How to Buy Unlisted Shares in India?
Unlisted shares are equity shares issued by companies that are not listed on public stock exchanges, typically held privately by promoters, institutions, and VCs, and not traded on exchanges like NSE and BSE. Let's understand the processes involved in buying and selling them.
Key Highlights:
- Unlisted shares represent ownership in companies that are not listed on stock exchanges such as the NSE or BSE.
- Buying and selling unlisted shares involves trusted intermediaries, KYC verification, a Demat account, and off-market transactions.
- List on an unlisted platform or sell to investors via OTC or wait for the IPO lock-in expiry to trade on the NSE/BSE.
What Are Unlisted Shares?
Unlisted shares are shares of a company that are not listed on any stock exchange, meaning they do not have a formal marketplace where buyers and sellers can easily trade them.
These unlisted shares, which belong to private companies that are not publicly listed, are in the process of being listed. These shares are typically less liquid and less transparent compared to listed shares.
How to Buy Unlisted Shares in India?
You can buy unlisted shares in India through specialised brokers and intermediaries, private transactions, startup or pre-IPO placements, and alternative investment platforms. Before investing, complete your KYC, keep an active Demat account, and research the company carefully.
How to Buy Unlisted Shares Through an Intermediary or Broker?
Intermediaries and brokers help investors buy unlisted shares by connecting them with verified sellers and facilitating the transaction.
- Step 1: Choose a trusted SEBI-registered broker or an intermediary dealing in unlisted shares.
- Step 2: Complete your KYC and ensure you have an active Demat account.
- Step 3: Select the company whose unlisted shares you want to purchase.
- Step 4: Review the price quote and share the broker's availability.
- Step 5: Confirm your order and make the payment.
- Step 6: Receive the shares in your Demat account after the off-market transfer is completed.
How to Buy Unlisted Shares Through an Alternative Investment Platform?
Online investment platforms allow investors to discover, compare, and buy unlisted shares digitally.
- Step 1: Register on a trusted unlisted shares investment platform.
- Step 2: Complete your KYC verification and link your Demat account.
- Step 3: Browse the available unlisted companies and compare valuations.
- Step 4: Select the company and enter the number of shares you wish to buy.
- Step 5: Complete the payment using the available payment method.
- Step 6: The shares are transferred to your Demat account after the transaction is verified.
How to Buy Unlisted Shares Through Private Transactions?
Investors can purchase unlisted shares directly from existing shareholders through privately negotiated deals.
- Step 1: Identify a willing seller, such as a promoter, employee holding ESOPs, or an existing shareholder.
- Step 2: Negotiate the price and the number of shares to be purchased.
- Step 3: Verify the share ownership and transaction details.
- Step 4: Complete the payment through the agreed banking channel.
- Step 5: Authorise the off-market transfer of shares to your Demat account.
- Step 6: Confirm that the shares have been credited to your Demat account.
How to Buy Unlisted Shares Through Pre-IPO Placements?
Eligible investors can invest in companies before they are listed through private or pre-IPO placements.
- Step 1: Identify companies offering pre-IPO investment opportunities.
- Step 2: Contact the investment bank, wealth manager, or financial advisor managing the placement.
- Step 3: Complete the required KYC and eligibility formalities.
- Step 4: Review the offer details, valuation, and investment terms.
- Step 5: Submit your investment application and make the payment.
- Step 6: Receive the allotted shares in your Demat account after the allotment process is completed.
How to Sell Unlisted Shares?
You can sell unlisted shares through a broker or a trusted unlisted share platform by finding a buyer and completing the off-market transfer process.
- Step 1: Contact a SEBI-registered broker or a reputed platform that deals in unlisted shares.
- Step 2: Provide details such as the company name, number of shares, and your Demat account information.
- Step 3: The broker or platform will identify potential buyers and provide the prevailing market price for your shares.
- Step 4: Review the offered price and confirm the number of shares you wish to sell.
- Step 5: Authorise the off-market transfer of shares from your Demat account to the buyer's Demat account through your Depository Participant (DP).
- Step 6: Once the share transfer is completed, the agreed sale amount is credited to your registered bank account.
- Step 7: Retain the contract note, proof of payment, and other transaction documents for tax filing and future reference.
Types of Unlisted Financial Instruments
The unlisted market includes various financial instruments that offer investors alternative investment opportunities beyond listed stocks.
| Unlisted Security | What It Is | Example |
| Unlisted Shares | Shares of companies that are not listed on a stock exchange. They are bought and sold privately between investors through over the counter (OTC) transactions. | Shares of private or pre-IPO companies. |
| Government Securities (G-Secs) | Debt instruments issued by the Government of India to borrow money. They are considered one of the safest investments because the government backs them. | Treasury Bills (T-Bills), Government Bonds. |
| Preference Shares | Shares that give investors priority in receiving dividends and repayment during liquidation. However, they generally do not provide voting rights. | Redeemable Preference Shares. |
| Employee Stock Ownership Plans (ESOPs) | Shares offered by a company to its employees as part of their compensation, allowing them to become partial owners of the business. | ESOPs issued by startups or private companies. |
| Swaps | Private agreements are arrangements in which two parties exchange cash flows or financial obligations over a fixed period to manage financial risks. | Interest Rate Swaps, Currency Swaps. |
| Forward Contracts | Customised contracts between two parties to buy or sell an asset at a fixed price on a future date. These contracts are privately negotiated. | Currency Forward Contracts, Commodity Forward Contracts. |
| Debentures | Companies issue unsecured debt instruments to raise funds. Unlisted debentures are privately placed and are not traded on stock exchanges. | Privately Placed Non-Convertible Debentures (NCDs). |
| Corporate Bonds | Companies issue bonds through private placements rather than on stock exchanges. They are generally available to institutional or high-net-worth investors. | Privately Placed Corporate Bonds. |
Benefits of Investing in Unlisted Shares
Investing in unlisted shares can offer early access to high-growth companies and the potential for attractive long-term returns.
- Early Access to Investment: You can get early access to shares of high-potential companies before they go public, which can lead to substantial profits if the company grows and lists on exchanges.
- Diversification: By investing in unlisted shares, you can diversify your investment portfolio beyond the stock market.
- Attractive Valuations: Unlisted shares may be offered at lower valuations than their potential future valuations once listed.
- Control and Influence: In some cases, by investing in private companies, you will have a greater chance of gaining more influence over the company's direction and decisions.
- Growth Potential: Many high-growth companies are privately held for a long time before going public. Investing in them at the right time can be highly lucrative.
- Risk Mitigation: While there is money, there will be risks; some investors may view private companies as lower-risk if they have a proven business model and strong management.
Differences Between Listed and Unlisted Shares
Understanding the differences between listed and unlisted shares can help investors choose the right investment based on their goals, risk appetite, and liquidity needs.
| Aspect | Listed Shares | Unlisted Shares |
| Market | Traded on the stock exchanges NSE and BSE. | Not traded on stock exchanges |
| Liquidity | High liquidity | Low liquidity |
| Transparency | High, with public disclosures and filings | Less transparency |
| Valuation | Determined by market demand and supply | Often harder to assess due to the lack of a market price |
| Regulation | Heavily regulated by SEBI | Less regulated |
| Investor Access | All types of investors | Available to institutional (or) accredited investors |
Conclusion
Unlisted shares can offer attractive long-term growth and help diversify your portfolio. However, they come with higher risks and lower liquidity than listed stocks. Before investing, research the company carefully, understand the risks, and use trusted platforms or intermediaries to make informed investment decisions.
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