Wondering how to tap into India's next big investment wave? Unlisted shares might be your answer.
What are Unlisted Shares?
Unlisted shares are shares of a company that are not listed on any stock exchange. These shares are traded privately between buyers and sellers, often through brokers or specialized platforms. Unlike listed shares, which are traded on public exchanges like the NSE or BSE, unlisted shares are not subject to the same level of regulatory scrutiny and transparency. This makes them a unique investment opportunity in India, but also one that comes with higher risks.
Unlisted shares are typically issued by startups, small and medium-sized enterprises (SMEs), or companies that are not yet ready or willing to go public. These companies may be in the early stages of growth, or they may be well-established but prefer to remain private for strategic reasons. Investors who buy unlisted shares are often looking for high returns, as these shares can be appreciated significantly if the company performs well and eventually goes public.
Top 5 Reasons to Invest in Unlisted Shares
Unlike other types of shares, unlisted shares have many features and provide benefits to the buyers. There can be several reasons for investors to buy unlisted shares online and through different sources. You can read the few reasons that make it a good option for many users:
High Growth Potential: Unlisted shares often belong to companies in their growth phase with innovative products or services. If they succeed, their value can increase dramatically.
Diversification: Adding unlisted shares to your investment portfolio can help diversify your holdings, providing a hedge against market volatility due to their lack of correlation with the stock market.
Lower Valuation: These shares are often available at a lower valuation compared to listed counterparts, allowing you to buy into promising companies at a discount.
Potential for High Returns: If the company performs well and goes public, the value of your shares could skyrocket.
Access to Promising Startups: Many high-potential startups choose to remain unlisted, giving you early access to potentially groundbreaking companies.
Who Can Buy Unlisted Shares?
Any individual who is above 18 years of age is generally eligible to buy online unlisted shares. However, Individual investors, HNIs, institutional investors, angel investors, and family offices are found buying unlisted shares offered by different organisations:
Individual Investors: Individual investors can buy unlisted shares, but they need to be aware of the risks involved. These shares are not as liquid as listed shares, and it may be difficult to find a buyer if you want to sell.
High Net-Worth Individuals (HNIs): HNIs often invest in unlisted shares as part of their diversified portfolio. They have the financial capacity to take on the higher risks associated with these investments.
Institutional Investors: Institutional investors, such as private equity firms, venture capital funds, and hedge funds, often invest in unlisted shares. They have the expertise and resources to conduct thorough due diligence and manage the risks.
Angel Investors: Angel investors are individuals who provide capital to startups in exchange for equity. They often invest in unlisted shares as a way to support early-stage companies and potentially earn high returns.
Family Offices: Family offices, which manage the wealth of wealthy families, may also invest in unlisted shares as part of their investment strategy. They often have a long-term investment horizon and can afford to take on illiquid investments.
What are the varied types of Unlisted Shares?
You can learn about the various types of unlisted shares that are popular among investors from different sections of society. Listed below are the Types of Unlisted Shares:
Equity Shares: Equity shares represent ownership in a company. Holders of equity shares have voting rights and are entitled to a share of the company's profits in the form of dividends. However, they also bear the risk of losing their investment if the company performs poorly.
Preference Shares: Preference shares are a type of unlisted share that gives holders a preferential right to receive dividends before equity shareholders. They also have a higher claim on the company's assets in the event of liquidation. However, preference shareholders usually do not have voting rights.
Convertible Shares: Convertible shares are a hybrid type of unlisted shares that can be converted into equity shares at a later date. This gives investors the flexibility to switch to equity shares if the company performs well.
Debentures: Debentures are a type of unlisted debt instrument that companies issue to raise capital. They offer a fixed rate of interest and are typically secured against the company's assets. However, they do not represent ownership in the company.
Warrants: Warrants are a type of unlisted security that gives the holder the right to buy equity shares at a predetermined price within a specified period. They are often issued as part of a financing round to attract investors.
What is the Difference Between Unlisted Shares and Listed Shares?
Below you can find the key differences between the two share types:
Particulars
Unlisted Shares
Listed Shares
Listing Status
The most obvious difference is that unlisted shares are not listed on any stock exchange
Listed shares are traded on public exchanges.
Regulation
Unlisted shares are not subject to the same level of regulation, which can make them riskier.
Listed shares are subject to strict regulatory requirements, including regular financial reporting and disclosure.
Liquidity
Unlisted shares, on the other hand, are illiquid and may be difficult to sell.
Listed shares are highly liquid, meaning they can be easily bought and sold on the stock market.
Valuation
Unlisted shares are typically valued based on the company's financial performance and growth prospects.
Listed shares are valued based on market demand and supply, which can lead to price fluctuations.
Transparency
Unlisted companies are not required to provide the same level of transparency, which can make it harder for investors to assess their value.
Listed companies are required to disclose a significant amount of information to the public, including financial statements, management discussions, and analysis.
Comparison of Different Types of Unlisted Shares
1. Equity Shares vs. Preference Shares
Equity shares offer voting rights and the potential for higher returns, but they also come with higher risk. Preference shares offer a fixed dividend and a higher claim on assets, but they usually do not have voting rights.
2. Convertible Shares vs. Debentures
Convertible shares offer the potential for capital appreciation if the company performs well, while debentures offer a fixed rate of interest. Convertible shares are riskier but offer higher potential returns, while debentures are safer but offer lower returns.
3. Warrants vs. Equity Shares
Warrants give the holder the right to buy equity shares at a predetermined price, which can be beneficial if the company's share price increases. However, warrants do not offer any ownership or voting rights until they are converted into equity shares.
Renowned Companies Selling Unlisted Shares in India
Below is the list of the renowned Companies Selling Unlisted Shares in the country:
1. Reliance Industries:
Reliance Industries is one of the largest conglomerates in India and has a significant presence in various sectors, including petrochemicals, telecommunications, and retail. The company has issued unlisted shares to raise capital for its various ventures.
2. Tata Motors:
Tata Motors is a leading automobile manufacturer in India and has issued unlisted shares to fund its expansion and research and development activities.
3. Infosys:
Infosys is a global leader in IT services and consulting. The company has issued unlisted shares to raise capital for its growth initiatives.
4. Wipro:
Wipro is another major IT services company in India that has issued unlisted shares to fund its expansion and acquisitions.
5. HDFC Bank:
HDFC Bank is one of the largest private sector banks in India and has issued unlisted shares to raise capital for its lending activities.
How Should You Choose the Right Unlisted Shares Policy?
For many new investors, choosing the right unlisted shares can be a challenging task. But there is no need to worry. You may seek guidance from a professional. You can also consider the below factors to enhance your understanding and make better decisions.
Assess Your Risk Tolerance: Unlisted shares are inherently riskier than listed shares, so it's important to assess your risk tolerance before investing. If you're comfortable with taking on higher risk for the potential of higher returns, unlisted shares may be a good option.
Conduct Thorough Due Diligence: Before investing in unlisted shares, it's crucial to conduct thorough due diligence on the company. This includes reviewing the company's financial statements, management team, business model, and growth prospects.
Consider the Company's Growth Potential: Look for companies with strong growth potential, innovative products or services, and a solid business model. These companies are more likely to succeed and provide a good return on investment.
Evaluate the Company's Valuation: Make sure the company's valuation is reasonable and reflects its growth potential. Overvalued companies may not provide a good return on investment, even if they perform well.
Diversify Your Investments: Diversification is key to managing risk in any investment portfolio. Consider investing in a mix of unlisted shares from different sectors and companies to spread your risk.
Why Buy Unlisted Shares Through InvestKraft, the Reputed Aggregator?
InvestKraft is one of the fastest-growing aggregators in the country engaged in offering solutions to varied investment products along with loans, credit cards, insurance, digital gold, and fixed deposits. You can consider the below advantages for an informed decision:
Expertise and Experience: InvestKraft has a team of experts with extensive experience in the unlisted shares market. They can provide valuable insights and guidance to help you make informed investment decisions.
Access to a Wide Range of Opportunities: InvestKraft offers access to a wide range of unlisted shares from various sectors and companies. This allows you to diversify your investments and find the best opportunities.
Thorough Due Diligence: InvestKraft tries to conduct thorough due diligence on all the companies it offers, ensuring that you invest in high-quality opportunities with strong growth potential. However, we also encourage investors to do individual research before investing in unlisted shares offered by any company.
Transparent and Secure Transactions: InvestKraft provides a transparent and secure platform for buying and selling unlisted shares. All transactions are conducted safely and securely, giving you peace of mind.
Personalized Investment Advice: You may expect personalized investment advice based on your financial goals, risk tolerance, and investment horizon. This ensures that you make the best investment decisions for your unique situation.
Final Thought
To conclude, unlisted shares offer a unique investment opportunity with the potential for high returns. However, they also come with higher risks, so it's important to conduct thorough due diligence and assess your risk tolerance before investing. By choosing the right unlisted shares and working with a reputable aggregator like InvestKraft, you can maximize your chances of success and achieve your financial goals.
Frequently Asked Questions (FAQs)
1. What are unlisted shares?
Unlisted shares are shares of a company that are not listed on any stock exchange. They are traded privately between buyers and sellers.
2. Why should I invest in unlisted shares?
Unlisted shares offer high growth potential, diversification, lower valuation, and the opportunity to invest in promising startups.
3. Who can buy unlisted shares?
Individual investors, HNIs, institutional investors, angel investors, and family offices can buy unlisted shares.
4. What are the types of unlisted shares?
The types of unlisted shares include equity shares, preference shares, convertible shares, debentures, and warrants.
5. What is the difference between unlisted shares and listed shares?
Unlisted shares are not listed on any stock exchange, and are less regulated, less liquid, and less transparent compared to listed shares.
6. How do I choose the right unlisted shares policy?
Assess your risk tolerance, conduct thorough due diligence, consider the company's growth potential, evaluate the company's valuation, and diversify your investments.
7. What are the risks of investing in unlisted shares?
The risks include illiquidity, lack of transparency, higher volatility, and the potential for loss of investment.
8. Can I sell unlisted shares?
Yes, but it may be difficult to find a buyer, and the process may take longer compared to selling listed shares.
9. How are unlisted shares valued?
Unlisted shares are typically valued based on the company's financial performance, growth prospects, and market conditions.
10. What is the minimum investment required for unlisted shares?
The minimum investment required varies depending on the company and the platform you use to buy the shares.
11. Can I invest in unlisted shares through a mutual fund?
Some mutual funds may invest in unlisted shares, but they are typically restricted to institutional investors or high-net-worth individuals.
12. What is the tax treatment of unlisted shares?
The tax treatment of unlisted shares depends on the holding period and the type of income (capital gains or dividends). It's advisable to consult a tax advisor for specific guidance.
13. How do I buy unlisted shares?
You can buy unlisted shares through brokers, specialized platforms, or aggregators like InvestKraft.
14. What is the role of an aggregator like InvestKraft?
An aggregator like InvestKraft provides access to a wide range of unlisted shares, conducts due diligence, and offers personalized investment advice.
15. Is it safe to invest in unlisted shares through InvestKraft?
Yes, InvestKraft provides a transparent and secure platform for buying and selling unlisted shares, ensuring that your investments are safe.
Author: Rajesh Mishra
Rajesh Mishra is a professional and multilingual writer with over 12+ years of versatile experience in content writing.
He has crafted compelling narratives across a diverse array of industries, including BFSI, fintech, IT, pharmaceuticals, e-commerce, education, fashion, and more. He is a commerce graduate from Mumbai University. His strong academic foundation and passion for storytelling enable him to engage audiences and deliver impactful content.
He is adept at transforming complex concepts into clear, relatable language, making his work accessible to both, industry professionals and everyday readers. He thrives in dynamic environments, leveraging his extensive knowledge to create articles, blogs, whitepapers, and marketing materials that resonate with target audiences. Driven by a commitment to excellence and a keen eye for detail, Rajesh Mishra continuously explores emerging trends and technologies, ensuring his content remains relevant and thought-provoking.
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