What are Unlisted Shares?
Unlisted shares in India refer to shares of a company that are not listed on any stock exchange. Unlike listed shares, which are traded on stock exchanges like the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), unlisted shares are not available for trading on such platforms. Instead, they are traded through private transactions between investors.
Investing In Unlisted Shares:
The IPO frenzy of the last few years has brought out a new investment instrument into the limelight called Unlisted Shares. We all have heard the stories of how we would be millionaires if we had bought and held the shares of Reliance & Wipro in the 1980s. However, we cannot do that but we can buy the stocks of various Next Gen companies that have the potential to disrupt entire industries and generate handsome returns. Hence smart people have stopped to wait for the IPOs of these companies and started to invest in the unlisted shares of these companies.
Investing in unlisted shares can offer certain advantages, such as the potential for higher returns compared to listed shares, as well as the opportunity to invest in companies before they go public. However, it also comes with its own set of risks, including lower liquidity and the lack of regulatory oversight that comes with being listed on a stock exchange.
Unlisted shares are typically traded through private placement or over-the-counter (OTC) markets, and the transactions are often facilitated by brokers or financial intermediaries who specialise in dealing with such securities. Additionally, the valuation of unlisted shares can be more complex compared to listed shares, as there may be limited information available about the company and its financial performance.
What are different criteria to consider for investment in Unlisted Shares
- Ownership Status: Unlisted shares are typically shares of a privately held company that has not undergone an initial public offering (IPO) and is not listed on any stock exchange.
- Company Size: Unlisted shares may belong to companies of varying sizes, ranging from small startups to large privately held corporations. The size of the company can affect the availability and attractiveness of its unlisted shares for investment.
- Valuation: The valuation of unlisted shares is an important factor for investors. It is determined based on various factors such as the company’s financial performance, growth prospects, industry trends, and market demand for its shares.
- Sector and Industry: Unlisted shares may belong to companies operating in various sectors and industries, including technology, healthcare, finance, manufacturing, and more. Investors may choose to invest in unlisted shares based on their preferences and beliefs about the growth potential of specific sectors or industries.
- Investment Purpose: Investors may consider various criteria when evaluating unlisted shares for investment, including their investment goals, risk tolerance, time horizon, and desired level of diversification.
- Regulatory Compliance: While unlisted shares are not subject to the same regulatory requirements as listed shares, investors should still ensure that any transactions involving unlisted shares comply with applicable laws and regulations, including those related to securities and taxation.
- Investment Opportunity: Investors may assess the investment opportunity presented by unlisted shares based on factors such as the company’s business model, competitive advantages, management team, intellectual property, and potential for future growth and profitability.
- Liquidity: Unlisted shares typically have lower liquidity compared to listed shares, meaning they may be more difficult to buy or sell. Investors should consider their liquidity needs and ability to hold onto unlisted shares for an extended period.
