IPO Grey Market Premium and Kostak Rates

IPO Grey Market is the over-the-counter market where deals are executed in-person only and only between the trusted group of investors. The deals are usually provided by the broker in the neighborhood at a fixed price. In the Grey market, an investor could sell an upcoming IPO share or IPO application before the company gets listed on the stock exchange at a fixed price called IPO Grey Market Premium.

IPO Grey Market Premium

Often called IPO GMP, is the premium at which the IPO shares are traded in the grey market. Kostak Rate is the rate at which an investor can sell his IPO application for a fixed price irrespective to he/she gets an IPO allotment or not.

IPO Grey Market Premium, Latest IPO GMP & Kostak Rates change every day. You should keep checking the current IPO GMP.

Important note for the Investors

  • IPO Grey Market Premium (IPO GMP) mention is valid for the specific date and may change any time.
  • We (Nifty Outlook or Its Authors) are not part of buying and selling IPO forms on IPO Grey Market.
  • Kostak Rate is the premium investor who gets by selling his/her IPO application (in an off-market transaction) to someone else even before allotment or listing of the IPO for public trading.
  • Do not subscribe for IPO by just looking at premium Price as it may change anytime before IPO listing. Subscribe to IPO only considering Fundamentals of the company.

What is Grey Market Premium?

The grey market is a term people used in the IPO market to buy or sell IPO Application or IPO Share before listing on the exchange. It means the stock of the company that came up with the Initial Public Offer, bought and sold outside the stock market. The grey market is unofficial and unregulated but to get the fixed gain of the stock one can buy or sell an IPO application.

The grey market operates before the IPO listing date on the market and during the days of the IPO start and the allotment. Grey market premium reflects the trend of how the IPO might react on a listing day.

For example, if the company comes up with an IPO of Rs.10 per share and the grey market premium is around Rs.2 per share then we can assume the IPO to list around 120 rupees on listing day on market. There is no reliability but in most of the cases, the GMP works properly and IPO list around the Grey Market Price.

What is Kostak Rates?

The Kostak rates are the price at which one buys or sells the IPO application before the IPO listing. As the grey market reacts the Kostak rates also react accordingly. 

One can buy and sell his/her full IPO application on Kostak rates outside the market and fix their profit on investment. The Kostak rates apply in each condition irrespective of allotment, the buyer should pay the Kostak rates for the IPO.

For example, if one applied for 5 applications for one IPO and sold the same at Rs.2000 per application it means he or she secured the IPO profit at 10000 rupees. If he gets the allotment in only 2 applications still his profit will be the same. Now, when he sells the stock after listing on the market which he got and earns the profit of around 20000 then he or she needs to give the remaining profit to the buyer who bought the application.

What is Subject to Sauda?

As per the Kostak rate, the Subject to Sauda (SS) on the IPO application is the price that is finalized to get the share allotment. If someone buys or sells the IPO application on the subject to Sauda that means he/she can get the said amount if he gets the allotment otherwise Sauda will be canceled. In this investor can’t fix his profit as it depends on the IPO allotment.

For example, if one gets an allotment and he/she decided to sell the application around Rs.10000 and the profit goes high on the listing day around Rs.20000 then one should pay Rs.10000 to the guy who bought the application.

Tags: Grey Market for IPO, Grey Market of IPO, Grey Market IPO, Grey Market Premium IPO, IPO Grey Market Premium, IPO GMP.

Zelman Yakubov

About the author

Hi, I am Zelman Yakubov, an expert stock market trader. My goal is to educate and mentor people that wants to learn the financial trading markets. In my free time I love to go out for various different entertainment and try new restaurants.