How to Buy Unlisted Shares in India?
market listed shares are monitored by the Securities and Exchange Board of
India's constant monitoring and regulations (SEBI). Although unlisted shares
provide tremendous opportunities for growth and exposure, they also carry the
risk of less stringent regulations. If such rapidly expanding opportunities
stir up your interest, this will help you understand the advantages of
investing in unlisted companies.
Definition of Unlisted Shares
Shares are defined as shares that are not listed on a stock exchange.
shares, also known as over-the-counter (OTC) securities, are any security or
financial instrument that is available for trade on over-the-counter markets.
companies generally do not trade on any formal stock exchange. This is because
smaller or newer firms do not want to or are unable to comply with certain
requirements such as listing fees, market capitalization, and so on.
Financial Instruments: What Are They?
stock is the most common type of unlisted financial instrument. The majority of
these unlisted stocks are traded on the over-the-counter (OTC) markets. Among
the other instruments are:
Securities issued by the government
Swaps, for example, are a type of
How Can You Make Money Trading Unlisted Stocks?
invest in stocks of some of India's top unlisted companies in a variety of
ways. Among the most popular methods are:
in new businesses and intermediaries
company is currently unlisted but plans to go public in the future. You can
invest in pre-IPO companies because the shares are delivered directly to your
Demat account, even if the transaction is off-the-record and the exchange is
not involved. The only thing to look for when selecting a trusted intermediary
is someone who can successfully help you close the transaction while avoiding
any counterparty risks.
also invest in unlisted start-ups with the potential for multi-fold growth in
the future. These companies may be off the radar right now, but they have the
potential to bring profits and growth in the future. Most start-ups require a
minimum investment of around Rs 50,000 to have the stocks transferred into your
Purchasing ESOPs from employees
brokers connect you with employees of organizations who sell their shares at a
predetermined price after a set period of time. This is one method of
purchasing shares in India's top unlisted companies.
Purchasing stocks from promoters
To invest a
significant stake in a company, contact a reputable investment bank, wealth
manager, or broker who can teach you how to calculate the share price of an
unlisted company. They will also help you connect with the business promoters
and introduce you to a list of unlisted companies in India in 2020-21. Private
placements are the term for such transactions.
Invest in PMS and AIF schemes that acquire unlisted stocks.
Management Systems, also known as PMS, are professionally managed investment
portfolios. In this case, the portfolio manager changes the weight and
composition of the portfolio dynamically based on market trends in order to maximize
the net returns of the investors. Investing in unlisted shares in India can be
beneficial through PMS schemes that include unlisted shares in their financial
strategy. This is far more secure than direct purchase because:
spread the risk across the portfolio's components.
the performance of the stocks, the portfolio manager dynamically removes and
investing in unlisted shares can be advantageous, it also carries a high level
of risk. The risks are as follows:
There is a chance that dividends
will not be paid.
result, before investing, make wise investment decisions and consult with an
experienced and trusted wealth manager.
share is a security or financial instrument issued by a company that does not
trade on the stock exchange.
stocks, penny stocks, corporate bonds, government securities, and derivative
products are examples of unlisted stocks.
in start-ups and intermediaries, purchasing ESOPs directly from employees or
promoters, or investing in PMS and AIF schemes that pick up unlisted shares are
all ways to invest in India's top unlisted companies.
include illiquidity, capital loss, dividend omission, and dilution.