Unlisted vs Listed Shares: What to Know Before You Buy in India

There are many investors who want to invest their capital in the Indian stock market for wealth creation. But, while retail investors are aware about how to trade listed shares on stock exchanges like NSE and BSE, an increasing number of savvy investors are eyeing unlisted shares. If you have been debating between taking the traditional road via listed shares or the untravelled path through unlisted equities, this CoinDCX News article will help you make an informed choice.

In this article, I will explain what is the difference between unlisted and listed shares and what are the risks and rewards associated with each of them and most importantly, how to buy unlisted share in India legally and safely.

What Are Listed Shares?

Shares that are traded on well-known stock markets such as BSE (Bombay Stock Exchange), or NSE (National Stock Exchange) are called listed shares. These firms must pass through a strict compliance and regulatory approval process to enable them to list.

Key Features of Listed Shares:

• Liquid: Can be easily bought or sold during trading hours.
• Transparency: Company disclosure of finansials and performance is public.
• Price Discovery : Prices are discovered based on the demand from market and supply to market.
• SEBI Compliance: With a strict compliance to the Securities and Exchange Board of India (SEBI) regulation.

What Are Unlisted Shares?

Unlisted shares are of private companies that are not listed on the stock exchange. These firms might not be start ups or pre-IPO but still decide to stay private. These shares may not be listed on NSE or BSE, yet you can buy and sell them through other platforms or by way of private deals.

Why Invest in Unlisted Shares?

Exclusivity for early-movers has long-been appealing to investors. Imagine having invested in Paytm or Nykaa before they went public! Here is where unlisted shares come in. But the payoff is more risk and less liquidity.

Key Differences: Unlisted vs Listed Shares

Criteria	Listed Shares	Unlisted Shares
Availability	Traded on NSE, BSE	Bought/sold through private networks
Liquidity	High	Low
Regulation	SEBI-regulated	Partially regulated
Transparency	High (disclosures mandatory)	Low (limited financial reporting)
Valuation	Market-driven	Negotiated privately
Risk	Comparatively Lower	Higher
Return Potential	Moderate to High	Can be very high or zero

How to Buy Unlisted Share in India?

This is the question that confuses most first-time investors. Unlike listed shares, you can’t just log into your brokerage account and search for unlisted stocks.

Here’s how to buy unlisted share in India safely and legally:

1. Through Startup Employees (ESOP Sales)

Employees who receive shares as part of their compensation often sell them on secondary markets. You can buy from these employees via intermediaries.

2. From Promoters or Investors

Sometimes early investors or company promoters look to offload some of their shares. These deals are often negotiated privately.

3. Through Online Platforms

There are credible online platforms like UnlistedZone, Share India, and others that list available unlisted shares. Make sure to verify the platform’s credentials.

4. Through PMS or AIF Funds

Portfolio Management Services (PMS) or Alternative Investment Funds (AIFs) sometimes offer exposure to unlisted shares as part of their portfolio.

5. Via Depository Participants (DPs)

Some brokers also help facilitate unlisted share transactions through demat accounts with proper documentation.

Documents Needed to Buy Unlisted Shares

• PAN Card
  
• Demat Account
  
• Bank Statement
  
• KYC Documents (Address, ID Proof)
  
• Share Purchase Agreement (if any)
  

CoinDCX News Tip: Always ensure due diligence before investing. Ask for the latest balance sheet, business model, and revenue forecasts before investing in any unlisted company.

Pros and Cons of Investing in Unlisted Shares

Pros

• Early-stage Opportunity: Get in before IPO
  
• High Returns: Some stocks multiply in value post-listing
  
• Diversification: Adds a different asset class to your portfolio
  

Cons

• Low Liquidity: You may not find buyers easily
  
• Information Gap: Limited financial data
  
• High Risk: Many companies don’t go public or even fail

When Do Unlisted Shares Become Listed?

Whenever a company floats on the stock market (initial public offering, IPO) shares which until that moment were unlisted become listed. Shareholders of unlisted shares usually experience substantial value-accretion post this transit. But there’s no certainty of an IPO — or a profitable exit.

Who Should Invest in Unlisted Shares?

• High-net-worth individuals (HNIs)
  
• Experienced investors
  
• Risk-tolerant retail investors
  
• Investors with a long-term horizon
  

If you’re new to investing, start with listed shares. But if you’re willing to take calculated risks, then learning how to buy unlisted share in India could be your next strategic move.

Taxation of Unlisted Shares in India

Tax treatment for unlisted shares differs slightly:

• Short-Term Capital Gains (<24 months): Taxed as per your slab
  
• Long-Term Capital Gains (>24 months): 20% with indexation benefit
  

Always consult a tax advisor before making large investments in unlisted shares.

How to Sell Unlisted Shares in India?

Just like buying, selling unlisted shares is also a private transaction. You can sell them through:

• Online unlisted share platforms
  
• Broker or DP facilitation
  
• Back to the company or other investors
  
• During IPO (if company allows OFS)
  

You’ll need to submit a DIS (Delivery Instruction Slip) to transfer the shares from your demat account.

Are Unlisted Shares Safe?

While not illegal, unlisted shares are less regulated and thus riskier. The safety depends on:

• Quality of the company
  
• Intermediary you deal with
  
• Legal documentation
  
• Transparency
  

Always deal through reputed platforms or brokers and do your research thoroughly.

Final Thoughts by CoinDCX News

There are pros and cons to both listed and unlisted shares. For safety, for transparency, for liquidity, listed shares are your best bet. But if you are someone willing to take calculated risks to possibly get higher rewards, then understanding how to buy unlisted share in India may be a good strategy.

Just a reminder — unlisted shares are not for everyone. They need patients and due diligence, and a large risk appetite. Educate yourself or consult with a financial advisor before you invest.

For the latest on unlisted shares, IPOs and market tickers, stay connected with CoinDCX News – your best friend in the world of investment.

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