How to Buy Unlisted Shares

Summary

Investing in unlisted shares offers diversification and high potential returns but comes with risks. Shares can be bought via pre-IPO deals, ESOPs, promoters, PMS/AIF schemes, or platforms like SharesCart. Careful research and risk assessment are crucial for success.

For investors who wish to diversify beyond the typical stock markets, investing in unlisted shares offers an unique opportunity. However, there are certain dangers and difficulties associated with these investments. This tutorial will provide you a thorough overview of where to look for unlisted shares, how to purchase them in India, and important considerations to make before investing.

Unlisted Shares: What Are They?

Securities that are not traded on major stock exchanges like the NSE or BSE are known as Unlisted shares. Usually, private transactions, middlemen, or investment platforms are used to buy and sell these shares. They pose more risks but also have the potential for large rewards because they are not subject to the same regulatory scrutiny as public stocks.

Types of Unlisted Financial Instruments

The Unlisted category includes a number of financial products, such as:

• Common Stocks:

  The most well-known kind of unlisted investment, frequently traded on the pink sheets or the OTCBB.

• Penny Stocks:

  These are inexpensive, highly volatile stocks, such as those of some respectable overseas businesses that choose not to submit SEC reports.

• Corporate Bonds:

  Debt instruments issued by private companies are known as corporate bonds.

• Government Securities:

  Treasury bills and unlisted bonds are examples of government securities.

• Derivatives:

  Specific financial agreements that are traded on the over-the-counter market, such swaps.

How to Invest in Unlisted Shares?

In India, there are several options to buy unlisted shares. Here are a few of the most successful techniques:

1. Investing in Pre-IPO and Startup Companies

Companies that want to go public shortly are known as pre-IPO companies. It can be rewarding to invest in them early, but careful research is necessary. Even though the transaction takes place outside the stock exchanges, the shares are transferred to your Demat account when you purchase them.

High-growth firms are also investigated by many investors, however they frequently have a minimum investment requirement of Rs. 50,000.

2. Buying ESOPs from Workers

Investors can purchase shares directly from employees who have stock options (ESOPs) through the assistance of certain brokers. Early access to shares prior to their release onto the public market is made possible by this strategy.

3. Purchasing Straight from Company Promoters

Investors can speak with promoters directly if they want to purchase a sizable share. These private placements are facilitated by investment banks and wealth managers, who guarantee legitimacy and regulatory compliance.

4. Putting Money Into PMS and AIF Plans

Unlisted stocks are included in the portfolios of Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS). By choosing high-potential stocks and diversifying assets, these professionally managed funds lower risks.

5. Online Purchase of Unlisted Stocks

Unlisted shares can now be traded online on a number of sites. By serving as middlemen, these platforms link buyers and vendors. Selecting a reliable platform is essential to preventing possible fraud.

Best Platforms to Buy Unlisted Shares in India

• Online investment platforms specializing in unlisted stocks, such as SharesCart.com

• Brokers dealing in pre-IPO shares

• Wealth managers and investment banks

• Direct transactions with company employees or promoters

Risks Involved in Investing in Unlisted Shares

Unlisted shares have significant risks even though they can yield alluring returns:

• Illiquidity: It may be difficult to find purchasers for unlisted shares.

• Capital Loss: Investors may suffer losses if the business performs poorly or postpones its IPO.

• No Dividend Payments: Rather than paying dividends, a lot of private businesses reinvest their income.

• Dilution Risk: An investor's ownership position may be diluted by subsequent share issuances.

Unlisted Shares in High Demand

Companies with good financial standing and significant growth potential should attract investors. Among the encouraging unlisted shares are:

• NSE

• Tata Capital

• Polymatech Electronics 

• Metropolitan Stock Exchange of India

• OYO

Do extensive study before purchasing any unlisted stock.

Concluding remarks

With the potential for large gains, unlisted shares in India present an appealing investment option. Before choosing to invest, it is essential to comprehend how to purchase unlisted shares and assess dangers. A successful investment journey can be ensured by thorough study and professional advice, whether one chooses to invest in startups, pre-IPO businesses, or through PMS/AIF plans.