Three grey market terms every IPO investor sees but rarely fully understands. Here is what each one means, how they differ, and when they actually matter for your decision.
The unofficial premium at which IPO shares trade before listing.
GMP is the extra amount above the issue price that buyers in the grey market are willing to pay for IPO shares before they officially list on NSE or BSE. If the issue price is ₹200 and GMP is +₹40, the grey market expects the listing price to be around ₹240.
GMP is quoted daily and changes as subscription data comes in. A rising GMP on Day 1 and Day 2 of subscription typically signals strong demand. Falling GMP toward close date is a warning sign.
GMP is entirely informal and unregulated — no transaction goes through SEBI, NSE, or BSE. There is counterparty risk in every grey market deal.
The fixed amount paid to buy or sell an IPO application before allotment is known.
Kostak is the premium someone pays to buy your entire IPO application — regardless of whether you get allotment. If Kostak is ₹500, the buyer pays you ₹500 upfront, and if you get allotment, the allotted shares (and the listing gain) belong to the buyer. If you don't get allotment, the buyer still paid you ₹500 — no refund.
For the seller, Kostak locks in a guaranteed ₹500 profit per lot regardless of allotment outcome. For the buyer, they are betting that allotment happens and the listing gain exceeds ₹500.
Kostak is more popular in heavily oversubscribed SME IPOs where allotment is uncertain, and when listing gain expectations are very high.
A conditional deal — payment only if allotment happens.
Subject to Sauda is a modified Kostak where the buyer pays only if you actually receive allotment. If you don't get allotment, no money changes hands.
STS rates are always lower than Kostak rates for the same IPO, because the buyer assumes less risk (they only pay if allotment happens). If Kostak is ₹500, Subject to Sauda might be ₹800 — you earn more, but only if you're allotted.
STS is better for sellers who are confident in getting allotment but don't want the hassle of waiting to sell on listing day. Kostak is better for sellers who want certainty regardless of allotment outcome.
| Feature | GMP | Kostak | Subject to Sauda |
|---|---|---|---|
| What it measures | Expected listing premium | Value of the full application | Value if allotment happens |
| When payment happens | At listing (informal) | Before allotment — unconditional | Only if allotted |
| Allotment risk | Buyer takes risk | Buyer takes full risk | No allotment = no deal |
| Typical use case | Gauging listing sentiment | Lock in profit with certainty | Earn more but conditional |
| Who benefits more | Bulls on listing day | Risk-averse sellers | Sellers confident in allotment |
All grey market activity — GMP, Kostak, and Subject to Sauda — is completely unregulated by SEBI. There is no legal recourse if a counterparty defaults. Participation involves real counterparty risk. These prices should be used as sentiment indicators only, not as a basis for financial decisions.