A day ahead of its listing, DLF shares were trading at a premium of Rs 50-70 per share in the Rajkot grey market.

Traders said it is unusual that the grey market is active even after the issue subscription has closed. DLF grey-market shares were priced at Rs 525 per share.

Traders said the premium reached its peak in the grey market since the sentiment in the secondary market is robust and the stock prices of real estate companies are rising.

Traders said this indicated a good premium for DLF shares when it lists on Thursday.

The grey market was also quite active for Vishal Retail shares, which was listed on Wednesday at a hefty premium. The scrip was commanding a price of Rs 350 in the grey market till Tuesday, compared to its issue price of Rs 270. The scrip closed at Rs 750 on listing day.

In the case of Everonn Systems, whose issue opens on Thursday, the premium in the grey market is Rs 300, against a price band of Rs 125-140.

The Allied Digital Services scrip is commanding a premium of Rs 100-110 against a price band of Rs 170-190 per share. The issue, which closes on Thursday, is already subscribed more than three times.

There is more. The Housing Development Infrastructure Ltd scrip commanded a premium of Rs 30-35 against a price band of Rs 430-500.

The grey market is an unofficial market for IPOs and acts as a price discovery mechanism before an issue opens for subscription and mostly operates in Ahmedabad, Rajkot, Kolkata and a few other smaller cities.

A network of brokers offers two-way quotes for shares which are on offer in an IPO. If he quotes Rs 50-52 price per share, he buys the shares at Rs 50 and sells them at Rs 52 to the buyer -- mostly retail investors.

The actual transfer of shares takes place when they are listed. Even if shares are listed at a discount, the broker has to pay the premium promised.

And if shares are traded at a much higher price than the premium, the seller has to transfer shares allotted to him, depending on the deal size.

If an investor has sold 100 shares and is allotted less, he has to buy the balance from the market and deliver it to the buyer-broker. There is no legal sanctity to these deals and hence, they are based on trust.