Unlisted Shares: Meaning, Benefits & How to Invest

Introduction

Unlisted shares are the equity shares of companies that are not listed on any recognized stock exchange such as NSE or BSE. These shares are traded in the over-the-counter (OTC) market or through private placements, employee stock options (ESOPs), and Pre-IPO investments.

With the rise of startups, unicorns, and companies planning for IPOs, unlisted shares have become a popular investment option among HNIs, retail investors, and venture capitalists.

What Are Unlisted Shares?

Unlisted shares are securities of companies that have not yet gone public. Unlike listed companies, they are not traded on open stock exchanges. Instead, transactions happen privately through brokers, investment platforms, or employee stock ownership transfers.

Examples of Companies with Unlisted Shares:

• Reliance Retail
  
  

• HDFC Securities
  
  

• Nayara Energy
  
  

• PharmEasy
  
  

• Studds Accessories
  
  

Why Invest in Unlisted Shares?

1. Pre-IPO Growth Opportunity – Get in before a company lists and benefit from value unlocking during IPO.
   
   

2. High Return Potential – Many startups/unicorns see rapid valuation growth.
   
   

3. Portfolio Diversification – Adds a unique asset class beyond listed equity and mutual funds.
   
   

4. Early Access to Big Brands – Invest in companies like Reliance Retail or PharmEasy before they list.
   
   

Risks of Investing in Unlisted Shares

• Low Liquidity: Unlike NSE/BSE stocks, buyers and sellers are limited.
  
  

• Valuation Uncertainty: No fixed market price; depends on demand and supply.
  
  

• Regulatory Risks: Subject to SEBI and company law regulations.
  
  

• Long Holding Period: May need to hold until IPO or acquisition.
  
  

How to Buy Unlisted Shares?

1. Through SEBI-registered brokers/platforms dealing in unlisted equities.
   
   

2. Employee ESOPs – Buy shares directly from employees who own them.
   
   

3. Private Placements – Offered to select investors by companies.
   
   

Taxation on Unlisted Shares in India

• Short-term (≤ 24 months): Taxed as per investor’s income tax slab.
  
  

• Long-term (> 24 months): 20% with indexation benefit.
  
  

Frequently Asked Questions (FAQ)

Q1: What are unlisted shares?
Unlisted shares are stocks of companies that are not traded on NSE/BSE but can be bought and sold privately.

Q2: How can I invest in unlisted shares?
You can invest through brokers, investment platforms, employee ESOPs, or Pre-IPO deals.

Q3: Are unlisted shares safe?
They carry higher risk than listed shares due to liquidity and valuation issues, but they also offer higher growth potential.

Q4: How are unlisted shares taxed in India?
If held for more than 24 months, they are taxed at 20% with indexation. For less than 24 months, gains are taxed as per your income slab.

Q5: Which are the best unlisted shares to buy in India?
Popular names include Reliance Retail, HDFC Securities, Nayara Energy, PharmEasy, and Studds Accessories.