Due to rising market prices and increased individual investors in India, many people are seeking alternatives. There is a sizable share market outside the major stock exchanges for these investors. Unlisted shares are traded in this market since they are not traded on regulated stock exchanges.
Unlisted shares trading is less open and less liquid than the SEBI-regulated stock market. Yet, when you list them on a stock market, you may see substantial gains.
Let’s look at how you may acquire shares that aren’t publicly traded.
How can you consider investing in unlisted shares?
Unlisted shares, contrary to listed shares, are not tradable on stock exchanges. So, here’s how you can put your money to work for you:
A direct sale from the promoter:
Through private placements, investors may acquire unlisted shares by contacting the company’s promoters.
To aid in price discovery and appraisal, consult the unlisted shares brokers, investment firms, or financial managers before making any financial commitments. They will also put you in touch with the business’s backers so you may negotiate a reasonable price with them.
Purchasing from current staff:
Employee stock ownership is a perk offered by many firms. To identify workers eager to sell their shares, you might make contact using platforms that specialize in acquiring and placing unlisted shares.
Brokers sell employee stock options (ESOP) under these firms at set pricing. This is the sole way to acquire shares in privately held companies.
Schemes for the PMS and AIF:
Portfolio management services (PMS) are available to retail investors from various financial organizations. The term “PMS” is shorthand for “professionally managed stock portfolio,” which experts run to achieve predetermined goals.
Corporate and High-Net-Worth investors may pool their money in Alternative Investment Funds (AIFs). These two funds share the goal of capitalizing on the increase in value that occurs when an initial public offering (IPO) is made public.
Let’s dive into buying unlisted shares and how they operate.
The operation of unlisted stock:
Despite the prevalence of stock markets like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), not all securities and financial instruments are traded there.
Unlisted securities include equities, corporate bonds, bonds issued by governments, and over-the-counter derivatives, among others.
Many privately held businesses have yet to begin the process of becoming public via an IPO. You may double your money often if you buy shares in a new tech company before they go public.
The clarity in market prices and disclosures is exceptionally high because of the stringent regulation of the Indian stock markets. Investing in unlisted securities is riskier since these protections do not apply to them. Sometimes crucial details, such as the size of a firm or its market capitalization, are unavailable. Putting money into some companies is bad since they have dangerous business ideas.
As a result, before putting your money into unlisted shares in India, you should do your research.
These investments go by another name because they are traded in OTC marketplaces. Unlisted securities may be traded in these marketplaces with the help of market operators or brokers.
In Closing:
Investing in unlisted shares has a high potential for loss, both in terms of liquidity and money. Not only that but almost little is known about them. Yet, with the firm’s listing on stock markets, they allow making substantial gains. You should use extreme caution when buying these stocks since rules don’t apply to them.
