Buy & Sell Unlisted Shares Online in India

Are you worried about missing out on high-growth investments because they’re not listed on the stock market? Investing in unlisted shares might be an intriguing option for you when you’re looking for high-growth prospects in companies not yet listed on official stock exchanges like the NSE or BSE. Investors trade these shares in over-the-counter (OTC) markets, and startups, developing companies, or businesses that choose to avoid the formal listing process with its associated costs and regulations.

Specialized platforms and brokers have streamlined the process of ‘where to buy unlisted shares in India’ and sell them online, making it easier for you to diversify your portfolio.  However, given the lack of regulation and the risks involved, it’s crucial that you exercise caution and choose trustworthy brokers for your transactions.

To understand how to buy and sell unlisted shares online in India, it’s fundamental to first grasp what unlisted shares are.

What are Unlisted Shares?

One of the financial instruments known as Unlisted Shares are not listed on reputable stock exchanges such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). Investors trade these shares in over-the-counter (OTC) markets, unlike official exchanges, which are centralized and usually subject to more regulation.

The term “over-the-counter (OTC) securities” is often used interchangeably with “Unlisted Shares.” These typically belong to startups, smaller businesses, or companies that might need to meet the strict requirements for listing on a formal exchange due to their recent establishment, smaller size, or the high cost of listing fees and maintaining market capitalization.

These shares offer ‘where to buy unlisted shares in India’, and unique investment opportunities, especially in companies in their early stages of growth, but they can also be riskier than listed shares. Investors usually use specialized brokers and platforms that provide access to these over-the-counter (OTC) markets to sell or buy unlisted shares in India. Given the risks involved, working with trustworthy brokers is crucial to ensuring transaction transparency and dependability​.

With a clear grasp of the potential and risks associated with unlisted shares, it’s time to make your move. At Tap Invest, we provide tailored investment solutions offering exclusive opportunities in Unlisted Bonds with impressive annual returns of 17-18% over 1.5-2 years. Explore our premium investment options by Signing Up on our website today. 

Now that we’ve learned the meaning of unlisted shares and their distinctions from listed securities, the next step is to explore how and where to buy unlisted shares in India is through online channels.

Also Read: What Are Equity Shares & Preference Shares?

How to Buy Unlisted Shares Online?

You can consider various methods for where to buy unlisted shares in India:

• Investing in Startups and Intermediaries

Many startups are not listed on formal stock exchanges for investment. With this approach, shares can often be bought directly from the business in certain circumstances or through intermediaries who specialize in unlisted shares and pre-IPO placements. The minimum investment required for these shares is usually around ₹50,000. Due to their early stage of development, startups carry higher risks but also offer high growth potential.

• Purchasing ESOPs Directly from Employees

Employee Stock Ownership Plans (ESOPs) are shares that company employees occasionally sell. These shares are often made available at a predetermined price after a specified vesting period. Brokers can aid these transactions by connecting you with employees looking to sell their holdings, providing access to companies that might otherwise be difficult to invest in.

• Buying Stocks Directly from Promoters

Another way for where to buy unlisted shares in India is to purchase them directly from company promoters. This process typically involves dealing with investment banks, wealth managers, or specialized brokers who can connect you with promoters looking to sell their shares. This strategy is often used by investors who are looking to take significant stakes in a business. 

• Purchasing Unlisted Shares through PMS and AIF Schemes

A more managed approach to where to buy unlisted shares in India is through Portfolio Management Services (PMS) and Alternative Investment Funds (AIF). These funds pool assets from multiple investors to create a diversified portfolio that includes unlisted shares. Investing through PMS and AIF offers professional management and risk diversification, which can be advantageous compared to purchasing individual unlisted shares directly.

When considering these approaches, conducting thorough research and collaborating with reliable brokers or financial institutions is crucial to mitigate risks such as liquidity challenges and potential capital loss.

After learning where to buy unlisted shares in India, let’s explore a dynamic and promising investment avenue: Investing in Startups and Intermediaries.

Also Read: Trading on Equity: Understanding the Financial Leverage Tool

Investing in Startups and Intermediaries

Unlisted shares can present sizable growth potential, especially for startups and businesses preparing for an IPO. To assist you with the process, consider the following guide:

• Put Money into Pre-IPO Businesses

Many unlisted shares belong to companies that intend to go public. Investing in these pre-IPO businesses can be a strategic choice if you want to profit from their growth before they officially list on exchanges. These shares offer a unique opportunity to benefit from the company’s upcoming market debut.

• Deliveries of Shares to Your Demat Account

Generally, sellers transfer unlisted shares directly to your Demat account upon purchase. This process ensures that the shares are safely stored electronically, streamlining ownership and future transactions.

• Unrecorded Transactions

Unlisted share transactions occur off-record and are not handled by official stock exchanges such as the NSE or BSE. Due to the lack of exchange involvement, which may lead to less regulation, you should be cautious and ensure that your trades are transparent.

Also Read: Understanding the Credit Guarantee Scheme: Support for MSMEs and Startups

• Select a Reputable Broker

Since these trades are off-record, choosing a trustworthy intermediary is essential to reducing counterparty risks. Using a reputable broker or platform helps ensure that transactions are carried out honestly and openly, safeguarding your investment.

• Invest in Startups with High Growth Rates

Investing in startups can yield significant returns, particularly if they promise future growth. These investments may prove incredibly profitable if these startups achieve key market milestones or lead in their respective industries.

• Minimum Level of Investment Requirements

Investing in startups typically starts at around Rs. 50,000. This minimum investment requirement makes it accessible for many investors who want to participate in early-stage growth prospects.

By being aware of these critical details, you can make well-informed decisions for where to buy unlisted shares in India, maximizing potential profits while minimizing associated risks.

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Having explored startups and intermediaries, let’s get into buying ESOPs directly from employees. This section will guide you on acquiring shares through Employee Stock Ownership Plans (ESOPs) and highlight how to access valuable prospects in high-growth companies.

Buying ESOPs Directly from Employees

Mainly investing through Employee Stock Ownership Plans (ESOPs) offers a unique opportunity to buy stock in high-growth companies before they go public. Here’s how the process works:

• Brokers Enable Transactions

Brokers are essential in the Indian market as they expedite the sale of ESOPs between buyers and sellers. These transactions usually occur after employees complete a lock-in period, during which they must retain their shares. Brokers assist by negotiating the sale price and ensuring the transaction complies with regulatory requirements.

Also Read: Maximise Your EPFO Benefits: A Guide for Employees and Employers

• Gain Entry to Leading Unlisted Companies

By purchasing ESOPs directly from employees, investors can gain access to top unlisted companies. This approach provides a unique chance to invest in rapidly expanding companies that still need to be listed on official stock exchanges. Investors can secure early access to promising businesses with sizable growth potential, often at advantageous prices, before these companies go public.

These steps will help you take advantage of where to buy unlisted shares in India in some of the most exciting unlisted companies by using broker services.

Now, let’s delve into the strategy of buying stocks directly from promoters.

Buying Stocks Directly from Promoters

Acquiring products directly from company representatives presents a unique opportunity to gain early access to potential ventures. Here’s the procedure you can follow:

Approach Reputable Investment Banks, Wealth Managers, or Brokers

In the finance industry, it is customary to approach reputable investment banks, wealth managers, or brokers. These professionals typically enable transactions for unlisted shares and private placements. Financial literature and industry reports well-document their role in connecting investors with facilities.

Find Out the Exact Share Price of Unlisted Companies

Since unlisted companies do not have publicly available share prices, financial advisors and brokers can provide access to valuations and pricing. Investment and financial management resources frequently address techniques for determining these prices.

Also Read: Unveiling the Cost Advantage: Direct vs. Regular Mutual Funds

Communicate Directly with Company Promoters

In private placements, direct communication with company promoters is typical. Investment banks and brokers are often involved in managing transactions with the promoters of unlisted businesses. Venture capital and private equity literature extensively document this practice.

Understand Private Placements

The term “private placements,” used in financial and legal contexts, refers to a recognized method of issuing securities to a small number of investors. The Securities and Exchange Board of India (SEBI) and other financial regulatory bodies provide guidelines and regulations for private placements.

Consult investment banking companies, financial management resources, and regulatory organizations like SEBI for more detailed, verified information.

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We’ve looked at the procedure for buying stocks directly from company executives. Now, let’s discuss the potential risks of investing in unlisted shares. 

Risks of Investing in Unlisted Shares

The risks associated with where to buy unlisted shares in India underscore the importance of conducting thorough research and carefully considering your decision before purchasing. 

Working with financial advisors and performing due diligence can help you make more informed investment decisions and mitigate these risks for where to buy unlisted shares in India. Here are the main dangers of investing in unlisted shares:

Lack of Liquidity

Compared to listed shares, unlisted shares are less liquid because they are not traded on public stock exchanges. Selling these shares quickly or at a profit may be challenging. In the absence of an official market, finding buyers can be tough and lead to prolonged delays.

Capital Loss

Investing in unlisted shares carries a higher risk of capital loss. These companies often face greater financial instability or failure risks since regulatory bodies do not subject them to the same scrutiny as listed companies. Investors could experience substantial losses if the business underperforms or fails.

May Not Distribute Dividends

Many unlisted businesses do not pay dividends, mainly if they are in their early stages or reinvesting profits into the company. This contrasts with established listed companies, which typically offer regular dividend payouts. For income-seeking investors, this lack of dividends can limit returns.

Risk of Dilution

Unlisted companies may issue additional shares to raise capital, potentially reducing the value of existing shares. This dilution can decrease the percentage of ownership and earnings per share for current investors. Investors must know the potential for dilution when considering investments in unlisted companies.

Also Read: Explore Best Short-Term Investment Plans: Maximizing Gains, Minimizing Risks

Conclusion

Unlisted shares differ from public stock market investments as they are not traded on exchanges like NSE or BSE. This lack of market visibility and regulatory oversight makes them a unique investment class with its own benefits and drawbacks. When you invest in unlisted securities, you could be dealing with corporate bonds, penny stocks, common stocks, or certain types of derivatives. These securities often present opportunities for substantial growth, but they also come with specific risks and complexities that you should consider carefully.

There are several ways for where to buy unlisted shares in India. Investors can either use intermediaries to enable transactions or invest directly in startups. Another strategy is to buy Employee Stock Ownership Plans (ESOPs) directly from promoters or employees, gaining early access to shares before an IPO. You can also explore professionally managed investments in unlisted shares through Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS).

Anyone wishing to invest in unlisted shares can make smarter decisions and successfully learn this complex sort of investment by knowing the opportunities and risks.
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