Investing in unlisted shares in India is gaining popularity among savvy investors who want to diversify their portfolios beyond the traditional stock market. These shares, not listed on stock exchanges like NSE or BSE, can offer substantial returns—but they also carry higher risks. If you’re looking to get in early on companies before their IPOs or find hidden gems in the private market, this guide will walk you through everything you need to know about how to invest in unlisted shares in India.
Table of Contents
- What Are Unlisted Shares?
- Why Invest in Unlisted Shares?
- Key Benefits and Risks
- How to Identify Unlisted Companies
- Ways to Invest in Unlisted Shares in India
- Taxation on Unlisted Shares
- Regulatory Framework
- Important Tips Before You Invest
- FAQs
What Are Unlisted Shares?
Unlisted shares are equity shares of companies that are not listed on recognized stock exchanges like the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). These can include:
- Startups
- Pre-IPO companies
- Subsidiaries of listed companies
- Delisted companies
They are typically traded through over-the-counter (OTC) markets, private placements, or directly between investors.
Why Invest in Unlisted Shares?
Investing in unlisted shares can be a smart move for investors looking for high-growth opportunities. Here’s why:
| Advantages | Details |
|---|---|
| Early entry | Get in before IPO and benefit from future valuation rise |
| Diversification | Reduce reliance on volatile listed markets |
| Long-term wealth creation | Potential for multi-bagger returns |
| Access to premium companies | Invest in top startups, unicorns, or blue-chip subsidiaries |
Key Benefits and Risks
✅ Benefits
- Pre-IPO Access: Invest in companies before they go public.
- High ROI Potential: Unlisted shares may give significant returns over time.
- Portfolio Diversification: Helps spread risk beyond listed securities.
⚠️ Risks
- Low Liquidity: Selling unlisted shares isn’t as easy or quick.
- Lack of Transparency: Financials and performance data may not be easily accessible.
- Regulatory Uncertainty: Subject to different rules compared to listed shares.
How to Identify Unlisted Companies in India
Before investing, it’s crucial to research unlisted companies thoroughly. Here’s how:
| Sources | Details |
|---|---|
| Company Websites | Financials, business model, team, and media coverage |
| Startup Databases | Sites like Tracxn, Crunchbase, and AngelList |
| Marketplaces | UnlistedZone, Sharescart, and PMSBazaar |
| Social Media & News | LinkedIn, Twitter, and industry news platforms |
Look for companies with:
- Strong leadership
- Proven revenue streams
- Scalable business models
- Consistent investor backing (VCs, Angel Investors)
Ways to Invest in Unlisted Shares in India
There are several ways to invest in unlisted shares depending on your investor profile and budget.
1. Through Online Platforms
Several fintech startups and brokers specialize in unlisted shares:
| Platform | Special Features |
|---|---|
| UnlistedZone | Insights, reports, and stock availability |
| Sharescart | Verified unlisted stock deals |
| TradeUnlisted | Smooth onboarding and portfolio tracking |
| PMSBazaar | Access to PMS, AIF, and unlisted share options |
These platforms allow you to buy minimum quantities—sometimes as low as 10 shares.
2. Via Intermediaries or Brokers
Many brokers facilitate private deals between buyers and sellers of unlisted shares. Make sure the broker is SEBI-registered and provides legal documentation like:
- Share purchase agreement
- Transfer deed
- KYC of the counterparty
3. Through Employee Stock Ownership Plans (ESOPs)
Many startups offer ESOPs to employees, which can later be sold privately or during an IPO.
If you’re an employee or have access to such deals via networking, this is a great route to own unlisted equity.
4. From Promoters or Existing Investors
In some cases, you can directly buy shares from:
- Founders
- Angel investors
- Early-stage VCs
However, such deals require proper due diligence and legal vetting.
How to Buy and Sell Unlisted Shares
✅ Steps to Buy:
- Research the company and assess valuation
- Connect with a broker or platform
- Complete KYC and documentation
- Transfer funds to an escrow account
- Receive share transfer via Demat
💼 Steps to Sell:
- You can sell your unlisted shares:
- Back to promoters
- To new investors via platforms
- Through buyback or after IPO listing
Ensure capital gains tax implications are clear before selling.
Taxation on Unlisted Shares in India
Tax rules for unlisted shares differ from listed ones.
| Tax Component | Unlisted Shares |
|---|---|
| Holding Period (LTCG) | More than 24 months |
| Long-Term Capital Gains | 20% with indexation benefit |
| Short-Term Capital Gains | Taxed as per individual’s income tax slab |
| STT (Securities Transaction Tax) | Not applicable |
Note: After listing via IPO, shares are considered listed for tax purposes.
Regulatory Framework for Unlisted Shares
Investing in unlisted companies falls under SEBI and RBI regulations (for NRIs). Key points include:
- KYC compliance is mandatory.
- PAN-Aadhaar linking must be completed for domestic investors.
- FEMA rules apply to NRIs and foreign investors.
- Companies must update ROC filings upon share transfers.
Always consult a SEBI-registered investment advisor or a legal expert before large investments.
Important Tips Before You Invest
| Tip | Why It Matters |
|---|---|
| Conduct thorough due diligence | Understand business model, risks, and financial health |
| Don’t go all-in | Start small, especially if you’re new to unlisted investments |
| Verify seller and share authenticity | Avoid scams and grey market frauds |
| Understand exit options | Ensure clarity on buyback, IPO, or secondary market opportunities |
| Track portfolio regularly | Use tools and platforms to monitor performance |
Future of Unlisted Share Investing in India
With more startups reaching unicorn status and the booming pre-IPO market, unlisted investing is becoming mainstream. Government initiatives like Startup India and Digital India have boosted innovation and funding.
Additionally, the rise of tech platforms and alternate investment funds (AIFs) is making unlisted equities more accessible to retail investors.
FAQs on Investing in Unlisted Shares
Q1. Can NRIs invest in unlisted shares in India?
Yes, NRIs can invest in unlisted shares under the Portfolio Investment Scheme (PIS) or on a non-repatriation basis, subject to FEMA rules.
Q2. Are unlisted shares riskier than listed ones?
Yes. They involve higher liquidity risk and limited disclosures but may offer higher returns.
Q3. How do I know if a company will go for an IPO?
Watch for company announcements, SEBI filings, or news reports about IPO intentions.
Q4. What is the minimum investment amount?
This varies. Some platforms allow investments starting from ₹10,000–₹50,000.
Q5. How can I transfer unlisted shares to my Demat account?
Once the transaction is approved, the company will process the share transfer through RTA (Registrar and Transfer Agent) to your Demat account.
Conclusion
Investing in unlisted shares in India is an exciting but complex venture. With the right strategy, due diligence, and risk management, it can lead to significant wealth creation. However, always remember that unlisted shares are not regulated like listed securities, so work with trusted platforms, registered intermediaries, and verified sellers.
Whether you’re an early-stage investor, a startup enthusiast, or looking for pre-IPO gems, the unlisted equity market is worth exploring—just do it smartly.