IPOs

The Grey Market Said 16%. SBI Funds Listed at 6.85%. Here's Why

The grey market priced SBI Funds Management's IPO at a 16% pop. It listed at 6.85% and fell below issue price in three sessions. What to check instead.

By The Indian Markets Desk 11 min read

A public experiment nobody designed, and everybody can read#

Most arguments about the grey market end in a stalemate, because nobody agrees on the scoreboard. India's largest asset manager settled one round of that argument in public this July.

Two days into bidding for the SBI Funds Management IPO, the grey market premium was quoted at ₹93 a share, which pointed to a listing price near ₹667 and a gain of about 16.2% over the ₹574 issue price. On 21 July the stock opened at ₹613.30 on the NSE, up 6.85%. It touched ₹624.95 and closed at ₹609.75. Three sessions later it slipped to ₹572.15, below the issue price. On 4 September it was around ₹562.

So the grey market got the direction right and the size wrong by a factor of more than two. That matters, because Google Ads data for India shows 2.24 million monthly searches for "IPO GMP" and another 165,000 for "grey market premium". A lot of money is being allocated on a number most people cannot trace to a source.

What the grey market premium actually is#

Grey market premium is the price at which unlisted IPO applications and allotted shares change hands privately, before the stock lists. It is quoted as a rupee figure over the issue price. Add the two together and you get the market's informal guess at the listing price.

Two things about it matter more than the number itself.

First, it is not a market in the regulated sense. There is no exchange, no clearing corporation, no settlement guarantee and no SEBI oversight. Trades are verbal commitments between a small set of dealers and their clients, settled in cash after listing. Nobody publishes volumes, so a quote of ₹93 tells you nothing about whether it was struck on ten lots or ten thousand.

Second, the websites that publish GMP are aggregators. They ring around dealers, average the answers and post the result. That is why the same IPO shows three different premiums on three trackers on the same afternoon.

The grey market exists because of a gap in the calendar. Since 1 December 2023, SEBI has required listing within three working days of an issue closing, down from six. Applicants know within a day or two whether they have shares, but cannot sell them for another two days. Somebody will always offer to buy that risk.

SEBI has noticed. At the FICCI capital markets conference in August 2025, chairman Tuhin Kanta Pandey asked whether India should pilot "a regulated venue where pre IPO companies can choose to trade subject to certain disclosures". That idea, sometimes called a "when listed" window, has not been implemented. Until it is, the grey market stays a private market with a public audience.

The scoreboard: what GMP promised and what the market paid#

Here is the SBI Funds Management sequence in one place.

Date (2026)EventPriceVersus ₹574 issue price
13 JulyAnchor allotment₹574Anchor book raised ₹2,663 crore
15 JulyGrey market quote, day 2 of bidding₹667 implied+16.2% (GMP ₹93)
16 JulyBidding closes, 41.66 times subscribed₹574Issue price fixed at the top of the band
21 JulyListing, NSE open₹613.30+6.85%
21 JulyListing day high₹624.95+8.9%
21 JulyListing day close₹609.75+6.2%
24 JulyIntraday low₹572.15-0.3%
4 SeptemberTraded priceabout ₹562-2.1%

Sources: India Infoline, Groww, Chittorgarh and Business Standard.

Is the grey market ever right? What the wider record suggests#

One IPO proves nothing on its own, so it is worth asking how the signal behaves across a season. An independent tracker that scored 138 IPOs listed up to July 2026 found average GMP of 10.54% against average listing gains of 8.65%, with the direction called correctly in 69 of 88 cases where a signal existed. On mainboard issues alone the direction was right about 82% of the time, with average GMP of 7.95% against actual gains of 6.93%.

That is not a SEBI dataset and it has not been audited, so treat it as indicative rather than settled. It is also consistent with what happened to SBI Funds: the grey market beats a coin flip on direction, estimates size poorly, and leans optimistic. Reading it as a price target is the mistake. Reading it as a sentiment thermometer is defensible.

What the prospectus said that no GMP quote could#

The offer document is free, filed with SEBI, and almost nobody opens it. It carried facts the grey market never priced.

The whole issue was an offer for sale by State Bank of India and Amundi. The abridged prospectus is blunt: "Our Company will not receive the Offer Proceeds. The Offer Proceeds will be received by the Promoter Selling Shareholders". No new factory, no debt repayment, no growth capital. Two existing owners cashed part of their holding.

The business itself is genuinely strong. SBI Funds Management is India's largest AMC by mutual fund quarterly average AUM, with ₹12.51 lakh crore and a 15.3% market share in FY26, roughly 18 million mutual fund investors, and profit after tax of ₹3,067 crore on revenue from operations of ₹4,389 crore. Set that against an industry that reached ₹73.73 lakh crore in AUM in FY26 and you can see why institutions wanted it.

The same document lists the risks in order. Management fees were 96.47% of revenue from operations, so earnings move with market levels rather than with anything management controls. The top five schemes were 42.57% of mutual fund AUM. Fee compression under SEBI's expense ratio framework and the shift to passive funds each get their own risk factor. ICICI Securities made the same point after listing, noting that earnings "remain linked to equity market performance", while Equirus initiated with a LONG rating and a March 2027 target of ₹627.

At ₹574 the stock was priced at roughly 38 times FY26 earnings. That is an opinion about the price, not a fact about the company, and it is the sort of judgement a ₹93 quote cannot contain.

Six things worth checking before the next one#

Read the subscription split by category#

SBI Funds closed at 41.66 times, which sounds emphatic. Underneath, QIBs bid 140.11 times while retail managed 3.60 times. At the end of day two, retail was at 1.07 times and QIBs at 0.08 times. Institutional money arrives late and decides the price. Retail enthusiasm on day one tells you very little.

Diary the anchor lock-in dates#

Under Schedule XIII of the SEBI ICDR Regulations, half the anchor allocation unlocks 30 days after allotment and the rest at 90 days. Anchors here were allotted on 13 July, so mid-August and mid-October. Supply arriving on a known date is not a prediction of a fall, but it is a calendar entry worth having.

Ask who is selling, and why#

A fresh issue puts money into the business. An offer for sale moves it to the seller. Both are legitimate; they are not the same transaction, and only one of them changes the company's balance sheet.

Compare with the listed peers#

AMC listings have gone every way. HDFC AMC opened at ₹1,726.25 on a ₹1,100 issue price in 2018, UTI AMC listed 11.5% below its ₹554 price in 2020, and ICICI Prudential AMC opened about 20% up on ₹2,165 in December 2025. Same industry, same regulator, three different debuts.

Check the provenance of the number#

A premium quoted on the morning of day two, before QIB bidding, is a guess about a guess. If the tracker will not say how many dealers it polled, that is the answer.

Decide your exit before you apply#

SEBI's own study of investor behaviour found that 54% of shares allotted to investors, excluding anchors, were sold within a week of listing. Most people applying to IPOs are trading, whatever they tell themselves. If you are trading, the GMP matters and the prospectus does not. If you are investing, it is the other way round. Knowing which one you are is the whole game.

Key takeaways#

  1. The grey market premium for SBI Funds Management implied a 16.2% listing gain. The stock opened 6.85% higher and was below its issue price within three sessions.
  2. GMP is an unregulated, unaudited quote with no published volumes. It is a sentiment reading, not a price target.
  3. The issue was entirely an offer for sale. The company received none of the roughly ₹9,800 crore raised.
  4. The prospectus disclosed that 96.47% of revenue from operations came from management fees and that the top five schemes were 42.57% of AUM, which ties earnings to market levels.
  5. Subscription split by category, anchor lock-in dates, use of proceeds and listed peer valuations are all verifiable before the issue closes. The grey market premium is not.

Frequently asked questions#

Is the grey market regulated in India? No. It runs off-exchange and outside SEBI's framework, so there is no recourse if a counterparty defaults. SEBI's chairman has floated a regulated alternative.

Does a high GMP mean the IPO is worth applying for? It means dealers expect a positive debut. It says nothing about the company's earnings, valuation or risks, all of which are in the prospectus filed with SEBI.

Why did the stock fall below its issue price so quickly? Reporting at the time pointed to profit taking after the debut and to earnings that track the equity market. Pinning a short move on one cause is interpretation, not fact.

Should I sell on listing day if the GMP is high? That depends on why you applied and on your tax position. SEBI's data shows most allottees sell within a week, which describes behaviour rather than recommending it.

Where can I read the offer document? In SEBI's public issues section. The red herring prospectus and the shorter abridged prospectus are both free.

What is the difference between GMP and kostak? GMP is the premium on the share itself. Kostak is a fixed amount paid for an entire application, whether or not it receives allotment. Both are informal.

Glossary#

Grey market premium (GMP). The unofficial price at which IPO shares or applications change hands privately before listing, quoted as a premium over the issue price.

Offer for sale (OFS). A public issue in which existing shareholders sell their shares. The company issues nothing new and receives no proceeds.

Anchor investor. A qualified institutional buyer allotted shares a working day before the issue opens, locked in for 30 days on half the allotment and 90 days on the rest.

QAAUM. Quarterly average assets under management, the average value of assets a fund house runs over a quarter. Fee income is charged on this base.

Qualified institutional buyer (QIB). A registered institutional investor such as a mutual fund, insurer, pension fund or foreign portfolio investor.

Price band. The range within which bids may be placed. The issue price is fixed within it after bidding closes.

Expense ratio. The annual charge a mutual fund scheme deducts from investors, capped by SEBI on a sliding scale.

T+3 listing. SEBI's rule that shares must list within three working days of an issue closing, in force since 1 December 2023.

References#

This article is journalism, not investment advice. It describes what was disclosed and what happened. Nothing here is a recommendation to buy, sell or hold any security. Consult a SEBI-registered investment adviser before acting.

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