Complete Guide to IPO Grey Market (GMP): How It Works, Risks, Kotak Rates and Trading Strategies

IPO stands for Initial Public Offerings Grey Market Premium. It is an insight into the unofficial market where shares of an upcoming IPO are traded before their official listing on a stock exchange. To understand the complete scenario, you need to understand them separately. Let’s first start with

IPO, which stands for Initial Public Offerings is one method companies can use to go public for the first time. Growing companies that need capital will often use IPOs to raise money. When a private company decides to go public, it can apply to be listed on a stock exchange, marking the official change from private to public ownership. By going public, a private company or business can sell their shares (equity) to the market. Any private company/business can choose to go public (given certain conditions). Let’s take an example: An inventive startup might choose to go public by listing on an exchange. However, an existing company may be able to expand its operations, pay off debt, and raise capital by going public. You may wonder why a privately held corporation would wish to go public and share ownership with the general public. A private company’s decision to go public marks the beginning of a new business. An organisation’s whole management structure is altered when it transfers from private to public ownership. As a retail investor, IPOs present both opportunities and risks for you.

Where “Grey Market” is an unofficial, uncontrolled marketplace where goods are purchased and sold before their official release on the primary market. In this market, products are acquired through unauthorised or unconventional channels. Although it can occur in a variety of industries, the grey market is especially prevalent in goods like jewellery, electronics, fashion, technology, and event tickets. Grey market sellers can obtain products through alternative sources, like unofficial distributors, parallel importers, resellers, or even individuals who purchase and resell goods before their official release. Products with limited supply and strong demand are frequently involved in grey market activities, which may result in a rise in the sales price. On the grey market, buyers are occasionally prepared to pay more for exclusive versions of products that might be hard to find on the mainstream market or for early access to a product.

It is crucial to remember that the grey market is unregulated, which puts buyers and sellers in danger. In addition to potential authenticity or quality issues, products sold on the grey market might not come with manufacturer warranties or protections.

Now, what is Grey Market IPO? It is a market where people buy or sell IPO shares before their release in stock exchanges. You can find the various types of companies in the IPO shares, remember it is the unofficial market. There are no rules and regulations for purchasing and selling goods or shares here. There is no authority like the Securities and Exchange Board of India (SEBI), National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are involved and responsible for your purchase and sale of IPO shares.

Latest IPO GMP Today

Here’s the table summarizing the latest IPO analysis and estimated IPO grey market rates for forthcoming IPOs with potential listing gains:

IPO Name	Date	Type	IPO GMP	IPO Price	Gain	Kostak	Subject
Bharti Hexacom	3-5 Apr	Mainline	₹60	₹570	11%	₹-	₹-
Polymatech Electronics	Apr 2024	Mainline	₹–	₹–	–%	₹-	₹-
TAC Infosec	27-2 April	NSE SME	₹115	₹106	108%	₹-	₹100,000
Radiowalla	27-2 April	NSE SME	₹35	₹76	46%	₹-	₹45,000
Yash Optics & Lens	27-3 April	NSE SME	₹20	₹81	25%	₹-	₹20,000
Jay Kailash Namkeen	28-3 April	BSE SME	₹15	₹73	21%	₹-	₹20,000
K2 Infragen	28-3 April	NSE SME	₹30	₹119	25%	₹-	₹25,000
Aluwind Architectural	28-4 April	NSE SME	₹5	₹45	11%	₹-	₹10,000
Creative Graphics	28-4 April	NSE SME	₹50	₹85	59%	₹-	₹60,000
DCG Wires and Cables	8-10 April	NSE SME	₹–	₹100	–%	₹-	₹-
Teerth Gopicon	8-11 April	NSE SME	₹10	₹111	9%	₹-	₹10,000

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What is Grey Market Premium IPO?

Grey Market Premium is a price at which a stock is traded on the grey market. Grey market premium IPO is the price of IPO shares in the grey market. The price and amount are totally based on the market sentiments. Grey Market Premium is high when supply is limited and demand is high. In contrast, the Grey Market Premium is low when supply is high and demand is low. Let’s take an example: Suppose the issue price of stock X is $100 and the GMP is $200. This indicates that traders are prepared to pay $300 ($100 + $200) for stock X. Now, whether or not the stock is listed on the GMP price will determine profits and losses. If the closing price of the stock on the first day of trading is higher than the price paid before the IPO, the trader will make a profit. If the price after the IPO is low, the trader will make a loss.

Gray Market vs. Black Market

Do not get confused in both. As we know, the grey market is unofficial. It is not controlled by third parties or authorities. In addition, there is not a formal platform and all transactions take place among a small number of individuals. Mutual trust is the foundation of all agreements in the grey market. However, the grey market is completely legal. It is not like the black market, which is considered illegal.

Precaution Before Entering Gray Market

• Associated Risks: Since the grey market is unregulated, investors should be aware of additional risks. There may be problems with warranties, customer service, legitimacy, and quality. Before investing, it is crucial to thoroughly investigate and assess the credibility and reliability of grey market vendors.

• Legitimacy and legality: Some goods that are sold on the grey market, like illegal copies, counterfeit goods, and parallel imports that infringe on intellectual property rights, may be subject to legal limitations. Investors must adhere to all relevant laws and regulations while making purchases on the grey market.

• Value and costs: Because of restricted product availability and projected demand, grey market prices are usually higher. Investors should assess whether the product’s genuine value can be justified by its grey market pricing and decide if they are willing to pay more to have early access to the goods.

• Warranties & Support: Support and guarantees from the manufacturer may not apply to goods acquired on the grey market. Investors should be aware that they can have trouble getting repairs, replacements, or refunds in the event of issues or flaws.

• Availability in the conventional market: Products that are first offered for sale on the grey market will frequently subsequently become available through official channels on the official market. Investors should think about whether it would be safer and more convenient to wait or to use official methods

Listed IPO Grey Market Premium of IPO 2022 | 2023 | 2024:

IPO Name	Price	IPO GMP	Listed
SRM Contractors	₹210	₹125	₹215
Krystal Integrated	₹715	₹55	₹795
Popular Vehicles	₹295	₹-	₹289
Gopal Snacks	₹401	₹-	₹351
JG Chemicals	₹221	₹5	₹209
R K SWAMY	₹288	₹-	₹250
Mukka Proteins	₹28	₹35	₹44
Exicom Tele-Systems	₹142	₹150	₹265
Platinum Industries	₹171	₹100	₹225
GPT Healthcare	₹186	₹10	₹195
Juniper Hotels	₹360	₹0	₹361
Vibhor Steel Tubes	₹151	₹130	₹425
Entero Healthcare Solutions	₹1258	₹0	₹1245
Rashi Peripherals	₹311	₹40	₹339
Capital Small Finance Bank	₹468	₹0	₹430
Jana Small Finance Bank	₹414	₹15	₹396
Apeejay Surrendra Park Hotels	₹155	₹35	₹187
BLS E-Services	₹135	₹150	₹305
Nova Agri Tech	₹41	₹15	₹55
EPACK Durable	₹230	₹5	₹221
Medi Assist Healthcare	₹418	₹35	₹465
Jyoti CNC Automation	₹331	₹45	₹370
Innova Captab	₹448	₹85	₹456
Azad Engineering	₹524	₹200	₹706
RBZ Jewellers	₹100	₹5	₹100
Happy Forgings	₹850	₹250	₹1000
Credo Brands (Mufti Jeans)	₹280	₹100	₹282
Motisons Jewellers	₹55	₹56	₹109
Suraj Estate Developers	₹360	₹15	₹340
Muthoot Microfin	₹291	₹25	₹275
Inox India	₹660	₹550	₹934
DOMS IPO	₹790	₹490	₹1300
India Shelter Finance	₹493	₹165	₹620
Flair Writing	₹304	₹150	₹503
Gandhar Oil	₹169	₹75	₹298
Fedbank Financial Services	₹140	₹-	₹138
Tata Technologies	₹500	₹430	₹1200
IREDA	₹32	₹12	₹50
ASK Automotive	₹282	₹30	₹305
Protean eGov Technologies	₹792	₹40	₹792
ESAF Small Finance Bank	₹60	₹20	₹71
Mamaearth	₹324	₹30	₹330
Cello World	₹648	₹180	₹829
Blue Jet Healthcare	₹346	₹25	₹380
IRM Energy	₹505	₹15	₹478
Plaza Wires	₹54	₹25	₹76
Valiant Laboratories	₹140	₹25	₹162
Updater Services	₹300	₹-	₹285
Manoj Vaibhav Gems	₹215	₹10	₹215
JSW Infrastructure	₹119	₹30	₹143
Yatra Online	₹142	₹-	₹127
Sai Silks Kalamandir	₹222	₹7	₹231
Signature Global	₹385	₹40	₹444
Zaggle Prepaid Ocean Services	₹164	₹15	₹164
Samhi Hotels	₹126	₹2	₹134
EMS IPO	₹211	₹100	₹282
RR Kabel	₹1035	₹95	₹1140
Jupiter Life Line Hospitals	₹735	₹230	₹973
Rishabh Instruments	₹441	₹65	₹460
Ratnaveer Precision Engineering	₹98	₹50	₹128
Vishnu Prakash R Punglia	₹99	₹60	₹165
Aeroflex Industries	₹108	₹65	₹197
Pyramid Technoplast	₹166	₹20	₹187
TVS Supply Chain Solutions	₹197	₹-	₹207
Concord Biotech	₹741	₹110	₹900
SBFC Finance	₹57	₹30	₹82
Yatharth Hospital	₹300	₹80	₹306
Netweb Technologies	₹500	₹400	₹947
Utkarsh Small Finance Bank	₹25	₹15	₹40
Senco Gold	₹317	₹100	₹430
Cyient DLM	₹265	₹150	₹402
IdeaForge	₹672	₹510	₹1300
HMA Agro	₹585	₹-	₹625
IKIO Lighting	₹285	₹100	₹391
Nexus Select Trust	₹100	₹5	₹103
Mankind Pharma	₹1080	₹100	₹1300
Avalon Technologies	₹436	₹10	₹436
Udayshivakumar Infra	₹35	₹5	₹30
Global Surfaces	₹140	₹15	₹164
Divgi TorqTransfer Systems	₹590	₹40	₹620
Sah Polymers	₹65	₹10	₹85
Radiant Cash Management	₹99	₹3	₹103
Elin Electronics	₹247	Disc	₹244
KFin Technologies	₹366	Disc	₹267
Abans Holdings	₹270	Disc	₹273
Landmark Cars	₹506	Disc	₹471
Sula Vineyards	₹357	Disc	₹361
Uniparts India	₹577	₹40	₹575
Dharmaj Crop Guard	₹237	₹55	₹266
Keystone Realtors	₹541	₹5	₹555
Inox Green Energy	₹65	Disc	₹60
Kaynes Technology	₹587	₹220	₹778
Five Star Business Finance	₹474	Disc	₹468
Archeran Chemicals	₹407	₹120	₹450
Global Health	₹336	₹20	₹401
Bikaji Foods	₹300	₹25	₹322
Fusion Micro Finance	₹368	₹5	₹360
DCX Systems	₹207	₹85	₹207
Tracxn	₹80	–₹4	₹84
Electronics Mart	₹59	₹30	₹90
Harsha Engineers	₹330	₹130	₹450
Tamilnad Mercantile Bank	₹510	₹15	₹495
Dreamfolks Services	₹326	₹120	₹508
Syrma SGS	₹220	₹55	₹260
Aether Industries	₹642	₹15	₹704
eMudhra IPO	₹256	+-₹10	₹270
Ethos IPO	₹878	+-₹10	₹825
Paradeep Phosphates	₹42	₹0.50	₹44
Venus Pipes	₹326	₹30	₹337
Delhivery	₹487	+-₹10	₹495
Prudent Corporate	₹630	+-₹10	₹650
LIC IPO	₹949	+-₹12	₹872
Rainbow Hospital	₹542	₹10	₹510
Campus Activewear	₹292	₹50	₹360
Hariom Pipe	₹153	₹15	₹220
Veranda Learning	₹137	₹15	₹157
Uma Exports	₹68	₹-	₹76
Ruchi Soya	₹650	₹60	₹855
Vedant Fashions	₹866	₹10	₹935
Adani Wilmar	₹230	₹30	₹227
AGS Transact	₹175	₹5	₹175
CMS Info Systems	₹216	₹5	₹220
Supriya Lifescience	₹274	₹130	₹421
HP Adhesives	₹274	₹90	₹315
Data Patterns	₹585	₹300	₹856
Medplus	₹796	₹180	₹1040
Metro Brands	₹500	₹-	₹437
MapmyIndia	₹1022	₹700	₹1565
Shriram Properties	₹118	₹-	₹90
RateGain	₹425	₹35	₹360
Anand Rathi Wealth	₹550	₹50	₹600
Tega Industries	₹453	₹300	₹760
Star Health	₹900	-₹50	₹845
Go Fashion	₹690	₹450	₹1310
Tarsons Products	₹662	₹180	₹682
LatentView Analytics	₹197	₹300	₹512
Sapphire Foods	₹1150	₹150	₹1350
Paytm	₹2150	₹30	₹1950
Sigachi Industries	₹163	₹230	₹570
SJS Enterprises	₹542	₹60	₹542
Policybazaar	₹980	₹150	₹1150
Nykaa	₹1125	₹750	₹2018
Aditya Birla AMC	₹712	₹25	₹715
Paras Defence	₹175	₹220	₹469
Sansera Engineering	₹744	₹65	₹811
Vijaya Diagnostic	₹531	₹0	₹540
Ami Organics	₹610	₹150	₹910
Aptus Value Housing	₹353	₹0	₹333
Chemplast Sanmar	₹541	₹0	₹550
Nuvoco Vistas	₹570	₹0	₹485
CarTrade	₹1618	₹150	₹1505
Windlas Biotech	₹460	₹85	₹437
Devyani International	₹90	₹55	₹141
Exxaro Tiles	₹120	₹15	₹126
Krsnaa Diagnostics	₹954	₹320	₹1005
Rolex Rings	₹900	₹450	₹1250
Glenmark Life Sciences	₹720	₹90	₹750
Tatva Chintan Pharma	₹1083	₹1100	₹2111
Zomato	₹76	₹25	₹126
GR Infraprojects	₹837	₹560	₹1716
Clean Science	₹900	₹620	₹1784
India Pesticides	₹296	₹65	₹350
Dodla Dairy	₹428	₹95	₹550
KIMS Hospital	₹825	₹110	₹1009
Shyam Metalics	₹306	₹135	₹380
Sona BLW Precision	₹291	₹5	₹301
Lodha Developers	₹486	₹0	₹436
Barbeque Nation	₹500	₹0	₹482
Suryoday Small Bank	₹305	₹0	₹293
Kalyan Jewellers	₹87	₹0	₹74
Anupam Rasayan	₹555	₹70	₹520
Laxmi Organic	₹130	₹45	₹155
Craftsman Automation	₹1490	₹32	₹1359
Nazara Technologies	₹1101	₹700	₹1990
Easy Trip Planners	₹187	₹140	₹212
MTAR Technologies	₹575	₹500	₹1050
Heranba Industries	₹627	₹270	₹900
Nureca Limited	₹400	₹80	₹615
Brookfield India REIT	₹275	₹0	₹281
Stove Kraft	₹385	₹65	₹298
Home First Finance	₹518	₹150	₹618
Indigo Paints	₹1490	₹900	₹2607
RailTel	₹94	₹15	₹109
IRFC	₹26	₹0.50	₹25
Antony Waste	₹315	₹105	₹436

How Do IPO GMP Work?

As grey market for Initial Public Offerings (IPOs) is handled outside the stock exchange. here is the step on how IPO GM works-

• Pre-IPO Announcement: The process begins when the company decides to go public and announce their shares through IPO. While announcing their IP, they have to provide details like the number of shares they want to issue, the issue price and a subscription period.

• Grey Market Formation: With time, when the news of the IPO Company spread, the grey market started to build. Every day, new traders and investors start showing interest in the IPO. They show interest in selling and buying the IPO shares through the great market or unofficial market.

• Grey Market Premium: Over time, The Grey Market Premium develops. It is calculated as the difference between the grey market price of the IPO shares and the official issue price. If there is a positive response it means it is premium and if there is a negative, it means discount.

• Broker Participation: In the grey market, brokers and intermediaries play an important role. They are the ones who connect the buyers and sellers of IPO shares in the grey market. Many investors show their interest in the particular IPO share through the brokers only and do not reveal their profile.

• Informal Trading: As we know grey market is informal trading. It is operated informally by word of mouth, online forums and communication channels. Investors/brokers exchange information about IPO shares and their GMP through informal channels only.

• GMP Discovery: The GMP price or amount of IPO shares is decided by the supply and demand. The price is influenced by the market sentiment, company valuation and economic condition.

• Risk Assessment: The complete process under the grey market is risk-associated.  Since it is an unofficial and unregulated market. Investors and traders should be aware of potential risks like fluctuations in GMP and legal protection of money.

• Subscription Period: There is an official subscription period on IPO shares by the company. The investor can apply to IPO shares only in the subscription period. The number of shares in the market depends on the demand. Investors need to get their desired quantity. Hence, it is good to check the number of shares as per subscription period.

• Allotment & Listing: Once the subscription period ends, the company and underwriters can decide the final allotment of the shares. Later the shares will be officially listed on the stock exchange and trading begins for it publicly.

• Post-Listing Price Movement: The actual listing price in the stock exchange of shares may and may not align with the grey market price. It is now official and can vary. Post-listing price of shares will be influenced by the market force, demand on the stock exchange as well as company performance and valuation.

• Impact on Grey Market: The official listing of shares can impact the grey market. If the price of shares is different from the grey market, then it will be adjusted in the GMP. Traders will also react as per the actual market price or value.

• Monitoring & Analysis: Investors and market participants monitor the grey market and GMP carefully. News, Market trends, etc influence the grey market price.

• Investor Caution: It is needed to caution against the grey market by the investors. While GMP provides insights into market sentiment, it is not a guaranteed indicator of post-listing performance, and decisions should be based on comprehensive analysis.

• Post-Listing Trading: As said, after being listed in the official stock exchange. Traders can start trading. Investors can buy and sell the shares through the brokerage accounts. The price of shares varies with demand and supply.

• Long-Term Consideration: Investors should consider the long-term prospect of the company and its shares. They should not stick to the initial listing price. e grey market and GMP provide a snapshot, but long-term investment decisions require a broader analysis of the company’s fundamentals.

• Regulatory Development: Regulatory bodies and authorities monitor the grey market activities and change the regulations as per their function. Investors should stay informed about every regulatory development done by grey market trading.

How To Calculate GMP Of IPO Share?

GMP is Grey Market Premium, which is a crucial step for the both investor and the IPO company. It is a difference between the grey market price of an IPO share and its issue price.

• Grey Market Premium(GMP): The price of the IPO shares in the grey market, during trading there.

• Issue Price: The price which is issued by the IPO company during the announcement.

To calculate the GMP, gather two essential pieces of the above information about the company. This information can be found in financial news or online forums. Once you have these values, you need to use a simple GMP formula:

• GMP = (Grey Market Price) – (Issue Price). 

Note the result and interpret it as follows-

• Positive GMP: If the result is positive, it means the grey market price is higher than the issue price suggesting strong demand and market optimism.

• Negative GMP: If the result is negative, which means the grey market price is lower than the issue price, a sign of potential concerns or lower demand.

• Zero GMP: If the result is zero, which means the grey market price and the issue price are equal.

Your work is done here. Keep track of any changes in the grey in the grey market price. If there are any changes, Adjust the GMP calculation. The value of GMP varies with the market news, market dynamics, investors, etc. You should be very cautious while approaching the information. The grey market is speculative, and actual post-listing performance may differ.

How To Buy And Sell IPO Shares In The Grey Market?

Buying and selling of IPO shares in the grey market is unofficial. Let’s understand the process of buying and selling IPO shares in the grey market-

To buy the IPO share in the grey market, you have to connect with unofficial channels like local brokers, informal networks or online forums. You can buy as many shares at the quoted price or premium, which is known as GMP. Selling IPO shares in the grey market follows the same process. To sell the secured IPO shares in the market you need to contact a broker. Brokers will find the potential sellers. IPO shareholders sell the shares because they are not about the GMP and cannot take the risk of holding the shares and releasing them for selling again. Remember, all the transactions in the grey market are done by cash only. In addition, there is no official contract between the parties.

Let’s take an example to understand better-

Let’s assume XYZ company’s issue price is Rs 500 in the grey market and it trades at a premium of Rs 100. Now buyers make an offer to buy 20 shares at Rs 600 which are worth Rs 12,500. Now the seller has made an offer for Rs 500*20 shares worth Rs 10,000.

Now, assume the share was listed at Rs 700. Let’s calculate the buyer and seller’s profit and loss-

• Seller’s profit: Rs 12,000 – Rs 10,000 = Rs 2,000.

• Buyer’s profit: 20*700 = Rs 14,000 – Rs 12,000 = Rs 2,000.

If the IPO gets listed at 550, then the profit and loss of seller and buyer is-

• Seller’s profit: Rs 12,000 – Rs 10,000 = Rs 2,000.

• Buyer’s profit: 20*550 = Rs 11,000 – Rs 12,000 = Rs -1,000.

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FAQ (Frequently Asked Question) On IPO Grey Market:-

Q.1 How much GMP is good for an IPO?

The position of Grey Market Premium (GMP) is favourable for IPO. It indicates the string of strong investor interest and confidence.

Q.2 What is GMP in grey market?

Grey Market Premium (GMP) is the financial term for the upcoming IPO in the unofficial and unregulated grey market. It is the difference between the grey market price of an IPO share and its issue price. The positive Grey Market Premium(GMP) is a sign of strong demand.

Q.3 How accurate is GMP IPO?

There is no guarantee about the GMp Accuracy. But in most cases, GMP is correct.

Q.4 How is GMP decided in IPO?

The Grey market Premium is based on the demand and supply shares.

Q.5 What is kostak?

Kostak is the price of an application. It is a premium amount of IPO application, in which you can trade in the grey market.

Q.6 Is the grey market legal?

The grey market is an unofficial platform, but it is not illegal like the black market.

Q.7 What factors influence Grey Market Premium (GMP)?
– Grey Market Premium is influenced by factors such as market sentiment, demand-supply dynamics, company valuation, and economic conditions.

Q.8 Is Grey Market Premium (GMP) a reliable indicator of IPO success?
– While GMP provides insights into market sentiment, it’s not a guaranteed indicator of post-listing performance. Investors should conduct comprehensive analysis.

Q.9 Can investors participate in IPO grey market trading without a broker?
– No, investors typically engage in IPO grey market trading through brokers or informal networks.

Q.10 Are there any legal consequences for participating in IPO grey market trading?
– Grey market trading is unofficial and unregulated, but it’s not illegal. However, investors should be cautious about potential risks.

Q.11 How do IPO companies view grey market activity?
– IPO companies may monitor grey market activity but do not officially endorse or participate in it.

Q.12 What precautions should investors take before engaging in grey market trading?
– Investors should research thoroughly, assess risks, and ensure compliance with relevant laws and regulations.

Q.13 Is there any correlation between Grey Market Premium (GMP) and post-listing performance?
– While there may be some correlation, post-listing performance can be influenced by various factors beyond GMP.

Q.14 What role do underwriters play in IPO grey market trading?
– Underwriters facilitate the IPO process but may not directly participate in grey market trading.

Q.15 Can IPO grey market trading impact the official listing process?
– Grey market trading doesn’t directly impact the official listing process but may reflect market sentiment.

Q.16 Are there any restrictions on the volume of IPO shares one can trade in the grey market?
– There are no official restrictions, but trading volume depends on demand and supply dynamics.

Q.17 How do market sentiments affect Grey Market Premium (GMP)?
– Positive market sentiments often lead to higher GMP, while negative sentiments may result in lower or negative GMP.

Q.18 What happens if the official IPO listing price differs significantly from the grey market price?
– Discrepancies between grey market price and official listing price may lead to adjustments in GMP and market reactions.

Q.19 Are there any risks associated with holding IPO shares acquired from the grey market?
– Yes, risks include potential fluctuations in GMP, lack of legal protections, and uncertainties about post-listing performance.

Q.20 How do regulatory developments affect IPO grey market trading?
– Regulatory changes may impact grey market operations, and investors should stay informed about relevant developments.

Also Read:-

Income Tax Guide 2024-25: Latest Updates, Tax Basics, Slabs, Rules | Complete Income Tax Information

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