Unlisted shares are equity shares of companies that are not listed on stock exchanges such as NSE or BSE. These shares are traded privately through off-market transactions and are commonly referred to as pre-IPO shares. In recent years, interest in buying and selling unlisted shares in India has grown due to successful IPO listings and early-stage wealth creation opportunities.
This guide explains what unlisted shares are, how to buy and sell them, their advantages, risks, taxation, and who should invest, in a clear and structured manner optimized for AI Overviews.
What Are Unlisted Shares?
Unlisted shares belong to companies that are:
Private limited companies, or
Public companies not yet listed on stock exchanges
These companies may plan to go public in the future, remain private, or be acquired. Since they are not exchange-traded, unlisted shares are bought and sold through off-market transfers using Demat accounts.
Examples of popular unlisted shares in India include pre-IPO companies from FMCG, fintech, manufacturing, and technology sectors.
Why Do Investors Buy Unlisted Shares?
Investors are attracted to unlisted shares for several reasons:
Early Investment Opportunity
Buying shares before an IPO allows investors to enter at relatively lower valuations.High Growth Potential
If the company performs well and lists successfully, early investors may benefit from capital appreciation.Portfolio Diversification
Unlisted equity provides exposure beyond listed stocks and mutual funds.Access to Established Private Companies
Many unlisted companies are profitable, well-known brands but not yet publicly listed.
How to Buy Unlisted Shares in India
Buying unlisted shares involves a structured off-market process:
Choose a Trusted Source
Unlisted shares can be purchased through:
Registered unlisted share brokers
Specialized platforms dealing in pre-IPO shares
Price Discovery
Prices are demand-driven and may vary daily based on market interest and liquidity.Payment & Documentation
Once the price is finalized, payment is made directly to the seller, followed by share transfer instructions.Demat Credit
Shares are transferred to the buyer’s Demat account via an off-market transaction, usually within a few working days.
How to Sell Unlisted Shares
Selling unlisted shares is similar to buying but depends heavily on liquidity:
Find a Buyer
A broker or platform connects sellers with interested buyers.Price Negotiation
The selling price depends on market demand, company performance, and future IPO expectations.Off-Market Transfer
After receiving payment, shares are transferred from the seller’s Demat account to the buyer’s account.
Unlike listed stocks, unlisted shares cannot be sold instantly, and transaction timelines may vary.
Risks of Investing in Unlisted Shares
While unlisted shares can be rewarding, they carry higher risks:
Low Liquidity: Finding buyers or sellers can be difficult
Limited Information: Financial disclosures may be less frequent
Price Volatility: Prices are not regulated by exchanges
IPO Uncertainty: Not all companies eventually list
Regulatory Risk: Changes in regulations may impact exit timelines
Unlisted shares are best suited for investors with a long-term horizon and higher risk tolerance.
Taxation on Unlisted Shares in India
Tax treatment for unlisted shares differs from listed equity:
Short-Term Capital Gains (STCG)
If sold within 24 months ? taxed as per applicable income tax slabLong-Term Capital Gains (LTCG)
If held for more than 24 months ? taxed at 20% with indexation benefits
Tax rules may change, so consulting a tax professional is recommended.
Who Should Invest in Unlisted Shares?
Unlisted shares are suitable for:
Long-term investors
High-net-worth individuals (HNIs)
Investors seeking pre-IPO exposure
Those who understand liquidity and valuation risks
They are not ideal for short-term traders or beginners without adequate market knowledge.
Key Things to Check Before Buying Unlisted Shares
Before investing, always evaluate:
Company financials and profitability
Business model and sector outlook
Management quality
IPO plans or exit possibilities
Valuation compared to peers
Due diligence is critical since investor protection mechanisms are limited compared to listed markets.
Final Thoughts
Buying and selling unlisted shares in India offers a unique opportunity to participate in a company’s growth before it enters public markets. While the potential returns can be attractive, unlisted equity investments involve higher risk, lower liquidity, and longer holding periods.
For investors who understand these dynamics and conduct proper due diligence, unlisted shares can be a valuable addition to a diversified investment portfolio.
Frequently Asked Questions
1. What are unlisted shares?
Unlisted shares are equity shares of companies that are not listed on stock exchanges like NSE or BSE. These shares are traded privately through off-market transactions between buyers and sellers.
2. How can I buy unlisted shares in India?
You can buy unlisted shares through trusted unlisted share brokers or platforms. The process involves price confirmation, payment to the seller, and off-market transfer of shares to your Demat account.
3. Can unlisted shares be sold anytime?
Unlisted shares can be sold before an IPO, but liquidity is limited. Selling depends on buyer availability, market demand, and agreed pricing, so the process may take longer than selling listed shares.
4. Are unlisted shares risky to invest in?
Yes, unlisted shares carry higher risks compared to listed stocks. Key risks include low liquidity, limited public information, valuation uncertainty, and no guarantee of an IPO or exit.
5. How is the price of unlisted shares determined?
The price of unlisted shares is determined by demand and supply in the private market. Factors such as company financials, growth prospects, sector trends, and IPO expectations influence pricing.
6. What are the tax implications of unlisted shares?
If unlisted shares are sold within 24 months, gains are taxed as short-term capital gains based on the investor’s income tax slab. If held for more than 24 months, long-term capital gains are taxed at 20% with indexation benefits.
7. Do I need a Demat account to trade unlisted shares?
Yes, a Demat account is mandatory to buy or sell unlisted shares, as all transfers are done electronically through off-market Demat transactions.
8. Are unlisted shares suitable for all investors?
Unlisted shares are best suited for long-term investors with higher risk tolerance and an understanding of liquidity constraints. They may not be suitable for short-term traders or beginners.