The IPO space in India has always been of great interest. Whenever a company goes public - whether it’s a tech giant or a startup - its Initial Public Offering (IPO) attracts a lot of investors hoping to get a stock before it lists on the exchanges. But here’s the thing - before the shares even hit the stock exchanges like the NSE (National Stock Exchange) or BSE (Bombay Stock Exchange), there's already some trading happening through something called the IPO grey market. It’s an informal setup where IPO shares are traded ahead of the listing day.
In this post, we’ll discuss how this market works, what the IPO grey market premium actually means, how it’s calculated, and why people care about it so much. We’ll also see whether it really says anything about the stock’s listing day performance.
The IPO grey market (or parallel market) operates unofficially outside of stock exchanges, without any regulatory support. Here, investors and traders deal in IPO shares before the company is listed on the stock exchanges. These deals are based on trust between the brokers and investors, and the market isn’t really accessible to everyone. You can either buy IPO shares directly or purchase IPO applications.
These grey markets provide insight into how the company might perform after its listing. As an investor, you can also easily exit the IPO or buy IPO shares even after the deadline. In the parallel market, Kostak and grey market premium (GMP) are two things you have to pay close attention to.
The IPO Grey Market Premium or IPO GMP is the difference between the issue price and the estimated listing price of the IPO in the grey market. It's the unofficial price which gives us a rough idea of how the IPO might perform on the listing day.
If demand is high, the GMP goes up. If it’s low, the premium drops or turns into a discount. The price agreed upon is what creates the IPO grey market premium (GMP). For example, if a company’s IPO is priced at ₹100, and the GMP is ₹150, it means there’s demand at ₹250 per share in the grey market.
IPO GMP is calculated using a simple formula:
GMP = Grey Market Price – IPO Issue Price
Grey market price = ₹142 + ₹10 = ₹152.
So, Virtual Galaxy's shares are being traded in the grey market at ₹152, which is ₹10 higher than the issue price.
If you want to calculate the GMP percentage, divide the GMP by the issue price and multiply by 100:
GMP % = (GMP ÷ Issue Price) × 100
In the case of Virtual Galaxy, the GMP per cent would be:
GMP % = (10 ÷ 142) x 100 = 7.04%.
The 7 per cent GMP suggests mild positive sentiment around the IPO. It gives a hint of listing expectations, but actual listing prices may vary depending on the broader economic conditions, market trends, and overall demand.
Here’s how the IPO share trading process works in the grey market:
Since IPO GMP runs outside official channels, several factors come into play:
The IPO grey market premium tells us how investors feel about the IPO shares before they list, but it’s not a foolproof indicator. While a high GMP suggests strong demand, it doesn’t guarantee the IPO will list at a higher price. Factors such as market conditions, investor demand, company performance, and global economic regulations or trends can all impact the actual listing price.
So, while GMP can help gauge interest, it’s important to do your research on the company and broader market before making any final investment decisions. It’s always better to look beyond the IPO GMP for a clearer picture.
First Published: Sep 24, 2025, 15:04
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