What is IPO GMP (Grey Market Premium)? Meaning & How to Read It

IPO GMP (grey market premium) explained: what it means, how the estimated listing price is worked out, kostak and subject-to-sauda rates, and why GMP is not reliable.

IPO GMP meaning

GMP, or grey market premium, is the premium at which IPO shares are informally traded before they list on the stock exchange. If the issue price is ₹100 and the GMP is ₹20, grey market participants expect the shares to list at about ₹120.

How to read the GMP

• Estimated listing price = upper end of the price band + GMP.
• Estimated listing gain (%) = GMP ÷ issue price × 100.
• A rising GMP during the bidding days usually reflects strong demand; a falling or negative GMP suggests weak demand.

Kostak and subject-to-sauda

Kostak is a fixed price paid for an IPO application regardless of allotment, while subject-to-sauda is paid only if the application gets an allotment. Both are informal grey market deals.

Why GMP should not be your only reason to invest

The grey market is unofficial and not regulated by SEBI or the stock exchanges. GMP can change quickly and is often wrong on listing day. Read the RHP, check the company's financials, valuation and subscription status, and treat GMP only as a sentiment indicator.

What is IPO GMP (Grey Market Premium)? Meaning & How to Read It IPO FAQs

Is IPO GMP legal?

The grey market is unofficial and unregulated. SEBI and the exchanges do not recognise grey market prices.

Does a high GMP guarantee listing gains?

No. GMP is only an indication of market sentiment and can change or reverse before listing.