FAQ - Unlisted

Unlisted companies are those companies that are not traded or listed on any recognized stock exchange (like NSE or BSE). These companies are typically owned by founders, employees, private investors, or closely held by the company.

Unlisted shares are equity shares of companies that are not traded on any recognized stock exchange (like NSE or BSE). These shares are typically owned by founders, employees, private investors, or closely held by the company, and their transactions occur in the "over-the-counter" (OTC) market.

Investing in unlisted shares offers the potential for significant capital gains, especially if the company is in a high-growth phase and later goes public (IPO) or gets acquired. It provides early access to promising companies before they hit the public market, allowing investors to participate in their growth story from an earlier stage.

The primary risks include illiquidity (they are harder to buy or sell quickly), lack of transparency (companies have fewer disclosure requirements than listed ones), and valuation challenges (no readily available market price). There's also the risk that the company may never go public or may not perform as expected.

Unlike listed shares with real-time exchange prices, unlisted share prices are determined through negotiation between buyers and sellers, influenced by factors such as the company's financial performance, industry outlook, growth potential, market sentiment, and the demand-supply dynamics in the unlisted market.

You can buy unlisted shares through specialized intermediaries or brokers who deal in these securities. The process typically involves identifying a suitable company, completing KYC (Know Your Customer) formalities, agreeing on a price, transferring funds, and then having the shares credited to your Demat account.

Yes, unlisted shares can be sold, but liquidity is a challenge. You can sell them through the same specialized brokers or platforms from whom you purchased them, or directly to another interested buyer if you find one. The process involves finding a buyer, agreeing on a price, and then transferring the shares from your Demat account.

While there isn't a mandatory lock-in period before listing, if the company goes public, the shares acquired in the pre-IPO stage might be subject to a lock-in period (e.g., 6 months in India post-listing) to ensure price stability.

Gains from selling unlisted shares are subject to capital gains tax. If held for 24 months or less, gains are short-term capital gains (STCG) taxed as per your income tax slab. If held for more than 24 months, gains are long-term capital gains (LTCG) taxed at 20% with indexation benefits.

The unlisted market has comparatively less regulatory oversight than the listed market. While the Ministry of Corporate Affairs (MCA) governs private companies under the Companies Act, 2013, and SEBI has some jurisdiction over specific aspects (like public fundraises), investors must conduct thorough due diligence due to lesser public disclosures.

Typically, you will need your PAN card, Aadhaar card, a copy of your Client Master List (CML) from your Demat account, and a cancelled cheque or bank statement. Additional documents may be required depending on the broker or the transaction specifics.

Banyan Tree Capital  Adviory Services offers specialized expertise in navigating the complexities of the unlisted shares market. Typically, you will get more insightful information about the unlisted companies. We provide short and crisp research prepared inhouse for our curated clients. We assist clients in identifying high-potential unlisted companies for investment, leveraging our extensive network and in-depth market research for robust due diligence and fair valuation.

As an investment banking outfit we work across sectors and work with companies to meet their capital requirements or meet expansion drive through M&A, Strategic Partnership or Joint Venture.