Kostak and subject-to-sauda, explained
Alongside GMP, IPO discussions often quote 'kostak' and 'subject to sauda' rates. Both are deals in the unofficial grey market for IPO applications, not for shares.
Kostak
A kostak rate is a fixed amount offered for an IPO application, paid whether or not the application gets an allotment. The buyer takes the risk: if the application is allotted, the buyer gets the gain (or loss) on listing; if not, the seller keeps the kostak anyway.
Kostak is usually quoted for retail applications and tends to rise when the GMP is high and the expected oversubscription is moderate.
Subject to sauda
A subject-to-sauda rate is paid only if the application is allotted. It is normally higher than kostak, because the seller is paid only when they actually get shares.
How they relate to GMP
GMP is the premium on shares; kostak and subject to sauda are prices for applications. All three move together with demand for the IPO, and all three are unofficial.
The risks
These deals are not on any exchange, are not regulated by SEBI, and are not legally enforceable: if the other side does not pay, there is no recourse. Selling an application also means handing your allotment, and often your account details, to someone else.
IPO Khata shows GMP as one unofficial signal and does not deal in, quote or recommend kostak or subject-to-sauda trades.
Related guides
- What is IPO GMP? Full form, meaning and how to calculate it
- How IPO allotment works
- What happens on IPO listing day
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Information, not investment advice. GMP is an unofficial grey-market indicator; figures come from public sources (InvestorGain) and may be late or wrong. Not registered with or affiliated to SEBI, the exchanges, the registrars or InvestorGain.