Unlisted Shares

Information

What are Unlisted Shares?

  • A financial instrument that is not traded on a formal exchange because it does not meet listing requirements.
  • Company offering the shares is a subsidiary of a large and reputed company or group.
  • So, to grab the opportunity for investing in innovative ideas or in businesses with lot of potentials, investors choose to invest in unlisted shares.

Why Unlisted Shares?

  • Greatest success stories to come from the businesses of the modern times who can be the game changer.
  • 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 considered:

  • 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

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 bank account at the agreed price.
  • Transfer to the demat account of the investor immediately on payment confirmation.

Strategies while investing

Do not put all eggs in one basket” – to have the desired result it is necessary to have diversified investment portfolio.

  • Sectoral diversification
  • Business diversification
  • Promoter diversification
  • Likelihood of the company going for an IPO.
Taxation

Taxation Aspects for Resident Indians

Type of IncomeRate of tax in India
Short term capital gains on sale of Unlisted Stocks (When holding period is less than 24 months). Slab rates of income tax
Long term capital gains on sale of Unlisted Stocks (When holding period is more than 24 months). 20% (With indexation benefit)
Dividend incomes from Unlisted StocksSlab rates of income tax