Ashutosh Financial Services believes that sound investment decisions are built on a foundation of financial education, not just market timing or tips. This conviction is what drives the firm to regularly host sessions where complex financial concepts are broken down into something practical and usable, so that investors can make choices with clarity rather than guesswork. It was in that spirit that the firm hosted “Catch Them Young – Investment in Promising Unlisted Stocks Before IPO,” a webinar held on 20th March 2021 for High Net-worth Individuals (HNIs) looking to broaden their equity exposure beyond listed markets. The session was led by Mr. Daxesh D. Kothari, and its focus on pre-IPO investing was particularly relevant for this audience, since unlisted equity requires a level of capital, patience, and risk appetite that typically only sophisticated investors are positioned to commit.
The session opened by drawing a distinction between traditional businesses, such as those in steel, cement, banking, and infrastructure, and modern businesses like IT-enabled services, research-driven pharma, and financial services. Traditional businesses tend to hold tangible assets, have shorter gestation periods, and are valued closer to the actual worth of the business. Modern businesses, by contrast, invest heavily in intangibles like technology, brand, and customer acquisition, take longer to mature, and often command valuations well above their current book value. This difference matters because it shapes how each type of company raises money and how investors should think about risk. Traditional firms typically raise capital through promoter contribution or debt, offering lower risk but limited upside. Startups and modern businesses raise risk capital from angel investors, venture capital, and private equity, offering higher potential returns alongside considerably higher risk and more demanding monitoring requirements.
This framing led into the core idea of the session: the value in identifying promising companies before they go public. Companies with strong fundamentals often deliver their most significant growth in the years before listing, and once an IPO happens, much of that growth story is already priced in. The presentation illustrated this using post-listing performance of companies that had once traded as unlisted shares, showing how early entry, when paired with the right selection, can translate into meaningfully different outcomes compared to buying in after the public listing.
Naturally, this opportunity comes with real hazards, including the difficulty of correctly evaluating a private company, limited ability to track its ongoing performance, and the challenge of finding a timely exit. The session addressed this by outlining a clear set of parameters for stock selection, covering liquidity in the stock, the strength and nature of the underlying business, the reliability of the promoter group, a demonstrated track record, and the presence of a durable competitive advantage, or “moat.” Investors were also encouraged to weigh the likelihood of an eventual IPO and to compare valuations against listed industry peers before committing capital, since a stock being unlisted does not automatically make it attractive.
Process was given as much attention as strategy. The webinar walked through how Resident Indians, NRIs, and even minors (through a guardian-operated demat account) can go about investing in unlisted shares, from opening a demat account to deal confirmation, payment, and share transfer. For NRIs, the added nuance of NRO versus NRE bank accounts and the applicable FDI compliance and repatriation rules under the US $1 million scheme was explained, underscoring that cross-border investing in unlisted shares carries its own procedural layer.
Two areas that HNIs often find confusing were also unpacked in some depth: regulation and taxation. On the regulatory side, the session clarified that unlisted shares of public limited companies are legally transferable, subject to a six-month lock-in from the date of IPO allotment under SEBI’s ICDR Regulations. On taxation, the distinction between short-term and long-term capital gains was explained in detail, along with how tax treatment changes once a previously unlisted share gets listed, including the applicability of Section 112 and the unavailability of certain concessions like the ₹1 lakh exemption or grandfathering benefit that apply to already-listed securities. A separate breakdown addressed the tax treatment for NRIs, including how Double Taxation Avoidance Agreements and currency fluctuation provisions come into play.
Throughout, the session reinforced that pre-IPO investing rewards patience and diversification, recommending a holding horizon of at least five years and a portfolio approach spread across sectors, business models, and promoter groups rather than concentrated bets on a single name. For HNI investors weighing whether to look beyond listed markets, the underlying message was less about chasing the next big listing and more about understanding what one is buying, why it fits into a broader portfolio, and what obligations, regulatory and tax-related, come attached to that ownership. Sessions like this reflect Ashutosh Financial Services’ continued effort to help investors build that kind of grounded, well-informed understanding before they act.
