A quick guide to Unlisted Equity for a Retail Investor
Mr. Kumar, a marketing professional and investor from Delhi intends to invest in Bank FD or Annuity Plan from HDFC Life some 5 years back.
While exploring the best of investment options online, he came across an undiscovered investment option called Unlisted Equity. He researched more about the unlisted shares and got in touch with us to know all about it.
We explained to him all about unlisted equity and recommended the above investments as per his financial goals and investment requirements. Post the analysis and discussions, instead of investing in an annuity plan, he invested in the unlisted shares from the same company.
The price of the Unlisted Equity went up from INR 200 to 881 per share in a period of 3 years. Meaning he not only invested in a good plan but made a multifold (as compared to 7 % annual returns in FD) within 3 years.
Unlisted Shares offer a higher return prospect but there is no denying the fact that they are high risk high return options for wealth management. At Rurash Fin, we facilitate investing in unlisted shares after detailed analysis and research. Our wealth custodians are seasoned players with decades of experience in Indian capital markets.
If you are interested to know all about Unlisted Stocks, what are unlisted stocks, their types, valuation, how can you invest in unlisted companies, etc. we will help you get your facts right.
|Company||Pre-IPO Price||Listing price||Return.|
Understanding Unlisted Equity
Generally, Unlisted equity are the shares of Publicly limited companies which are “Not Listed” on any Stock Exchange. Which means, those shares are not traded publicly on NSE/BSE. A holder of Unlisted equity shares will not have the same privileges accorded to equity shareholders of a Listed Company. Now the question is: what kind of companies are we talking about here? Are they big enterprises or newbies in line? Well, these are generally small but ambitious startups who need investments to take their idea and business to the next level. Although there is a downside where significant risks are involved, if the idea becomes “the next big thing” in the market, the downside becomes negligible. That is where Rurash Fin acts as the wealth custodian and helps you in wealth creation through various investment options.
Is it Different from Unlisted Security?
Yes, unlisted security is a financial instrument which consists of equity securities, debt securities or derivative securities which can be traded over the counter. Whereas unlisted equity is one type of security which is also traded over the counter. Unlisted Equity are popularly known as Over-the-counter Stocks.
What are the popular companies of Unlisted Equity Stocks?
There is a huge market of Unlisted Stocks in India. However, there are some popular companies that have been performing consistently. Some of the popular names here:
- Paytm One 97 Communication Unlisted Shares
- National Stock Exchange - NSE
- Hero Fincorp Limited.
- Studds Accessories Limited Unlisted Shares
- S Reliance Retail Limited Unlisted Shares
- HDB Financial Services Ltd
- Capgemini Limited
- Cochin International Airport Ltd (CIAL)
- Chennai Super Kings (CSK)
- B-9 Beverages - Bira Beer
Taxation on Unlisted Shares in India
In India, Income Tax on Trade of Unlisted Shares is equivalent to most financial assets’ tax status. The rate of income tax on the selling of Domestic Business or International Corporation unlisted shares are as follows:
On Long Term Capital Gain – the rate is 20% with Indexation
On Short Term Capital Gain – the rate depends on the slab rates
While this is the standard tax status, we at Rurash will guide you in detail to make your investments grow multifold with efficient tax planning.
Who can buy unlisted shares?
Individuals who invest in individual stocks, real estate, and other alternative investments – in short any person who is an investor, can buy unlisted shares.
- Investors can invest in intermediaries and startups
- They can buy from promoters directly
- Individuals can make an investment in a new business venture in exchange for common or preferred equity
- Apart from retail investors, financial institutions running portfolio management services (PMS) and alternative investment funds (AIF) can buy unlisted shares.
Listed vs Unlisted Stocks
|Factors of differentiation||Listed Stocks||Unlisted Stocks|
|Type of Stocks||These stocks are listed under any Stock Exchange(Mainly BSE/NSE) and they are traded publicly.||
These stocks are not listed on any Stock Exchange and they are not traded publicly.
They are traded over the counter(OTC)
|Nature of Stocks||Volatile in nature – price may not reflect underlying assets||Volatility is lower.|
|Liquidity||Liquidity is higher as investors can redeem their units by simply selling on the stock exchange||They are traded over the counter and hence they are not as liquid as their listed counterparts.|
|Investment Type||Arbitrage - Trading - Investments||Trading and Investments|
How are the Unlisted Companies valued?
Unlisted equity shares are the shares of companies which are “Not Listed” on the stock exchange.That’s why a fair value of the share is arrived at by market forces and generally traded at 30 -50% discount to their listed counterparts on account of unlisted shares. Unlisted shares enter trading circles when employees dilute their stock options or through private placements by promoters or general shareholders. Promoters of startups prefer this route to raise small amounts of working capital without higher levels of stock dilution and get a valuation reference point for further fundraising. So, while raising equity from private investors, the company is valued by these companies which serve as a reference point.
Interested in knowing more about Unlisted Equity Investments?
What is the process to sell/buy unlisted shares?
You can check the procedure details on our page here. Or speak to us now. Call at, +91 22 4157 1111
Who sells unlisted equity shares?
Individuals or companies holding unlisted shares can sell them
What are the documents required to buy unlisted shares?
To buy unlisted share you need the following documents:
- Pan card (Id Proof)
- Aadhar card (Id proof)
- Bank Statement or Utility Bill (Address proof)
- Cancelled Cheque (Of the account from which you are sending payment)
- Demat account
What are the instruments used to buy or sell the shares?
You can buy and sell unlisted shares in physical and demat form.
What are the top reasons to unlisted shares?
This kind of shares are generally available at a discount and offer prospects for higher returns.
What is the kind of time horizon to see the gains in unlisted shares?
A minimum time horizon of 3-5 years
What are the kinds of risks involved in investing in unlisted shares?
Do the unlisted shares have any lock-in?
Generally not. But some companies like market infrastructure institutions ( National Stock Exchange of India - NSE) have fit and proper criteria to hold the share.
ROFR shares - Right of first refusal clause in some shares.
We at Rurash are happy to present you with a wide range of unlisted shares of HDFC Securities, Studds Accessories, Suryoday SFB, Hero Fincorp, HDB Financial Services, Fino Paytech, Chennai Super Kings, One97 Communications (Paytm) a and many more.
As Warren Buffett said, “Buy stock as an owner, not a speculator.” With our research articles exclusively for you, pick the right stock.