MUMBAI: The grey market for initial public offers (IPOs) may be limping back to life post demonetisation . The BSE IPO set to open for public subscription on January 23, is already quoting at a 12-15% premium over the upper end of the price band of Rs 805-Rs 806 per share, set by the exchange and its merchant bankers.BSE’s will be the first IPO to test the markets post demonetisation. In November last year, it was believed that the note ban would forever kill grey market activity in equities but brokers say there is no substance to such assumption now.The initial few days after the government’s sudden ban of Rs 500 and Rs 1000 notes had spread panic among grey market operators and havala traders. It was believed that cash-based trade settlement would become impossible.“Cash situation seems to be easing as Rs 2,000 notes are widely available and brokers in grey market are willing to accept large bets,” said a trader in Mumbai. “Traction for BSE IPO was building up as the exchange is available at 90% discount to the valuation of its larger rival the National Stock Exchange (NSE). If NSE is valued at Rs 40,000 crore, than BSE at a valuation of around Rs 4,200 crore will definitely generate interest.”Though NSE has a lion’s share in equity trading, there is a belief that regulations would make it impossible for a third national exchange to emerge for a long time, giving BSE an edge as the sole number two in equity trading. The BSE’s policy of fat dividends to shareholders has been a talking point among institutions, brokers said.At a price of Rs 806 per share, BSE is being valued at 1.6 times its Financial Year (FY) 2016 book value of R497.7 per share (of Rs 2 face value). The NSE was valued at over 2.8x its FY16 book value in July 2016 when State Bank of India sold its 5% stake.Brokers said subscription by anchor investors, mainly large institutional players, will be closely followed by the grey market.“Premiums could further rise in grey market if there was an overwhelming response from institutional investors," said another trader from Gujarat.Grey market for equity IPOs is active in Mumbai, Delhi, Rajasthan and Gujarat among other places. Here, large investors try to corner shares ahead of their listing. Those who sell shares in grey market ensure they have several retail traders as front for applying to an IPO, which in turn raises the official demand for shares ensuring a premium on listing. Merchant bankers to the BSE IPO told ET that details of anchor book subscription would be out by January 21.