Kostak rate is the flat amount a grey market buyer pays to an IPO applicant for the right to receive any shares the applicant is allotted. The Kostak is paid upfront, regardless of whether the application is allotted or not. It compensates the applicant for blocking their demat-account capacity and ASBA bank balance during the bidding window.
A typical Kostak quote might be ₹800-1,500 per application on an oversubscribed IPO. The seller files the application in their own name using their own PAN and demat. If allotment happens, the allotted shares are eventually transferred or sold to the buyer. If no allotment, the seller keeps the Kostak but the buyer has paid for nothing.
Kostak transactions are entirely informal — there is no exchange or escrow, no legal documentation, and no enforcement mechanism beyond dealer reputation. Kostak rates are quoted by grey market dealers alongside GMP. The two should not be confused: GMP is per-share expected premium; Kostak is per-application flat fee.