What is sauda rate in IPO?

The sauda rate in an IPO is a fixed premium that an investor is willing to pay to the seller of the IPO if the IPO applicant receives the allotment.

The sauda rate is commonly known as "subject to sauda" and is a common term in the grey market for IPOs. The sauda rate is quoted for the entire IPO application.

For example, an investor agrees to pay Rs 4,000 to the seller of the IPO application who has applied for 100 shares at Rs 150. If the applicant receives the allotment, he is required to remit listing gains/losses to the buyer of the IPO application against Rs 4,000 . However, if the IPO applicant does not receive the allotment of shares, the transaction will be cancelled.