What Are The Main Benefits You Should Know Before Investing In Unlisted Shares?


Buying unlisted shares is becoming a significantfamous option for investors to invest for high returns. Some companies make huge profits but are not listed on the National Stock Exchange(NSE) and Bombay Stock Exchange(BSE). For those companies, there is also an option of getting investments from the shareholders through unlisted shares. Unlisted shares are offered by the companies that are preparing for their IPO. There are many benefits associated with buying unlisted shares. Read this blog to learn the benefits of unlisted shares and how to invest in the grey market. 

Investing In Unlisted Shares

Benefits Of Buying Unlisted Shares

Investing in unlisted shares can be a smart move to diversify your portfolio, get into high-growth opportunities, and potential return on investment. Here are some benefits to consider:

High-Value Investments 

Unlisted shares are not publicallyeasily traded, so their prices can stay undervalued or overvalued for extended periods. If you invest when they are undervalued, you can earn substantial returns when their actual value is recogniszed.

Portfolio Diversification of Risk 

Unlisted shares are a unique asset class. If you’ve put most of your money in publicly traded stocks, adding pre-IPO shares to your portfolio can help diversify spread your risk. This diversification can protect your investments if the stock market takes a downturn.

High Growth Potential 

Many unlisted companies still need to go public to raise capital. Investing in them when small and witnessing their growth until they go public can lead to impressive returns. This is often because their initial size makes it easier for them to experience substantial growth.

Low Allotments 

Getting shares in a good pre-IPO can be tough in the stock market. Accredited investors often get their hands on shares before a listing. But once the company goes public, it can become overvalued quickly. Unlisted shares may offer more reasonable opportunities for allocation without the frenzy of IPO subscriptions.

Peace of Mind 

Unlike publicly traded stocks, the prices of unlisted shares tend to be stable. You don’t need to constantly worry about the ups and downs of the stock market. This can provide peace of mind, especially during volatile market conditions.

Guidelines For Buying Unlisted Shares Of A Company

It is important to know some guidelines before investing in unlisted shares. Read the below guidelines if you are planning to invest:

Verify Registration 

Ensure the company you plan to invest in is registered with the Register of Company. You can do this by checking with the Registrar of CompaniesCompany’s office.

Reputation Matters 

Invest in companies with a good reputation. There are many registered companies, but only a few are well-known and trusted.

Beware of High Returns

Be cautious if someone promises unusually high returns. If it sounds too good to be true, it often is. Do your research before committing.

Analyse Financials 

Look at the company’s financial health. Check if it consistently makes a profit or avoids significant losses. Investigate how long it has been in business.

Examine Management 

Dig deeper into the company’s management. Assess their performance, decision-making, and other factors impacting the company’s success.

Review Prospectus

Obtain and read the company’s prospectus before investing. It contains valuable information about the business and its plans.

Understand Growth Plans

Learn about the company’s growth plans and how they might affect its future. This insight can help you make informed investment decisions.

How To Buy Unlisted Shares?

Buying pre-IPO stocks is not a challenging task. If you are not aware of how and where to buy unlisted shares in India, read the below points:

Choose a Reputable Unlisted Share Broker

To buy unlisted shares in India, it’s essential to select a reliable unlisted share broker. Look for brokers with a good track record and customer reviews.

Open a Demat Account

Investors must open a Demat account, a digital repository for holding shares. This account is necessary for buying unlisted shares.

Minimum Investment Requirement

Be prepared to invest a minimum of Rs. 50,000 in unlisted shares of any company. Ensure you have the required funds available.

Payment and Delivery

Once you decide to invest, make the payment in advance. After one working day from the payment date, you will receive the shares in your Demat account.

Private Placement

Consider investing in unlisted shares through Private Placement. Promoters often offer their stakes in the company through this method. Having a solid network is crucial for accessing information about such opportunities.

Alternative Investment Funds (AIF) and Portfolio Management Services (PMS)

For larger investments, explore AIF and PMS options. These are suitable for those who can invest significant capital and are willing to wait for potential returns when the company goes public or its valuation increases.

Equity Crowdfunding Platforms

To become an angel investor and support start-ups, consider using equity crowdfunding platforms. These platforms allow you to invest in unlisted shares, helping companies in their early stages of growth.

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