An unlisted security is a financial instrument that is not traded on a formal exchange because it does not meet listing requirements. Trading of unlisted securities is done on the over-the-counter (OTC) market and they are often called OTC securities.
Why Unlisted Shares attract investors?
When the company offering the shares is a subsidiary of a large and reputed company or group. For example, Reliance Jio is a subsidiary of Reliance which is a reputed Indian conglomerate.
So, if investors trust the subsidiaries based on the parent company, and expect the subsidiaries to provide returns on investments, they would invest in unlisted shares.
So, for investing in innovative ideas or in businesses that have a lot of potentials, investors choose to invest in unlisted shares.
Consequence of missing to ‘CATCH THEM YOUNG’?
Greatest success stories to come from the businesses of the modern times who are the game changers.
The returns on such stocks could be multi-bagger.
Ordinary returns in equity asset class – Traditional businesses Extraordinary return in equity asset class – Modern businesses
They come for IPO when the success story is very much evident and visible to the world at large.
Points to be keep in mind while investing:
Investing in companies which are not in the baby stage, child stage, but are young.
Risk of infant & child mortality is eliminated.
The valuations are not that of a fully grown adult or an elderly.
Supply of stocks available from Employees Stock Ownership Plans (ESOP) and shareholders who have been allotted shares on preferential basis. Thus, the universe of unlisted stocks is large, far & wide.
Just because a particular stock is unlisted does not make it a worthy investment option.
Invest in companies which satisfies a certain set of parameters for stock selection.
Procedure for investment in Unlisted Stocks for Non-Resident Indians (NRI)
Minimum investment amount to invest through our company Rs.50,000.
Opening a demat trading account with any broker if it is not there.
Deal confirmation by investor to be given along with images of certain basic documents like cancelled cheque, PAN card, etc.
Payment through NRO bank account at the agreed price.
Transfer to the demat account of the investor immediately on payment confirmation.
Transfer from NRO bank to NRE bank account after sale under the U.S. $1 million scheme for repatriation abroad.
Portfolio based investment approach
Diversification – Do not put all eggs in one basket.
