IPO Grey Market Premium (GMP)

Current IPO GMP Today and Kostak & Subject to Sauda Rates

Click on the IPO names in below table to check the day by day GMP data of respective IPO issue and also about Subject to Sauda rates.

IPO Grey Market Premium 2024:

IPO Name	IPO Latest GMP (Today)	IPO Price	Listing Gain Expected
Jyoti CNC Automation IPO GMP	₹77	₹331	₹408 (23.26%)

IPO Grey Market Premium 2023:

IPO Name	IPO Latest GMP (Today)	IPO Price	Listing Gain Expected
Azad Engineering IPO GMP	₹375	₹524	₹899 (71.56%)
Innova Captab IPO GMP	₹210	₹448	₹658 (46.88%)
Suraj Estate Developers IPO GMP	₹25	₹360	₹385 (6.94%)
DOMS IPO GMP	₹483	₹790	₹1273 (61.14%)
IREDA IPO GMP	Rs10	Rs32	31%
TATA Technologies IPO GMP	Rs410	Rs500	82%
Flair Writing IPO GMP	Rs80	Rs304	26%
FedBank Fianancial Services IPO GMP	Rs0	Rs140	0%
Gandhar Oil IPO GMP	Rs65	Rs169	41.42%

Introduction to Grey Market Premium (GMP)

When it comes to investing, the term “Grey Market Premium” (GMP) comes up a lot when people talk about IPOs. But what exactly is it and why do you need to know about it?

Well, this article is gonna give you the information on GMP in Indian IPOs.

So, by the time you read this, you’ll know what GMP is and how it affects investment decisions. Plus, you’ll know why it’s an important part of the IPO world.

What is Grey Market Premium?

Let’s start by talking about the “Grey Market” before we get into GMP.

Basically, it’s like a flea market (unofficial market) where people buy and sell stocks before they’re officially listed on the stock market.

GMP is like a price tag that people who are interested in investing in pre-IPO stocks attach to them. It’s the difference between how much those shares are worth when they’re traded on the Grey Market and the price set by the company itself..

• If the Grey Market price is higher than the official price, it results in a positive GMP.
• Conversely, if the Grey Market price is lower, it leads to a negative GMP.

Basically, GMP gives you a sneak peek into the hype and anticipation of an initial public offering (IPO) before it officially goes public.

Understanding Grey Market Premium

The Significance of GMP:

GMP holds significant importance in the IPO market for several reasons:

#1. Early Indicator of demand

GMP is a great way to get an idea of how much investors want to pay for shares in a particular IPO. If an IPO has a lot of GMP, it’s a sign that there’s a lot of demand for the shares even before the IPO hits the market. That means more listing gains for those investors who buy shares early in the IPO subscription period.

#2. Gauge of Market Sentiment

The GMP can show how excited investors are about an IPO. If the GMP is high, it usually means the market is in a good mood and investors are expecting the stock price to go up after the IPO. On the other hand, if the GMP is low or negative, it could mean investors are being cautious or pessimistic, which could affect investor decisions.

#3. Impact on Allotment Decisions

GMP can affect how many shares are allotted, especially to retail investors. When an IPO is oversubscribed (when there’s more demand than supply), the decision-makers may give more shares to those who bid higher, including those affected by a good GMP. So, if GMP is good, retail investors are more likely to get shares.

Factors Influencing Grey Market Premium

To get a better idea of what’s going on with GMP, it’s important to look at the different things that can cause it to go up or down.

This is especially important when it comes to figuring out how much interest and demand there is for a particular IPO on the Grey Market.

#1. Investor Sentiment and Demand

• Positive News and Hype: When there’s good news or buzz surrounding an IPO, it tends to increase GMP. For instance, if you’re a company that’s known for cutting-edge technology or cutting-edge products, investors may be more likely to buy your shares at a higher price.
• Expectations of Listing Gains: IPOs are a popular way for investors to get into the stock market, hoping to make some quick money once the shares hit the market. If there’s a lot of confidence that an IPO is going to bring big listing benefits, then GMP will go up.

#2. Company’s Financial Performance and Prospects

• Strong Financials: Companies with a good track record, growing revenue, and making money are more likely to draw in investors. GMP is often a sign of trust in a company’s financial health.
• Promising Growth Prospects: Generally speaking, investors like companies that are on the rise. A well-thought-out plan for growth and a clear idea of what’s next can make a big difference to GMP.

#3. Market Conditions

• Overall Stock Market Trends: When it comes to GMP, the higher the stock market is, the better. When the stock market is going up, GMP is higher because people are more likely to invest in IPOs.
• Economic Conditions: GMP is affected by economic factors like GDP, inflation and interest rates. When the economy is doing well, it usually means more people are investing in IPOs.
• Industry-Specific Factors: GMP can also be affected by the industry the company is in. For example, if a certain industry is growing fast or expected to, it can affect the GMP of companies in that industry.

#4. IPO-Specific Factors

• Size of the IPO: The size of the initial public offering (IPO) can have an impact on GMP. Bigger IPOs tend to have different Grey Market dynamics than smaller ones. Demand can be affected by the sheer number of shares available.
• Company Reputation and Brand Value: Companies that have been around for a while and have a good reputation and brand recognition tend to have higher Good Manufacturing Practices (GMPs). This means that investors are more likely to be willing to pay more for shares of companies that are already well-known.
• Pricing Strategy: The price at which company offer the IPO shares to the public is really important. If company sets an attractive issue price, it can attract more investors and result in higher premium. On the other hand, a pricing strategy that’s too aggressive can scare away investors and lead to lower GMP.

Calculating and Interpreting Grey Market Premium

It’s really important for investors and market watchers to know how GMP is determined and what it stands for. GMP can give you a good idea of how the market is feeling and how an IPO might do. Here’s a quick look at how GMP is measured and how it’s interpreted.

Calculating GMP

Basically, GMP is just a simple way to compare the price of shares in an initial public offering (IPO) on the so-called “Grey Market” to the company’s official issue price. This is usually done through market makers or informal brokers.

The formula to calculate GMP is as follows: makefile

GMP = Grey Market Price - IPO Issue Price

Now, let’s break down each component:

Grey Market Price:

The Grey Market price is the point at which an Initial Public Offering (IPO) share is actively traded on the unregulated and unofficial market known as the “Grey Market”. The Grey Market price is established by market participants, taking into account the dynamics of supply and demand and the sentiment of investors. It is important to emphasize that trading on the Grey Market is informal and is not subject to stock exchange regulations.

IPO Issue Price:

The IPO Issue Price is the company’s official price at which it plans to sell its shares to the market. It’s decided by a committee made up of the management, the underwriters, and regulators like SEBI. It’s a reflection of the company’s value and its goals for raising capital.

Interpreting GMP:

Interpreting GMP involves assessing its implications for investors and understanding what it signifies:

Positive Vs Negative GMP:

If GMP is positive, it means there’s a lot of demand for the shares before they go public. This means investors are really excited about the IPO and there could be lots of listing gains.

On the other hand, if GMP is Negative, it means the price of the shares won’t be as high. This could mean that investors aren’t as excited about the IPO, which could lead to losses.

Implication for IPO Investors:

High GMP:If you have a high GMP, you might find it hard to get your hands on an IPO share during the subscription period. That’s because if there’s too much demand for shares, it can be hard to get them. On the other hand, if your GMP is high, it usually means there’s a lot of investor interest and you could make a lot of money from the IPO.

Low or Negative GMP: If the GMP is low or negative, it might scare away some investors because it means there’s not much demand. But don’t just focus on GMP – other factors like the company’s business, industry, and future prospects should also be taken into account.

Risks and Considerations

GMP can be a great indicator, but it’s important to be aware of the risks and restrictions it comes with. Here are some of the main things to keep in mind:

Risks Associated with GMP

• GMP Volatility: GMP can be really volatile and can go up and down really fast. The grey market is an unregulated and informal market, so it’s easy for people to trade in it. That’s why GMP can fluctuate really quickly and without warning.
• Speculative Nature: GMP doesn’t always represent what’s really going on in the market and what investors are looking for. If you rely on GMP for all your investment decisions, you’re putting yourself at risk because it might not give you a good idea of what the company will look like in the future.
• Uncertain Predictive Power: GMP forecasts are based on what people think and what’s popular in the market. But they’re not always a good predictor of how an IPO will do once it’s officially listed on the stock market like NSE or BSE. So, investors should be careful about relying on GMP to make investment decisions.
• Variance in GMP Predictions: Different sources can give different GMP estimates for the same initial public offering. This shows how GMP is still a bit of a guess and how hard it is to use it as a way to predict what will happen in the future.

Real-Life Examples

Examining actual IPOs and their GMP experiences can provide valuable insights into how GMP affects investment decisions and outcomes. Here are two real-life examples:

Example 1: Positive GMP – Company X

Company X, a technology startup, decided to go public with an IPO. They set the official issue price for their shares at ₹100 each. However, in the Grey Market, these shares were actively traded at ₹120, resulting in a GMP of ₹20.

Implications:

• High Investor Interest: Even before Company X’s shares went live on the stock exchange, there was a lot of demand for the company’s IPO shares. This was because the company’s gross margin over time (GMP) was so high that it attracted a lot of investors who thought they could make a profit by listing the company.
• Oversubscription: The IPO was so popular that the demand for shares was so high that there were more shares available than there were investors to buy. Retail investors had a hard time getting shares because there was so much demand.
• Listing Gains: When Company X’s stock started trading on the exchanges, they saw huge listing growth. Investors who bought shares during the initial public offering (IPO) made money as the stock price went up.

Example 2: Negative GMP – Company Y

Company Y, a traditional manufacturing company, announced its IPO with an official issue price of ₹150 per share. However, in the Grey Market, these shares were trading at ₹130, resulting in a negative GMP of -₹20.

Implications:

• Lower Investor Enthusiasm: The fact that the GMP was negative (-₹ 20) meant that there weren’t too many people interested in buying Company Y’s shares before they went public. This didn’t bode well for potential investors.
• Lower Subscription Levels: The IPO didn’t do as well as expected during the subscription period. Investors were hesitant to apply for shares because of the poor quality GMP.
• Potential Listing Losses: When the shares of Company Y finally started trading, the investors saw their share price go down. The investors who applied for the shares at the Rs. 150 issue price had to suffer listing losses because the shares were trading at a much lower price than the issue price.

Conclusion – IPO GMP

GMP is like a weather forecast for the stock market. It’s an early indicator of investor interest in a stock, so if it’s high, it means people are really excited about the stock.

On the other hand, if it’s low, it means investors are hesitating. Investors use GMP to get a feel for what’s going on in the market.

But like weather, it’s not always right, so it’s important to mix it with other research. Even though markets are constantly changing, GMP is still a useful tool for investors, but it’s not infallible.

IPO Grey Market Premium – FAQs

Past IPO Grey Market Premium of IPO 2022-2023:

IPO Name	Price	GMP	List Price
Valiant Laboratoriesn IPO GMP	Rs140	Rs25	Rs162
Plaza Wires IPO GMP	Rs 54	Rs25	Rs76
Delhivery	Rs487	Rs10	Rs495
Paytm IPO	Rs2150	Rs30	Rs1950
LIC IPO	Rs949	Rs12	Rs872
Zomato	Rs76	Rs25	Rs126

Check Below Links For Complete Information about Current and Upcoming IPOs

Check Out IPO Dashboard Below for Upcoming IPOs, IPO Allotment and IPO Knowledge:

IPO DashBoard