India’s IPO Market: Growth, Grey Market Premiums, and Investor Insights

India has become a vibrant hub for Initial Public Offerings (IPOs), showcasing remarkable growth in volumes and attracting a diverse range of investors. The country’s dynamic regulatory framework, robust domestic capital market, and a vast base of retail investors have collectively contributed to this surge. In 2025 alone, India witnessed approximately 90 mainboard IPOs, averaging nearly 7 to 8 each month. This article delves into the intricacies of the IPO landscape in India, focusing on the significance of Grey Market Premium (GMP) and its reliability as an investment metric.

The Rise of IPOs in India

India’s IPO market has flourished due to several factors. A progressive regulatory environment has fostered investor confidence, while a well-established domestic capital market provides a solid foundation for companies looking to raise capital. The influx of retail investors, eager to participate in the growth story of Indian companies, has further fueled this trend.

The year 2025 marked a significant milestone, with 90 companies successfully listing through IPOs. This surge reflects not only the growing interest in equity markets but also the potential for substantial returns that IPOs can offer.

Understanding Grey Market Premium (GMP)

Before diving into IPO subscriptions, investors should consider the accuracy of the Grey Market Premium (GMP). The GMP represents the additional amount—above the IPO issue price—that investors, particularly High Net-Worth Individuals (HNIs), are willing to pay. This unofficial indicator is commonly used to gauge the likely listing price of a stock even before it hits the exchanges.

While GMP is a widely followed metric, its reliability remains a topic of debate. Many investors rely on rough estimates rather than concrete data, as the grey market lacks transparency. Typically, a positive GMP signals strong demand in the unofficial market, while a negative GMP indicates weak sentiment. Investors closely track these premiums during the pre-listing phase, as GMP figures often surface 5 to 10 days before the IPO opens.

Is GMP Accurate for IPOs?

The accuracy of GMP is a crucial consideration for investors. To explore this, IPO Central analyzed all mainboard IPOs listed in 2024. Out of the 90 IPOs, four—Sagility India, Godawari Biorefineries, Niva Bupa Health Insurance, and Carraro India—had no meaningful activity in the grey market and were excluded from the analysis.

The study focused on the correlation between GMPs and actual listing performance. In a high-correlation scenario, high GMPs should consistently translate into similar listing gains. The analysis calculated the average GMP of each of the 86 IPOs and compared it with the actual listing prices.

Key Findings

1. Variance in Performance: The analysis revealed that while some IPOs performed in line with GMP expectations, others exhibited significant variances. For instance, Vibhor Steel Tubes had a remarkable variance of nearly 59% from the latest GMP, indicating a strong disconnect between GMP predictions and actual market enthusiasm.

2. Overestimations and Underestimations: Conversely, Deepak Builders and Engineers saw a sharp 32% downside from its latest GMP estimates, highlighting a significant overestimation by the grey market. Similarly, Udayshivakumar Infra listed 33% below its GMP, showcasing how informal pricing signals can be misleading, especially during periods of weak broader market sentiment.

3. Market Dynamics: In large-cap IPOs like Unicommerce eSolutions and Vibhor Steel Tubes, high listing prices were possibly driven by panic buying from investors who missed allotment during oversubscription. In contrast, the case of Deepak Builders and Engineers illustrates a genuine misreading by the grey market.

The Reliability of IPO GMP

The majority of IPO listings had variances within the 25% range, suggesting that while GMP can provide insights into pre-listing demand, it is not always a reliable predictor of actual listing performance.

Key Takeaways

1. Subscription Impact: High subscription rates can lead to a reverse squeeze situation, causing listing day performance to exceed grey market expectations.

2. Discounting GMP: Investors may benefit from applying a discount of 20-25% on prevailing GMPs to enhance reliability. The analysis showed that several premiums diminished after subscription dates.

Overall, while IPO grey premiums offer a glimpse into pre-listing demand, they should be viewed as one of many tools for making informed investment decisions. The accuracy of IPO GMP is not always up to the mark, and investors should approach it with caution.

Conclusion

India’s IPO market continues to thrive, driven by a combination of regulatory support, market maturity, and investor enthusiasm. However, the reliability of Grey Market Premiums remains a contentious issue. Investors are encouraged to use GMP as a supplementary tool, while also considering other factors that influence IPO performance. By understanding the nuances of the IPO landscape and the limitations of GMP, investors can make more informed decisions in this dynamic market.