It is almost a flashback to 1994, with new issues commanding a premium in the grey market even before listing.

Indraprastha Gas, which is slated to be listed, has started commanding unofficial premiums. Investors are speculating on the premium TV Today might fetch even before the issue is closed.

Says Kamlesh Gandhi, director, Centrum Finance, "Oversubscription (to issues) is one of the reasons for the grey market and the premiums they are commanding."

Simply put, demand is far outstripping supply. The pricing of issues is structured such that there is scope for a premium and investors can make money. Adds Gandhi, "The grey market has thrown up opportunities for investors to stagger their subscriptions and sell at a price before listing."

The Securities and Exchange Board of India has reserved 50 per cent of all issues for subscription by retail investors -- those who subscribe to less than Rs 50,000 per application. Although the number of applicants runs into hundreds of thousands, the amount subscribed to is not big in relation to what is bought by wholesale investors.

Who, then, buys in the grey market? Someone who feels the grey market price is attractive in relation to the "perceived opening price".

Divi Labs hit the market in February followed by Maruti Udyog, which is considered a turning point for the IPO market in as much as it revived the interest of almost 300,000 investors in the country. Initially, the Maruti IPO's price was considered steep at Rs 125 per share for a Rs 5 paid-up share.

The response, however, was phenomenal and on listing the opening price was over Rs 160. This has now climbed to over Rs 355. Maruti was a book-built IPO with a price discovery mechanism and yet reportedly there was a grey market price for the share.

On its heels came the Uco Bank issue, attracting about 1 million applicants. The second issue of Indian Overseas Bank attracted about 4.5 million applicants and Vijaya Bank attracted over Rs 4,000 crore (Rs 40 billion) in subscriptions.

The last one to get a huge response was Indraprastha Gas, which has reportedly garnered about Rs 3,000 crore (Rs 30 billion). TV Today's public offer, which opened yesterday and sold out in two hours, is expected to draw in excess of Rs 3,000 crore.

The oversubscription is also a result of the financing which is available in plenty. How does this funding work? Say, for instance, company X makes an IPO with an issue price Rs 50 per share. Wholesale investors will receive funding with 5 per cent margin.

That is, for every Rs 100,000, the investor will receive funding of Rs 20 lakh (Rs 2 million). Interest charged on the money varies from 15 to 18 per cent.