TL;DR (Executive Summary)
- GMP (Grey Market Premium) is an informal per-share premium quoted in the IPO grey market before listing; it hints at expected listing sentiment but is noisy, hype-prone, and not regulated.
- Unlisted Price is the negotiated price at which currently unlisted company shares change hands off-exchange (pre-IPO or never-to-IPO); it reflects supply–demand, company fundamentals, and deal liquidity, and typically settles via off-market demat transfer.
- Use GMP only as a sentiment gauge for listing day; use unlisted pricing for longer-term entry/exit decisions in private names. Both can mislead when float is tiny, news is stale, or the trade is illiquid. An SME IPO just listed 90% above issue price despite a ~60% GMP—a perfect example of GMP’s limits.
- What’s new: SEBI has proposed bringing parts of the grey/pre-listing trading into a regulated framework (“when-listed” or regulated pre-listing platform) to improve transparency and price discovery—reducing reliance on the informal GMP tape.
Why this guide (and who it’s for)
If you buy/sell unlisted shares or watch IPO action in India, you’ve likely seen two numbers floating around: GMP and an unlisted market price. They sound similar but measure different things. This deep-dive explains the mechanics, math, and when to ignore both—with a practical playbook for investors and channel partners using UnlistedCorner.
1) What is GMP?
GMP is the per-share premium/discount quoted unofficially for an upcoming IPO relative to its issue price. If an IPO’s issue price is ₹100 and the market quotes a GMP of ₹25, the crowd is implying a ~₹125 listing “whisper.” It emerges from informal, off-exchange conversations and deals before listing day.
Two other grey-market terms often ride alongside:
- Kostak rate: a lump-sum price for buying/selling an IPO application (not shares) before allotment.
- Subject to Sauda (STS): a price for an application conditional on firm allotment—the deal is valid only if shares are allotted.
Important: The grey market operates outside the formal exchange framework; its prints can be thin, rumor-driven, and volatile.
2) What is an Unlisted Price?
An unlisted price is the negotiated price at which shares of a company not listed on NSE/BSE change hands today. Drivers include:
- Supply–demand in the secondary (off-exchange) market
- Recent funding round valuation and private comps
- Financials (revenue, EBITDA, cash flow, unit metrics)
- Corporate events (buybacks, ESOP unlocks, DRHP, dividends)
- Liquidity & lot size constraints for HNIs/retail
Settlement typically happens through off-market demat transfers after funds clear—not via exchange clearing. Price discovery is negotiated, not screen-based.
3) Side-by-Side: GMP vs. Unlisted Price
|
Dimension |
GMP (IPO) |
Unlisted Price (Pre-IPO/Private) |
|
What it measures |
Crowd-implied listing premium vs. issue price |
Current negotiated value of unlisted equity |
|
Market type |
Informal grey market (pre-listing) |
Off-exchange secondary for unlisted equity |
|
Time horizon |
Days/weeks around listing |
Months/years to potential IPO/exit |
|
Price source |
Informal quotes, dealers |
Negotiated bids/asks, broker networks |
|
Settlement |
Mostly application-level deals (Kostak/STS) until listing |
Off-market transfer into demat post-payment |
|
Reliability |
Sentiment proxy; noisy |
Fundamentals + flows; still illiquid |
|
Best use |
Gauge listing-day sentiment |
Long-term entry/exit in private names |
Quick math:
- Indicative listing price ≈ Issue Price + GMP (very rough, may be off by a lot).
- Unlisted mark-to-market is simply your latest negotiated trade price (or broker-published quote), adjusted for lot size, fees, and transfer timelines.
4) When GMP works—and when it fails
Works better when:
- The IPO is well-known with strong institutions and retail buzz.
- The float is reasonable and price band is perceived as fair.
- There’s supportive newsflow into listing.
Fails often when:
- Thin float / SME IPOs cause outsized listing swings; even a “60% GMP” can translate to 90%+ listing or much lower—recent example: Anondita Medicare listed ~90% above issue vs. ~60% GMP.
- Rumor mills and small dealer networks influence quotes.
- Macro/sector sentiment turns after the GMP is quoted.
- There are lock-in dynamics or large anchor exits the market didn’t price in.
Bottom line: Treat GMP as sentiment, not valuation. Use it to frame risk on listing day, not to decide fair value 3–12 months out.
5) When unlisted prices are reliable—and when to walk away
More reliable when:
- You have current financials and a handle on unit economics.
- There’s recent secondary activity with multiple counterparties.
- A DRHP is filed or strategic event (buyback/dividend) anchors value bands.
- The lot size isn’t so big that it skews who can trade.
Walk away (or deeply discount) when:
- The only prints are stale or one-way dealer quotes.
- Settlement terms are unclear (escrow, timelines, transfer process).
- You can’t diligence cap table / ESOP unlocks / promoter selling.
- You see extreme spreads between bid and ask with no natural liquidity.
Remember: Unlisted trades are negotiated, and price can differ from any media headline. Seek documentation and clarity on who is selling (employee, investor, intermediary) and how delivery will occur (off-market demat).
6) What SEBI’s evolving stance means for you
SEBI has publicly discussed regulating the grey/pre-listing area to improve price discovery and tax transparency. Reports in August 2025 indicated work with exchanges and the corporate affairs ministry on a regulated pre-listing/“when-listed” platform. This could legalize and standardize the gap between allotment and listing, reducing reliance on informal GMP ticks and improving investor protections.
If/when such platforms go live, expect:
- Cleaner price signals pre-listing
- Defined settlement and KYC/AML rails
- Lower leakages and less room for rumor-led premiums
7) Risk controls, taxes, settlements & documentation
Settlement & delivery: Off-market demat transfer after funds clear; confirm ISIN, quantity, seller identity, and timeline in writing.
Tax angle (high-level): Unlisted equity has different holding period rules and potential tax treatment vs. listed equity; keep documentary evidence for cost basis. (Consult qualified tax advisors as rules change.)
Regulatory evolution: With SEBI exploring regulated pre-listing frameworks, execution may get simpler and safer—but until then, rely on documented deals and robust KYC/AML practices.
GMP caution: GMP can be directionally useful but can misprice outcomes on listing day—especially in SME and thin-float cases. Recent debuts show big gaps between GMP and actual listing prints.
8) Practical playbook: How to use (and ignore) GMP vs. Unlisted Price
Use GMP to:
- Position for listing day noise (tight stops; size small)
- Compare sentiment across IPOs this week/month
- Identify overhyped vs. under-the-radar issues
Ignore GMP when:
- You’re evaluating fundamental value 6–18 months ahead
- The float is tiny or lock-ins are complex
- The quote hasn’t updated after material news
Use unlisted price to:
- Build a long-term position in a pre-IPO leader
- Negotiate entry during buyback/ESOP unlocks or soft patches
- Trim exposure when private valuations detach from fundamentals
Ignore unlisted price when:
- It’s a single-dealer print without confirmations
- Bid–ask is abnormally wide or terms of transfer are opaque
- Your sizing would move the market or lock you in
9) FAQs
Q1) Is GMP legal?
GMP arises in the informal market. SEBI is exploring regulated alternatives to bring transparency to the pre-listing window—watch this space.
Q2) Are unlisted trades legal?
Yes—unlisted shares can be bought/sold off-exchange with off-market demat transfer after payment, subject to applicable laws and documentation.
Q3) What are Kostak and Subject-to-Sauda?
Kostak is a lump-sum price for an IPO application; Subject-to-Sauda is a price conditional on allotment (valid only if shares are allotted).
10) A quick illustration: Listing-day math vs. negotiated unlisted price
- IPO A issue price: ₹100, quoted GMP: ₹25 → Indicative listing ₹125 (± big error bars). If the book is small or news breaks, actual listing may overshoot/undershoot.
- Company B (unlisted) last dealt at ₹1,000 on 25K shares with clean delivery. A large ESOP unlock hits; two sellers compete; you negotiate ₹930 with T+2 demat transfer and escrow release on credit—that ₹930 is today’s unlisted price you can actually execute.