what is kostak rate ? and sauda for ipo s ? please explain in details, is kostak rate same like premium in grey market or different ?
Kostak Rate: It is the amount you sell your application for. For an example, Company A has announced an IPO and their greymarket rate or premium is 100 Rs. and their Kostak rate is 1500 Rs., If you want to sell your application in the greymarket before the allotment then you will get 1500 Rs. for the application. They will pay you 1500 Rs., if you get shares or not they will pay you 1500.
Sauda or Subject to Sauda Deals – Say you have applied for Company A and Subject to sauda deals are running in that partucular IPO and suppose deals are done at 4000 Rs. So, if you do sauda deals in Company A, you will get 4000 Rs, only if you get the shares via allotment. If you are unlucky and you do not get shares in your demat account then you will not get anything.
This is my understanding of Kostak and Sauda for IPOs. I hope you understand the process.
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IPO grey market is where the bought and sold outside the authorized trading channels. It is an unofficial way of trading of a company’s shares before they are issued in the IPO – Initial Public Offering.
Those who believe that the IPO issue price is cheaper than the potential of the stock, they try to collect the shares in the Grey market itself by approaching any sellers. The rate at which one gets premium by selling his/her shares which are allotted in IPO application in the grey market is called Kostak.
The premium which is generated in this Grey market by this trading is called GMP(Grey market Premium). GMP is useful to estimate the opening price of the IPO while listing.