IPO GMP Calculator

What Is GMP and Where Does It Come From?

GMP — grey market premium — is the price at which IPO shares change hands before they officially list on NSE or BSE. This is an entirely unofficial market that SEBI neither regulates nor sanctions. Trades happen between private parties, often through brokers who operate in specific pockets of Surat, Ahmedabad, and Mumbai.

The grey market works on trust and reputation. Buyers and sellers transact based on verbal commitments. No exchange records these deals, no depository holds these shares. Settlement happens after listing: if you bought at GMP and the stock lists higher, the seller pays you the difference. If it lists lower, you pay the seller. The entire structure runs on counterparty risk.

GMP typically emerges within a day or two of an IPO opening for subscription. It fluctuates constantly — sometimes multiple times a day — as subscription data comes in. A heavily oversubscribed IPO on Day 1 can see GMP jump 30–40% overnight. A tepid response drops it fast.

Kostak Rate and Subject to Sauda

Two terms appear constantly in grey market conversations: Kostak rate and Subject to Sauda (STS).

Kostak rate is what someone pays you for your IPO application itself — not the shares, but the application. If Kostak for an IPO is ₹800 and you applied for one lot, you receive ₹800 regardless of whether you get allotment. The buyer bets that allotment will come through. If you get shares, he profits from the listing gain. If you don't, he loses ₹800. This is a risk-free trade for the applicant.

Subject to Sauda (STS) is similar but contingent on allotment. You agree to sell shares at a fixed price above issue price, but the deal only executes if you actually receive an allotment. No allotment, no transaction. STS prices are typically higher than Kostak because the buyer is taking on allotment risk too.

GMP as Sentiment Indicator — Not a Guarantee

Here's the part most retail investors miss: GMP has a weak and inconsistent relationship with actual listing prices. It reflects demand in a thin, informal market. A few large players can move GMP by taking big positions. It is, at best, a crowd sentiment reading.

Paytm's IPO in 2021 had positive GMP before listing. It listed at a 27% discount to issue price — one of the worst listings in recent memory. On the other side, many IPOs with modest GMP have delivered strong listing gains when institutional demand materialized at the last minute.

Studies covering 2019–2023 IPO data show that GMP predicts listing direction correctly about 65–70% of the time — better than random, but not reliable enough to bet large sums on. The accuracy improves for IPOs that are subscribed 50x or more, where broad demand signals a genuine frenzy.

Use GMP as one data point alongside subscription numbers, peer valuations, and sector conditions. Never use it as the sole reason to apply for an IPO at the last minute.

Historical GMP Accuracy — Notable IPO Examples

Looking at some landmark cases illustrates the pattern. In 2021, Zomato's GMP was around ₹25–30 before listing. It listed at ₹116 against an issue price of ₹76 — a 52% premium. GMP directionally correct. Nykaa had a GMP of ₹600+ and listed with an 80% gain. But these were euphoric market conditions.

In 2022 and into 2023, the IPO market cooled. Several IPOs with positive GMP listed flat or negative. Life Insurance Corporation (LIC) — the largest IPO in Indian history at ₹21,000 crore — had declining GMP in its final days and eventually listed at a 9% discount. The grey market had actually warned participants, but many ignored it.

2024 saw a revival with strong GMP readings on IPOs like Bajaj Housing Finance, Hyundai India, and NTPC Green Energy. Bajaj Housing Finance listed 114% above issue price, one of the best performances of the year. Hyundai disappointed with a flat listing despite reasonable GMP, reminding investors that large-cap IPOs behave differently.

How to Use This Calculator

Enter the IPO issue price and current GMP to see the implied listing price. The calculator also shows estimated Kostak value based on lot size — useful if you want to assess whether selling your application in the grey market makes sense.

Remember that GMP changes constantly. The number you see today may be meaningless by tomorrow morning when Day 3 subscription data drops. Check GMP sources — typically Chittorgarh, IPO Watch, or community Telegram groups — multiple times as the IPO window closes.

One practical rule: if an IPO's GMP drops significantly after Day 2 subscription data, take that as a warning signal. Sustained or rising GMP through the closing day is a stronger signal than an early spike that fades.