What Are Unlisted Shares?
Unlisted shares are stocks of companies that are not listed on any recognized stock exchange such as the NSE or BSE. These companies are privately held, and their shares are not available for trading on the public stock markets.
Popular examples of companies whose shares were once unlisted include Reliance Retail, HDB Financial Services, Tata Technologies, and PharmEasy.
Why Are Unlisted Shares Gaining Popularity in India?
The demand for unlisted shares in India has been rising due to:
- Increased investor appetite for pre-IPO opportunities
- Strong brand value and performance of private companies
- Access to sectors like fintech, logistics, EVs, and SaaS, which are often underrepresented in the listed space.
Benefits of Investing in Unlisted Shares
Here are some reasons why savvy investors are considering unlisted stocks:
1. Early Access to High-Growth Companies
Buying shares before an IPO gives you early entry into a promising business, potentially at lower valuations.
2. Diversification Beyond Public Markets
Unlisted shares help in portfolio diversification, giving exposure to non-correlated private assets.
3. Pre-IPO Valuation Surge
When a company files for an IPO, the market interest often increases the value of unlisted shares before listing.
4. Strong Brand-Backed Companies
Many unlisted shares belong to subsidiaries of large Indian conglomerates like Tata Group, SBI, or Reliance.
How to Invest in Unlisted Shares in India
If you’re wondering how to buy unlisted shares in India, here are the steps:
1. Contact SEBI-Registered Intermediaries
Unlisted shares are usually available through stockbroking firms, investment advisors, and online unlisted share platforms.
2. Verify the Company and Pricing
Ask for the company’s financials, recent valuations, and deal structure before investing.
3. Payment and Demat Process
Once you agree to invest, you make a bank transfer, and the shares are transferred to your Demat account via off-market transaction.
4. Minimum Investment
Some platforms require a minimum investment amount, depending on the stock and demand.
Risks Involved in Investing in Unlisted Shares
Like any investment, unlisted shares carry risks, especially due to their nature:
1. Liquidity Risk
These shares cannot be traded easily, and exits may take weeks or months unless there’s an IPO.
2. Valuation Uncertainty
Since there’s no official market price, pricing can be inconsistent and opaque.
3. Regulatory and Tax Risks
Taxation on unlisted shares (capital gains) differs from listed ones and must be planned carefully.
4. Limited Information
Privately held companies are not bound by SEBI’s disclosure norms, making due diligence vital.
5. Lock in period
Retail investors can only sell their shares 6 months after the listing date of the stock exposing them to the volatility of the stock.
Tips Before Investing in Unlisted Shares
- Do deep research – Read balance sheets, investor presentations, or private reports.
- Know the seller – Deal only with trusted intermediaries or platforms.
- Think long term – These are best for investors with a 3–5 year horizon.
- Use a Demat account – It ensures proper tracking and compliance.
Success Story: Tata Technologies
Background: Tata Technologies, a subsidiary of Tata Motors, operated in the unlisted market before its IPO in November 2023.
Unlisted Market Performance:
- In June 2020, Tata Technologies’ shares were trading at approximately ₹100 in the unlisted market.
- By July 2023, the price had surged to around ₹1,010, marking a nearly 900% increase. (Moneycontrol)
IPO Details:
- The IPO was priced between ₹475–₹500 per share, which was about a 47% discount compared to its unlisted market price.
- On listing day, the stock debuted at ₹1,200 on the NSE, a 140% premium over the IPO price.
- Post-listing, the shares climbed to ₹1,400, translating to a 180% gain over the IPO price.(Moneycontrol, Fortune India)
Investor Returns:
- Investors who purchased shares in the unlisted market had to hold their shares for 6 months and their lock-in period ended on May 27, 2024.The price of the shares on that day was Rs.1093
- This price was lower than the listing price but significantly higher than the ipo offer price.
Cautionary Tale: Swiggy
Background: Swiggy, a leading food delivery platform, remained unlisted until its IPO in November 2024.(Business Standard)
Unlisted Market Performance:
- Between July and September 2024, Swiggy’s unlisted share price rose from around ₹355 to approximately ₹490, driven by IPO anticipation. (The Times of India)
IPO Details:
- The IPO was priced at ₹390 per share.
- On November 13, 2024, Swiggy’s shares listed at ₹412 on the BSE and ₹420 on the NSE, reflecting a modest premium.(The Financial Express, Business Standard)
Investor Impact:
- Investors who bought Swiggy’s unlisted shares at ₹490 and held through the IPO faced losses, with the stock price at ₹319 when the 6 month lock-in period ended.
Key Takeaways
- Due Diligence is Crucial: While unlisted shares can offer substantial returns, as seen with Tata Technologies, they also carry risks, exemplified by Swiggy’s post-IPO performance.
- Market Dynamics Matter: Factors like lock-in period expiries can significantly impact stock prices.
- Long-Term Perspective: Investors should assess the company’s fundamentals and market conditions before investing in unlisted shares.
Conclusion
Unlisted shares present a powerful opportunity for wealth creation, provided you enter with due diligence, patience, and long-term vision. As more companies stay private longer before IPOs, this space is becoming a vital part of modern portfolios.
Disclaimer: Unlisted shares are subject to market risks and illiquidity. Always consult a financial advisor before investing.
Contact us today to know the best unlisted shares to buy in 2025 based on your goals, risk profile, and investment horizon.