If you want to invest in a company before it gets listed on a stock exchange, and potentially want to make an early entry, you are in the right place. How to invest in unlisted shares in India is one of the most popular searches among Indian investors, and for good reason. Recently, the unlisted share market in India has experienced rapid growth. Most investors gain the most profit the earliest when they understand the expanding unlisted share market in India. The unlisted shares market in India consists of shares of companies that do not trade on the NSE or the BSE and are sold through private transactions. Because they market high-potential investment opportunities, they are considered very enticing. Whether you are a salaried professional, a small investor, or just interested in the unlisted shares market, this guide is aimed at explaining to you everything in the most straightforward manner possible. By the end of this guide, you will understand how to buy unlisted shares in India, the possible risks you may face, and the process of safely transferring your unlisted shares to your demat account.
Table of Contents
Defining Unlisted Shares in India.
Unlisted Shares in India: How to Buy Them?
- Specialized Platforms
- Pre-IPO Placements
- ESOPs from Employees
Direct Promoter Deals
Delisted Stocks — The Most Underrated Method
Unlisted Shares: Risks Involved
Demat Transfer Process of Unlisted Shares
Final Thoughts
Frequently Asked Questions
What Are Unlisted Shares in India?
Unlisted shares represent instructional equity shares of companies that are not listed on recognised stock exchanges such as the NSE or BSE. In other words, they are not publicly traded shares that you would never find in your trading app. Instead, described transactions occur directly between the buyer and the seller in the so-called private market for shares in India.
The following businesses fit in the described categories:
- Private companies: businesses that have never opened to the public
- Pre-IPO companies: businesses that are about to book a spot on the stock exchange
- Delisted companies: businesses that have previously been listed but have been taken off the exchange
The price for shares of listed companies is updated every second on your screen, but for unlisted shares, the prices are dependent on demand, supply, the company’s financials, and expectations of future listings, making the price movement of unlisted shares difficult to track. The last five years have seen tremendous growth in India’s market for unlisted stocks. Investors bought NSE unlisted shares, MSEI unlisted shares, Polymatech unlisted shares, etc., made tremendous profits. That story keeps repeating, and that is why more and more people are asking: how to invest in unlisted shares?
Methods to Buy Unlisted Shares in India
There are a variety of approaches to buying unlisted shares in India. There is no single method for purchasing unlisted shares. Based on your budget, appetite for risk, and the nature of the company you are aiming for, several alternative approaches are available in this book.
1. Purchasing via Specialised Platforms
Beginner investors looking to buy unlisted shares in India can use these specialised platforms as intermediaries, like Delisted Stocks. They act as brokers or online platforms that facilitate the buying and selling of shares in private markets in India.
In most cases, these platforms:
• Identify unlisted shares of particular companies that are available for purchase
• Provide documentation and pricing for the shares
• Transfer the shares to the demat account of the buyer once payment and documentation are completed
It is advisable to conduct thorough research before selecting any investment platform. One useful source is the India unlisted shares market yearly review, which gives an overview of which companies and sectors are currently trending in the secondary market for unlisted shares.
2. Pre-IPO Placements: Invest Before the Company Goes Public
One of the most sought-after opportunities in pre-IPO investing is purchasing shares of companies that are expected to be listed on the stock market soon. When you invest in pre-IPO shares in India, you are almost guaranteed that the company will list at a price higher than your cost. Entry prices for companies’ pre-IPO shares often cause investors to accumulate pre-IPO shares in India. Investors should know that there is no guarantee that the company will even go public. Because of the lack of certainty in public listings, there is a large amount of diligent research needed to analyse the validity of the pre-IPO offering.
3. ESOPs from Employees: A Smart Secondary Route
Startups and private companies have part of their employees’ remuneration packages that include Employee Stock Ownership Plans (ESOPs). Employees can sell their shares at the Secondary Market for Unlisted Shares, which is the market where the investors go to buy the employees’ shares. In private equity markets like India, gaining access to ESOPs represents an opportunity to buy otherwise inaccessible private equity shares, which is especially advantageous. Consider that there may be times when your company might approve the ESOP, or there are lock-in periods, and taxes may be a factor with the exchange. Be sure to research and evaluate the cash-out options for the shares before getting a deal.
4. Direct Promoter Deals: For Larger Investors
Some of the private investors in India, who are also referred to as early-stage investors, buy shares of private companies directly from the promoters. These transactions are referred to as direct promoter deals and are primarily focused on large investors, family offices, and institutional players. Since these negotiations take place behind closed doors, there is a formal requirement for documentation and legal processes to be completed. Occasionally, smaller investors may be able to participate in these deals through an authorized broker. Understanding how stock exchanges work in India: NSE and MSEI would assist you in learning the difference between the transactions in the listed markets and the transactions in the unlisted markets. As private companies, investing in strong companies that have proven and consistent revenue can be a great opportunity. For investment opportunities in unlisted share companies with good revenue, one opportunity with a reasonable amount of research can be found at DelistedStocks, as it specializes in unlisted shares in India.
Demat Transfer Process for Unlisted Shares
Once you have made a decision to buy unlisted shares in India, the next step is to initiate the transfer of those shares to your demat account. This is classified as an off-market share transfer in India, and it is also far less complicated than what most people think. This is a demat transfer unlisted shares procedure step-by-step guide.
Complete the Transaction
You will need to negotiate with the seller about how many shares, the price per share, and all the payment terms. It is advisable to have a written agreement; an email is an easy and quick way to start.
Make the Payment
Use NEFT, RTGS, or IMPS to transfer the agreed amount to the seller. For compliance issues, it’s advisable to use banking methods that are trackable, rather than using cash.
Submit Transfer Documents
The seller hands over a Delivery Instruction Slip (DIS) to his/her/their Depository Participant (DP) to start the off-market share transfer process. You will have to share your details of the demat account (i.e. DP ID + Client ID).
Receive Shares in Your Demat Account
The shares will be transferred to your demat account via the off-market transfer route, which usually takes 1 – 3 working days. After the transfer is done, you will see the shares in your demat account.
Confirm and Record
Check the demat account statement to confirm that the shares have been received. You are also required to keep the documentation of the transactions, as you will need them for tax purposes. To see a detailed walkthrough of the entire process of buying unlisted shares in India, you may refer to the step-by-step guide available on Delisted Stocks.
Things to Remember Before Investing in Unlisted Shares
When investing in unlisted companies, there are things that need to be cared for. Liquidity is an important factor to consider, as well as the potential risks of investing in unlisted shares.
Conclusion
It is not too difficult to invest in unlisted shares in India if you have the right tools and the willingness to wait a little to learn. If you have the right knowledge and the correct tools, unlisted shares in India can be one of the best market opportunities for Indian investors. It all depends on your risk tolerance if you invest in pre-IPO shares India, ESOP, and promoter deals. You should always keep in mind to invest what you can afford to hold for the long term and make sure to do your due diligence. The Indian unlisted shares still have a long way to go compared to the global private markets, so start small, learn the market and scale your investments over time. To get all the relevant information for your investment opportunities in unlisted companies and to buy unlisted shares in India, visit DelistedStocks to keep track of the unlisted stock market in India.
Frequently Asked Questions
Q1- How to invest in unlisted shares in India online?
Q2- How to buy unlisted shares using Zerodha?
Q3- Where can investors find a list of unlisted share companies?
Q4- What are the 10 best unlisted share companies in India.
Buyers and sellers are connected, paperwork is done, and the demat transfer is completed. It is best for investors to consider credibility, pricing transparency, and transaction support from the selected broker.
Q5- Where can investors check the unlisted shares price list?
Q6- Can retail investors invest in unlisted shares in India?
Q7- Are unlisted shares a good investment before an IPO?
However, investors need to consider the financial performance, business model and the liquidity situation, as they are going to invest in the private market, which operates differently from the stock exchange.
Q8- What is the NSE unlisted share price, and why do investors track it?
Q9- What does the OYO unlisted share price mean?
Q10- Can investors purchase MSEI unlisted shares in India?
Disclaimer:
This article is for informational and educational purposes only. It does not constitute financial advice or a recommendation to buy or sell any securities.
