What is Kostak?

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. 

Make daily profit using our bank nifty option tips as we trade less but trade accurately.

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.