What is IPO GMP (grey market premium)? Meaning and risks

Updated 26 October 2026 · 5 min read

IPO GMP, or grey market premium, is the extra amount over the issue price at which some informal dealers say they will buy or sell an IPO's shares before those shares list on the exchange. If an IPO's price band tops out at ₹200 and the GMP is ₹30, the grey market is pricing the share at about ₹230 ahead of listing.

GMP is widely quoted in news, on social media and on IPO websites, including this one. But it is not an official price. There is no exchange, no regulator, no record of trades and no protection if a deal goes wrong. SEBI does not recognise the grey market. This guide explains how GMP is quoted, how to turn it into an estimated listing price, the related terms kostak and subject-to-sauda, why the number moves, and why it should never be treated as a forecast.

How GMP is quoted

GMP is quoted in rupees per share, not as a percentage. A message saying "GMP 45" means dealers are willing to pay ₹45 per share above the issue price. A negative GMP, sometimes written as a discount, means the grey market expects the share to list below the issue price.

Quotes usually begin a few days before the issue opens, once the price band is announced, and continue until the morning of listing day. Different dealers and different trackers often quote different numbers for the same IPO at the same time, because there is no single market. Each figure is really a rumour of what a group of traders is willing to pay.

Estimated listing price: the formula with an example

The estimated listing price that IPO websites show is simple arithmetic: the upper end of the price band plus the GMP. The upper end is used because popular IPOs are almost always priced at the top of the band. The estimated gain in percent is the GMP divided by the upper band.

Say an IPO has a price band of ₹100–105 and a lot of 142 shares, and the GMP is ₹21.

Kostak and subject-to-sauda

Besides trading shares, the grey market also trades whole applications. Two terms come up often:

• Kostak is a fixed amount paid for an IPO application regardless of whether it gets allotment. The applicant agrees to hand over any shares allotted, and the dealer takes the risk of not getting any.
• Subject-to-sauda is a price paid for an application only if it is actually allotted. If the application gets nothing, no money changes hands.
• Both deals depend entirely on trust. The applicant's PAN, bank account and demat account are involved, and there is no legal way to enforce the agreement if either side backs out.

Why GMP moves

GMP is driven by sentiment more than by any analysis of the company. Common reasons it rises or falls:

• Subscription figures, especially on the last day when institutional and HNI bids pour in.
• The overall stock market mood: a sharp fall in the Nifty or Sensex often drags GMPs down across all live IPOs.
• Listing performance of recent IPOs in the same sector or of similar size.
• News about the company, the anchor book or the valuation compared with listed peers.
• Deliberate influence: because volumes are small and unrecorded, a handful of players can push a quote up or down. GMP can be manipulated.

Risks and limits of GMP

• It is unregulated. No exchange matches trades, no clearing corporation guarantees them and there is no grievance process.
• It is not a forecast. It is a price some people are quoting today, which may change by tomorrow.
• It covers only listing day sentiment. It says nothing about the business, its debt, its profits or how the share may trade after a month or a year.
• Sources differ. Two websites can show different GMPs for the same IPO on the same day.
• Listing can be very different. GMP can fall sharply in the last days before listing, and a high GMP does not guarantee a gain.

How this site shows GMP

Each IPO page here shows GMP only for information. Instead of trusting one source, the figure is the median of several public GMP trackers, along with how many sources were used and the range between them when they disagree. A small chart shows the GMP trend over the days before listing, so you can see whether it has been steady, rising or fading rather than reading a single number. The GMP accuracy page then compares the last GMP before listing with the actual listing gain for past mainboard and SME IPOs, so you can judge for yourself how close it tends to come.

Even the median of several trackers is still only grey market chatter. It is shown because investors look for it anyway, and it is better to see it with its trend, its spread and its track record than as a bare number.

A better way to judge an IPO

GMP can tell you what some traders feel this week. To understand what you are actually buying, read the RHP: the objects of the issue, the risk factors, the restated financials and the basis for issue price, which compares the valuation with listed peers. Subscription by qualified institutional buyers is an official record of demand from professional investors, and is a more grounded signal than GMP, though it too can be wrong.