If you spend time in IPO communities or grey market circles, you will come across the term Kostak rate. It is less well-known than GMP but equally important for understanding how grey market participants trade IPO applications. Here is everything you need to know.
What is Kostak Rate?
Kostak rate is the price at which an IPO application is bought or sold in the grey market — regardless of whether the applicant gets an allotment or not.
Think of it this way: instead of trading the shares themselves (which is what GMP tracks), Kostak involves trading the entire IPO application form. The buyer pays a fixed amount to the seller of the application upfront, and in return takes on all the risk and reward of what happens after allotment.
Kostak = Price paid per IPO application, regardless of allotment outcome
How Kostak Rate Works — A Simple Example
You applied for an IPO at ₹15,000 (minimum lot).
Kostak rate in the grey market is ₹800.
A grey market dealer offers to buy your application for ₹800.
You receive ₹800 guaranteed, regardless of allotment.
If you get allotment — the buyer gets the shares and keeps all profit.
If you don't get allotment — the buyer loses ₹800. You keep it anyway.
What is "Subject to Sauda"?
You may also hear the term Subject to Sauda (STS). This is a variation of Kostak where the deal only applies if the applicant gets an allotment. Unlike Kostak (which pays regardless), Subject to Sauda pays only on allotment.
Subject to Sauda rates are typically higher than Kostak rates because the seller only gets paid if allotment happens — higher risk for the seller means higher reward.
Kostak Rate vs GMP — Key Differences
| Feature | GMP | Kostak Rate |
|---|---|---|
| What is traded | IPO shares | IPO application |
| When | After allotment, before listing | During or after IPO subscription period |
| Allotment needed? | Yes | No (guaranteed payout) |
| Risk for seller | Opportunity cost | Zero — paid upfront regardless |
| Risk for buyer | Listing price risk | Full risk if no allotment |
Why Does Kostak Rate Matter?
Kostak rate is a useful indicator of how much grey market participants value getting allotment in an IPO. A high Kostak rate means strong confidence in a good listing. It also gives retail applicants a way to lock in guaranteed profit without waiting for allotment results or listing day.
For example, if you applied in 5 family member accounts, selling all 5 applications at Kostak ₹800 each gives you ₹4,000 guaranteed — before even knowing if you got allotment.
Kostak trading is unregulated and carries no legal protection. Deals are based on trust between parties. Never trade with unknown dealers.
Frequently Asked Questions
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