEBI approval status, IPO Review, and Buybacks. If you are new to IPOs, you might want to go through our resources section which contains a lot of information about the best practices to follow when it comes to primary markets.