AI Overview
What is Subject to Sauda? Subject to Sauda (STS or Sub2Sauda) is a conditional grey market deal where payment to the IPO applicant happens only if they receive allotment. If no allotment, the deal is cancelled with no payment. STS rates are quoted per allotted lot and are directly tied to GMP. Unlike Kostak (which pays regardless of allotment), STS eliminates allotment risk for the buyer so STS rates are always higher than Kostak rates.
Introduction: The Conditional Deal in India’s IPO Grey Market
After learning about GMP and Kostak, Subject to Sauda is the third important term in India’s IPO grey market vocabulary.
Subject to Sauda is effectively an agreement to transfer your listing gain to a buyer but only if you actually receive shares. It is more specific than Kostak, more directly tied to GMP, and carries different risk profiles for buyer and seller.
What Does “Subject to Sauda” Mean?
“Sauda” is a Hindi/Urdu word meaning “deal” or “transaction.” “Subject to” indicates conditionality. Together, Subject to Sauda means: “This deal is conditional it only completes if the seller receives allotment.”
In practice:
- A grey market buyer and IPO applicant agree on an STS price per lot before allotment
- If the applicant receives allotment: the deal executes the applicant transfers shares and receives the STS amount
- If the applicant does not receive allotment: the deal is cancelled no money changes hands
Subject to Sauda Example
Setup:
- IPO: PQR Ltd, upper price band ₹200, lot size 75 shares
- GMP: ₹80 per share (expected listing at ₹280)
- STS rate: ₹4,500 per lot
Scenario A Allotment received:
- You receive 75 shares (1 lot) at ₹200 issue price
- You transfer 75 shares to the STS buyer
- Buyer pays you ₹4,500 (your locked-in STS gain per lot)
- Buyer receives 75 shares worth approximately ₹280 each on listing = ₹21,000
- Buyer net: ₹21,000 – ₹15,000 (cost) – ₹4,500 (STS paid to you) = ₹1,500 profit (if listing is exactly at GMP)
Scenario B No allotment:
- No shares received
- Deal automatically cancelled
- You receive nothing, pay nothing
- Buyer receives nothing, pays nothing
STS vs Kostak vs GMP: Final Comparison
| GMP | Kostak | Subject to Sauda | |
| What | Per-share premium | Fixed price per application | Conditional price per allotted lot |
| Allotment needed? | Yes (shares) | No | Yes |
| Seller risk | None | None | None |
| Buyer risk | Listing performance | Allotment + listing | Listing performance |
| Correlation to GMP | Direct | Lower (includes allotment risk premium) | Direct |
| Rate vs Kostak | Higher per lot | Lower | Higher |
Why STS > Kostak: Kostak buyer takes allotment risk (may pay and receive no shares). STS buyer only pays if shares are allotted no allotment risk. Therefore, the STS buyer pays more per lot because they are only paying when they know they are getting shares.
Is Subject to Sauda Legal?
Same answer as Kostak: grey market activity including STS operates outside SEBI’s regulatory framework. It is not explicitly illegal, but:
- There is zero legal protection if a counterparty defaults
- Income from STS is taxable under Indian income tax law
- SEBI does not recognize or validate these transactions
iposhareprice.com reports STS rates as market intelligence for educational purposes only. We do not facilitate or recommend participation in grey market transactions.
Frequently Asked Questions
How is STS rate different from GMP?
GMP is the per-share premium in the grey market. STS is quoted as a total amount per allotted lot combining all shares in that lot. To compare: STS rate ÷ lot size = implied per-share GMP.
Can STS rate change after I agree to a deal?
Informal grey market deals have no written enforcement. In practice, both parties honor agreed rates but rates quoted publicly change daily as GMP fluctuates.
Why would anyone sell at STS instead of holding for listing?
To eliminate uncertainty. An STS seller locks in a guaranteed amount per allotted lot without risking a listing disappointment. The STS buyer takes the listing performance risk in exchange for owning the shares.
