What It Means
Kostak price is a flat, fixed amount a buyer pays a seller for an IPO application itself in the grey market, before allotment is even known. It's a rupee amount per application (or per lot), and the buyer pays it whether the seller ends up getting allotted shares or not.
Example
Say an IPO's price band tops out at ₹350 and a seller has applied for one lot. A buyer offers a Kostak of ₹800 for that application. The seller pockets ₹800 the moment the deal is struck, regardless of what the IPO allotment turns out to be. If the seller does get allotted shares, the buyer keeps them (or sells them on) and takes on the market's risk from there.
Warning
Don't confuse Kostak with GMP. GMP is a per-share premium on the shares themselves, while Kostak is a flat fee for the application, paid up front and independent of allotment.
Related Terms
- GMP (Grey Market Premium): the per-share premium quoted separately from Kostak
- Subject to Sauda: the allotment-contingent version of a grey market share deal
- What Is GMP in IPO? Should You Trust Grey Market Premium?: the full explainer this term comes from