Understanding Unlisted Stocks or Shares

Unlisted stocks or shares are like trading cards that aren’t sold in stores. Instead, they are traded between friends or through a special broker who deals with these unique shares.

Types of Unlisted Shares

• Pre-IPO Shares – Shares from companies getting ready to go public.
• Delisted Shares – Shares that were taken off the stock exchange for various reasons.
• Private Placement Shares – Shares sold directly to a select group of investors.
• ESOP Shares – Shares given to employees as part of their job benefits.
• Shares held by private company owners.

Advantages of Unlisted Stocks or Shares

• Chance to invest in a company before it becomes popular.
• No need to worry about missing out on shares when the company goes public.
• Potential for higher profits compared to regular stocks.
• Helps spread out your investments for better financial security.
• Unlisted shares are stored electronically in a special account.

Disadvantages of Unlisted Stocks or Shares

• Risky because they aren’t regulated by stock exchanges.
• Takes longer to buy and sell these shares.
• Not easy to find buyers or sellers, making them less liquid.
• You need to invest a lot of money at once to buy unlisted shares.
• Only a few brokers specialize in unlisted shares.
• It’s best to hold onto unlisted shares for a long time to see benefits.

Trading Unlisted Securities

You can buy unlisted stocks shares through special brokers or directly from sellers who deal with these unique shares. These brokers buy shares from employees or existing investors and sell them to new investors.

Ways to Invest in Unlisted Stocks or Shares

1. Invest in startups or through intermediaries.
2. Buy ESOPs directly from employees.
3. Purchase shares from company owners.
4. Invest in PMS or AIF schemes that focus on unlisted shares.

Unlisted Shares Brokers

There are a few brokers in India who specialize in unlisted shares. You can place orders online, over the phone, or through email to buy or sell these shares. Unlisted shares are traded electronically.

Exit Strategies for Unlisted Shares

You can sell unlisted shares at any time if you find a buyer. However, it may take some time to find a buyer due to the limited market. Ways to sell unlisted shares include selling privately, through a dealer, buyback by the company, or acquisition by a listed company.

Lock-in Period for Unlisted Shares

There is no specific lock-in period for unlisted shares, except for Pre-IPO shares. You can sell unlisted shares whenever you find a buyer. However, if a company goes public, there is a six-month lock-in period before you can sell those shares.

Taxation of Unlisted Stocks or Shares

The tax rate for selling unlisted stocks or shares depends on how long you’ve held them.

1. If sold within 24 months, it’s considered a short-term gain and taxed based on your income tax rate.
2. If held for more than 24 months, it’s a long-term gain taxed at a fixed rate of 20%.

Comparison: Unlisted vs Listed Shares

Unlisted Shares

Listed Shares

Traded privately.

Traded on stock exchanges.

Less liquid market.

More liquid market.

Not regulated by stock exchanges.

Regulated by SEBI.

Riskier investment.

Less risky investment.

Harder to buy and sell.

Easier to buy and sell.

Page Glossary

• • PMS (Portfolio Management Service): A service that helps manage investments for investors based on their goals and risk tolerance. Some PMS services offer access to unlisted shares.

• AIF (Alternative Investment Fund): Funds managed by professionals that pool money from investors to invest in various assets, including unlisted shares.

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