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Unlisted shares represent stock in a company that is not sold through a recognized stock exchange, such as NSE or BSE. Unlisted shares represent stock in a company that is not sold through a recognized stock exchange, such as NSE or BSE.

Yes, it is completely legal to buy and sell shares of an unlisted company in India, as per SEBI regulations, provided the transaction is supported by proper documentation and KYC procedures.

Listed shares are shares in companies that trade publicly on an exchange. These shares offer liquidity and transparency, while unlisted shares trade privately and do not trade as frequently as listed shares, but they can provide higher growth potential.

'Unlisted shares' is a broad term used for a company that is not listed on an exchange, and 'pre-IPO' refers to the subcategory of unlisted shares for those companies that have real plans to list their stock through an IPO in the near future. In other words, all pre-IPO shares are unlisted shares, but not all unlisted shares are pre-IPO. They may have no intention of listing themselves, and they may trade privately in the unlisted market.

An investor can buy unlisted shares through various avenues, such as through brokers that are authorized to buy and sell unlisted shares, through a type of online marketplace that specializes in pre-IPO stocks, or even from shareholders currently in possession of the shares—these can be current employees, founders, or existing promoters.

Unlisted shares can be sold in three ways: you can try to sell your stock outright to another buyer, sell through a dealer that specialises in unlisted stocks, or after the company has a successful IPO.

Yes, you can demat unlisted shares, and just like traded shares, you would hold them in your Demat account. Prior to 1994, shares were options for personal property and were vulnerable to loss, theft, or destruction. However, with the safety and control of dematerialisation, shares became property that could be transferred electronically, safely, faster, and without the hassle of sharing ownership records or physical replacement of stock when sharing ownership. In India, the two authorised depositories for the dematerialisation of shares are NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). In private equity markets, unlisted shares can be transferred seamlessly from one Demat account to another

Investments in unlisted shares expose an investor to a variety of risks, namely:

• Low liquidity: shares that are unlisted by the issuer are traded away from a stock exchange and can thereby be more difficult to sell.
• Valuation challenges: share prices are established by private agreements or brokers' quotes; thus, it is not always clear what the fair price should be for an unlisted share.
• Risk and volatility: unlisted companies provide limited financial information, increasing the exposure to operational risk or market risk.
• Limited dealer quotes: only a small number of specialised brokers will facilitate the trading of the shares (which limits access and increases transaction costs).
• Higher minimum investment: unlisted shares require larger investment amounts or minimum lot/loading sizes, which excludes smaller investors from participating.

While buying unlisted shares may be a vehicle for outsized returns, such investments are related to the risks of liquidity, pricing, volatility, access, and investment size. Research and diversification are important tools in managing those risks.

Valuing unlisted shares can be a complicated venture, since these equity interests are trading on over-the-counter (OTC) markets and do not have a market price for an investor to rely on. Instead, most investors, as well as other analysts/dealers, will extract fair value using several common methodologies, which can include:

• Book Value Method: Values the company based on its tangible assets and legal liabilities.
• Last Transaction Price Method: Uses the last transaction (or deal price) for the target company's share/stock price from the previous transaction as a price for valuing the shares.
• Price-to-Earnings (P/E) Ratio: Derives value based on the target company's previous earnings and most recent cash flows or trading multiples to derive the current dollar value in reference to any ratios created around a discount rate from the individual.
• Net Asset Value (NAV): Derives the present value once calculated based on the present assets and liabilities of the company, instead of historical cost accounting.

As noted previously, the value attributed to unlisted shares is primarily a calculation based on financial fundamentals, historical and current performance, relative comparable information in the market, or benchmarks, and not based compulsively on a price in the daily market.

This can vary, but typically most unlisted shares are issued with minimum investments ranging from ₹50,000 to ₹200,000, but it can depend on the underlying company, and also the broker

Yes, shareholders are entitled to dividends if the company declares dividends, even if it's private.

The tax treatment is based on the holding period.

• Short-Term Capital Gain (STCG): If shares are sold during the 24-month holding period, the taxation is as per the income tax slab rate of the investor.
• Long-Term Capital Gain (LTCG): If shares are sold after more than a 24-month holding period, the tax rate is 12.5% without indexation

No. Securities Transaction Tax (STT) is only levied on listed shares on recognized stock exchanges.

Yes, long-term capital gains on private shares are eligible for an indexation benefit after a holding period of 24 months.

Yes, stamp duty applies to the transfer of unlisted shares at a rate of 0.015% of transaction value, generally to an unlisted entity. However, stamp duty does not apply to transfers on our platform, making the process easier and less expensive for the investor to transact.

Advanced access, the potential for outsized returns, diversification, and the ability to invest in promising early-stage startups before they are listed through an IPO.

You can find out by typing the name of the company into the NSE or BSE websites. If you do not see the company on either website, then it is an unlisted company.

Unlisted shares automatically convert to listed shares post the IPO. Investors are free to sell their shares after the 6-month post-IPO lock-in period.

It is recommended that unlisted shares be held for a period of 3-5 years until they list, at which point liquidity and growth are achieved.

Yes, pre-IPO investors are obligated to hold their shares for a lock-in period of six months from their listing date to sell in the market

Unlike listed shares and publicly traded company shares on stock exchanges (NSE/BSE), unlisted shares are bought and sold privately between parties involved in the transaction and are facilitated by specialised brokers or on broker-dealer platforms, otherwise known as OTC platforms. Investors can buy or sell unlisted shares on a dedicated unlisted share platform such as Sharecart.com that connects buyers with sellers and facilitates a seamless and secure transaction process.

Yes, following the vesting of employees in their ESOP shares, they may sell the shares back to the company or other shareholders/investors, or buy and sell shares on unlisted shares sites.

Yes, unlisted shares can be a great investment for investors who have a high risk tolerance and who invest with a longer horizon. Unlisted shares would generally be bought at the pre-IPO stage or in a private transaction, so there is the potential for a much greater return after the IPO/sale of the company vs a similar public or listed share.

You can buy unlisted shares via certified unlisted share brokers, online unlisted share marketplaces, or directly from the company employees or other shareholders.

Investing in unlisted shares can be a smart investment for anyone interested in early-stage growth and increasing the diversification of one's holdings for several reasons:

• Potential for Higher Returns: By investing in shares of a company before an IPO, you buy into a company at an earlier stage with a lower valuation and potential for higher gains when the company goes public.
• Less Volatility: As unlisted shares do not trade daily like listed shares do, their price is not driven by the buying and selling reasons as publicly listed shares. The result is less volatility in price.
• Increased Diversification: Investing in unlisted shares increases the number of complementary investments that an investor has in their listed investments and increases exposure to privately held companies and high-growth companies, such as startups.