WHAT IS GMP?

Grey market premium or GMP is a premium amount paid at which initial public offering (IPO) shares are traded before it is listed on the stock exchanges. For instance, LIC fixes its IPO price at Rs 90 per share and its IPO GMP is 50, then the organisation will get listed at Rs 140.90. Eventually, investors will receive up to 55 per cent of the profit on listing day.

 

Simply put, IPO-bound firms test waters in the grey market before making the listing debut and the GPM acts as a key indicator that reflects how the IPO may perform on listing day.