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Subject to sauda is the price the buyers pays to buy the entire IPO application from the seller only if he receives the allotment. However, if the seller does not receive an allotment of shares, the grey market transaction is cancelled.
Let us explain this with an example:
Suppose a company has issued IPO at a price of Rs 300 per share and the lot size is 50 shares. An investor has applied for the IPO for 1 lot worth Rs 15,000. Prior to the allotment of the IPO, a buyer wants to buy the IPO application of Rs 15,000 at Rs 4,000, subject to Sauda rate.
If the allotment is made, the buyer pays Rs 4,000 subject to sauda rate as a premium on the IPO application of Rs 15,000. The seller has to remit the listing gain or shares to the buyer for Rs 15,000 + 4000 = Rs 19,000.
However, if the seller does not receive any allotment, the deal will be cancelled and the buyer will not have to pay any Sauda rates.
Zerodha Trade@20
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