A ‘Block Deal’ is made between two parties who agree to buy or sell their shares at exactly the same price and same quantity.
The minimum quantity for a ‘Block Deal’ is 5,00,000 (5 lakh) shares or minimum value of ₹ 5 crores.
The price decided for the ‘Block Deal’ cannot be 1% higher or 1% lower than the current market price. I.e if the current price is ₹ 100 per share. Then the block deal has to happen between 99 – 101.
Block Deals will be displayed publicly for everyone to see.
Block Deal Example
Let’s say you want to buy Reliance Industries shares directly from Mukesh Ambani. And he agrees to sell them to you!
Now, to execute the transaction, both of you should first decide the stock price – which cannot be 1% higher or 1% lower than the current market price.
The price as on 15th May 2020 is ₹ 1459. So Ambani and you have to decide a price between 1445 to 1473.
The minimum quantity is 5 lakh shares – which would mean you need ₹ 73 crore at current price of ₹ 1459 per share.
Since that could be too much, you can buy shares worth 5 crore – which would be 34,270 shares.
Block Deal Timing
Block Deals are executed through a single transaction – which takes place at a specific time.
The timing is different on the two major stock exchanges.
On BSE, Block Deal orders can be placed for 35 minutes between 9:15am to 9:50am.
On NSE, there is a Morning Block Deal window between 8:45am to 9:00am. This is before the market opens. There is an Afternoon Block Deal window between 2:05pm to 2:20pm. Totally, the block deal window on NSE is open for 30 minutes.
Difference between Block Deal and Bulk Deal
- Bulk deals can be executed anytime during market hours. Whereas Block deals can only be executed at fixed time – decided by stock exchanges.
- If it’s a Bulk Deal, the individual or organisation can purchase shares at any price through the open market. However in a block deals, two parties have to decide the price and quantity before they buy or sell shares.
- The minimum quantity for a Bulk Deal is 0.5% shares of a company. For a Block Deal the order value has to be a minimum of 5 crores OR 5 lakh shares.