IPOs · 5 min read

IPOs and Grey Market Premium (GMP), explained

What an IPO actually involves, and why GMP is watched closely but shouldn't be trusted blindly.

What is an IPO?

An Initial Public Offering (IPO) is the process by which a private company sells shares to the public for the first time and becomes listed on a stock exchange. Before an IPO, a company's shares are typically held by founders, employees, and private investors. Going public raises capital and gives that stock a tradeable market price for the first time.

During the subscription window, investors can apply for shares within a set price band. If demand exceeds supply — the IPO is "oversubscribed" — shares are allotted through a lottery-style process for retail investors, or proportionately for larger institutional and high-net-worth categories.

The key dates to track

Open date — the first day you can apply
Close date — the last day to apply
Allotment date — when the registrar finalizes who receives shares
Credit date — when allotted shares are credited to your demat account
Listing date — when the stock begins trading on the exchange

What is GMP?

Grey Market Premium (GMP) is the unofficial premium at which IPO shares are bought and sold before they officially list, in an informal, unregulated market that exists outside SEBI's oversight entirely — hence "grey."

A simple example: if an IPO's upper price band is ₹100, and the GMP is quoted at ₹20, that means some traders in the grey market are informally willing to pay ₹120 for shares ahead of the official listing — implying they expect the stock to open around 20% above its issue price.

Why people watch it anyway

GMP is popular because it's the earliest available signal of listing-day sentiment — often available days before the stock actually starts trading. When there's genuinely no other data point yet, it fills a gap.

But treat it carefully: GMP is unofficial, completely unregulated, and can swing significantly — even within the same day — based on rumor, sentiment, or a small number of grey-market trades that don't reflect broad demand. It has, on multiple occasions, turned out to be a poor predictor of actual listing performance. Never use GMP as your sole basis for applying to or holding an IPO.

What's more reliable than GMP

Subscription numbers — how many times the IPO was oversubscribed across retail, institutional, and other categories, published officially by the exchange
The company's actual financials and RHP (Red Herring Prospectus) — the legal document detailing the company's business, risks, and use of proceeds
Sector and broader market conditions at the time of listing

Where to check current IPOs

Script Tick's IPO page shows which IPOs are currently open for subscription, along with price band, lot size, and key dates for upcoming and recently listed IPOs — sourced from publicly available data and updated regularly.