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By IPOCheckr Editorial TeamLast reviewed
IPO GMP (grey market premium) is the informal premium at which people privately quote an IPO's shares before they list. It is not published by SEBI, the stock exchanges or the company, nothing is settled through a clearing house, and it frequently differs from the price the stock actually opens at. Treat it as a rough mood reading, not a forecast.
An unofficial quote for an IPO's shares before listing, expressed as rupees above (or below) the issue price.
Informal dealers and their networks. No exchange, regulator or issuer publishes or verifies it.
Grey market deals are outside the exchange system. There is no settlement guarantee and no investor grievance route if a counterparty defaults.
The actual opening price is discovered in the exchange's pre-open call auction on listing day, which can land far from the last GMP.
Between the time an IPO's price band is announced and the day its shares start trading, the shares exist only as applications. Some people still want to buy or sell their expected allotment. The price at which those informal deals are quoted, minus the issue price, is the grey market premium.
If an issue is priced at ₹300 and the grey market quote is ₹345, the GMP is ₹45, or 15% of the issue price. A quote below the issue price produces a negative GMP, sometimes called a grey market discount.
The key word is informal. These quotes are passed along by dealers, chat groups and websites. Nobody audits them, the volume behind a quote is unknown, and two sources on the same morning can show different numbers.
Shares in an IPO cannot be traded on the exchange until the exchange issues its trading notice, which under the current T+3 timeline happens on the evening of the second working day after the issue closes. Any trade before that is a private side arrangement, not an exchange transaction.
That has practical consequences. There is no clearing corporation to guarantee settlement, no contract note, no stock exchange record, and no route through the exchange or SEBI's grievance system if the other side does not pay. Grey market arrangements are also commonly settled in cash, which carries its own legal and tax problems.
IPOCheckr shows GMP because readers search for it and it is widely quoted. Showing it is not an endorsement of grey market dealing, and IPOCheckr does not buy, sell or broker grey market positions.
Two other grey market terms appear alongside GMP. Both are about selling your application, not your shares.
A kostak rate is a fixed amount offered for an application regardless of whether it gets an allotment. If the kostak is ₹800, the buyer pays the applicant ₹800 and takes whatever profit or loss the application produces.
A subject-to-sauda (often shortened to ‘sauda’) rate is paid only if the application is allotted shares. If the rate is ₹2,000 and the application gets nothing, no money changes hands.
Both arrangements depend entirely on trust. The applicant still holds the shares in their own demat account after allotment and is expected to sell them on listing day and pass on the difference. Nothing enforces that. Separately, an IPO application must be made with the applicant's own PAN, demat account and bank account; using it on someone else's behalf is not how the system is designed to work.
Several mechanical reasons explain the gap, before you even get to sentiment.
If you look at GMP at all, look at the direction of travel over several days rather than one figure, and read it alongside data that is official.
Subscription figures are published by the exchanges during the bidding period and show actual demand by category. The red herring prospectus shows what the company does, what it will do with the money and what could go wrong. Both are more reliable than a grey market quote.
A worked example of reading the numbers: an issue priced at ₹300 with a 50-share lot costs ₹15,000 per lot. A GMP of ₹45 implies roughly ₹2,250 per lot before costs. Our return calculator does this arithmetic for you, but remember the result is an estimate built on an unofficial input.
GMP says nothing about the business, the valuation, the quality of management or whether the stock is worth holding after listing day. It is a short-horizon number driven largely by sentiment. A strong GMP and a weak business can coexist, and so can the opposite.
IPOCheckr's guides are educational. Nothing on this page is a recommendation to apply for, hold or sell any security.
Primary rules and official pages this guide was checked against. Rules change, so the official text always prevails.
General information, not investment advice. Rules set by SEBI, RBI and the exchanges can change, so confirm current limits with your broker or the offer document.