Kostak: This is the amount paid by an individual per IPO application before shares are listed on the stock exchange. One can fix their profit by buying and selling their entire IPO application on Kostak rates outside of the market. Even if the shares are not allotted in the IPO, the seller gets to keep the kostak amount.
During the Avenue Supermart (DMart)
IPO, Kostak rates had surged to re-
cord highs and eventually when the
₹299/share IPO listed at ₹604/share,
many made money. However, such
high gain instances are rare in the
market.
Sauda: In case of 'sauda', the deal
between the buyer and the seller on
the IPO application is valid only if allotment occurs.
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If there is no share
allotment, the deal becomes void.
Here, the risk is lower for the buyer
of the IPO application. This is why
the premium in sauda transactions
is usually higher than the issue's kostak rate. For instance, the subject to
sauda rate for SBFC Finance IPO at
₹8,000 is 9 times more than kostak
rate of ₹850.
For the Concord Biotech IPO, sauda rates are roughly 3
times than kostak. Sauda and kostak
rates are known to diverge as the
IPO date nears.
GMP: GMP is a short form of
Grey Market Premium. GMP is the
premium at which the IPO shares
are traded in the grey market. Some
portals also provide kostak rates and
sauda rates. The source of such in-
formation is unknown and so you
should be wary of unverified information.
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