How to Invest in Unlisted Companies in India?

How to Invest in Unlisted Companies in India?

Are you looking to diversify your investment portfolio and explore new avenues for wealth creation? Investing in unlisted companies in India might just be the opportunity you’ve been waiting for! While most investors focus on listed stocks, unlisted companies offer a unique chance to invest in promising ventures before they go public. In this blog post, we’ll guide you through the method of investing in unlisted agencies and spotlight some of the fine opportunities available in India. So, let’s dive right into the world of unlisted stocks and uncover the secrets and techniques to successful investments!

What are Unlisted Shares?

How to Invest in Unlisted Companies in India?

Unlisted shares, also known as unquoted shares or privately held shares, are stocks of companies that are not listed on any stock exchange. Unlike their listed counterparts, these companies do not trade publicly and their shares are not available for purchase through the regular stock market.

Essentially, it entails buying stocks in a corporation that has but to move public or has chosen to stay private. This means that the ownership of these shares is limited to a select group of investors and there may be restrictions on selling them.

Investing in unlisted shares comes with its own set of advantages and risks. On one hand, you have the potential for substantial returns as early-stage companies often experience significant growth once they hit the market. Additionally, investing in unlisted companies allows you to support promising startups and contribute to their success.

However, it’s important to note that investing in unlisted shares can be more speculative and volatile compared to investing money in established listed companies. Since these investments lack liquidity due to the absence of exchanges, exiting your position may prove challenging if circumstances change.

Why Invest in Unlisted Companies?

Unlisted companies, also known as privately held companies, offer a unique investment opportunity that sets them apart from their publicly traded counterparts. While investing in unlisted companies may carry certain risks, it can also yield significant benefits for savvy investors. Unlisted companies, also known as privately held companies, offer a unique investing opportunity that sets them other from their publicly traded counterparts. While investing in unlisted businesses may additionally carry certain risks, it can additionally yield large blessings for savvy buyers.

  • Unlisted companies offer the potential for high returns due to their undervalued shares and growth potential.
  • Investing in unlisted companies supports promising startups and contributes to economic development.
  • Unlisted investments offer greater flexibility and control over investment decisions.
  • Unlisted shares can diversify portfolios by adding an alternative asset class.
  • Unlisted securities like corporate or government bonds provide fixed-income options with attractive interest rates.

While there are numerous advantages to investing in unlisted companies, it is important to note that this type of investment comes with some risks as well. The lack of market liquidity may make it difficult to exit your position quickly if needed. Additionally, since these businesses operate outside the strict regulations imposed on publicly traded firms; they may face higher operational risks or governance issues.

Various Types of Unlisted Financial Instruments

Various Types of Unlisted Financial InstrumentsUnlisted companies offer a wide range of financial instruments for investors looking to diversify their portfolios. These instruments include penny stocks, corporate bonds, government securities, and derivative products like swaps.

  1. Penny stocks are shares of small companies that trade at low prices. While they can be risky due to their inherent volatility, they also hold the potential for high returns if you choose the right ones. It’s important to thoroughly research these stocks before investing.
  2. Corporate bonds are debt securities issued by corporations to raise capital. They offer fixed interest payments over a specified period and are generally considered less risky than equities. Investors receive regular income through coupon payments until the bond matures.
  3. Government securities refer to bonds or treasury bills issued by the government. These investments are considered relatively safe as they have lower default risk compared to other types of investments. Government securities provide steady income through periodic interest payments.
  4. Derivative products like swaps allow investors to speculate on the future price movements of an underlying asset without actually owning it. Swaps can help manage risks in portfolios and provide opportunities for hedging against market fluctuations.

Each type of unlisted financial instrument has its own set of advantages and considerations, so it’s essential for investors to carefully evaluate their investment goals and risk tolerance before making any decisions in this space.

How to Invest in Unlisted Companies?

Investing in Indian unlisted companies may be a beneficial possibility for investors trying to diversify their portfolios and earn better returns. There are several ways to invest in unlisted companies, each with its own set of benefits and considerations.

  1. Pre-IPO Investments: Pre-IPO investments involve acquiring shares of companies that are planning to go public shortly. This approach gives the potential to get in on the ground floor of potentially successful companies before their shares become widely available.
  2. Startups: Startups, characterized by high growth potential and innovative ideas, often seek funding from external investors. Investing in startups can give substantial returns, but also it carries huge risks due to the inherent uncertainties of early-stage businesses.
  3. Employee Stock Options (ESOPs): ESOPs provide employees with the opportunity to purchase shares of their company at a discounted price. This aligns employee interests with the company’s success and incentivizes them to contribute to its growth.
  4. Direct Purchase from Promoters: Purchasing shares directly from promoters, individuals, or entities holding significant stakes in a company, allows investors to establish direct relationships with management and gain insights into the company’s operations.
  5. Portfolio Management Services (PMS) and Alternative Investment Funds (AIF): PMS and AIF schemes offer professionally managed investment strategies tailored towards unlisted companies. Investors can leverage the expertise of these managed funds to navigate the complexities of unlisted investments.

With these various avenues available, investors have multiple options when it comes to investing in unlisted companies. It’s critical for people considering this kind of funding method to carefully evaluate every possibility and check its chance-reward profile earlier than making any investments.

Best Unlisted Companies to Invest

how to invest in unlisted companies in india

When it comes to investing in unlisted companies in India, several promising options can potentially yield significant returns. Here are five of the best-unlisted companies to consider:

  1. National Stock Exchange (NSE): As one of the leading stock exchanges in India, NSE provides a unique investment opportunity for those looking to get into the country’s vibrant capital markets.
  2. Swiggy: With the growth in popularity of online food delivery services, Swiggy has emerged as one of the key players in this industry. Investing in Swiggy gives you access to the booming food-tech sector.
  3. Serum Institute of India: Known for its expertise in vaccine production, Serum Institute is currently playing a crucial role in combating COVID-19 through mass production and distribution of vaccines. Investing here not only supports public health but also offers potential financial growth.
  4. Dream11: In recent years, fantasy sports platforms like Dream11 have gained immense popularity among Indian users. By investing in Dream11, you can take advantage of the growing trend and potentially earn substantial profits.
  5. Parle Products: A household name when it comes to biscuits and confectionery products, Parle Products has been serving Indian consumers for decades. Investment opportunities with Parle allow you to be part of an established brand with a strong market presence.

These unlisted companies gift interesting possibilities for investors in search of diversification past conventional avenues like shares or mutual finances. However, thorough studies and due diligence are necessary earlier than making any funding decisions.

Taxes Associated With Investing in Unlisted Companies

When it comes to investing in unlisted companies, it’s important to consider the tax implications associated with such investments. In India, the taxable percentage for long-term capital gains from investing in unlisted companies is 20%. This means that if you make a profit when selling your shares or securities after holding them for more than two years, you will be subject to this tax rate.

However, there is some relief in the form of indexation benefits. This allows you to adjust the cost of inflation while calculating your capital gains. By factoring in inflation, you can potentially reduce your overall tax liability and ease the taxation burden.

It’s worth noting that the minimum holding period for availing long-term capital gains benefits on investments in unlisted companies is typically two years. So, if you plan on investing in these types of ventures, it’s crucial to have a long-term perspective and be patient with your investments.

Understanding and being aware of the taxes associated with investing in unlisted companies is essential for making informed decisions. It’s always advisable to consult with a financial advisor or tax expert who can provide guidance tailored to your specific investment goals and circumstances. By staying informed about taxes related to unlisted company investments, investors can navigate their way toward optimizing returns while remaining compliant with applicable regulations.

Risks and Benefits of Investing in Unlisted Companies

Potential Rewards:

  • Undervalued Opportunities: Unlisted companies, often in their early stages of growth, may have undervalued shares, providing investors with an entry point before their true value is widely recognized.
  • Diversification Benefits: Unlisted investments can effectively diversify portfolios, offering an alternative asset class that behaves differently from traditional stocks and bonds.
  • Supporting Innovation: Investing in unlisted companies, particularly startups, contributes to fostering entrepreneurship, technological advancements, and economic development.

Risk Considerations:

  • Limited Liquidity: Unlisted shares lack the readily available market for buying and selling as compared to publicly traded stocks, making it challenging to exit investments quickly.
  • Information Asymmetry: Unlisted companies typically provide less comprehensive financial information compared to publicly traded firms, making it difficult for investors to accurately assess their financial health and growth prospects.
  • Higher Failure Risk: Unlisted companies, especially startups, often face greater operational challenges and are more susceptible to economic downturns, increasing the likelihood of failure.

Tips for Investing in Unlisted Companies

Tips for Investing in Unlisted Companies

  1. Thorough Research: Before investing in any unlisted company, it is crucial to conduct thorough research. Look into the company’s financials, management team, growth prospects, and industry trends. This will help you make an informed decision and minimize risks.
  2. Diversify Your Portfolio: It is always advisable to diversify your investments across different unlisted companies and sectors. By spreading your investments, you can reduce the impact of any potential losses from a single investment.
  3. Seek Professional Advice: If you are new to investing in unlisted companies or unsure about the process, seek guidance from a professional advisor or consultant who specializes in this area. They can provide valuable insights and help you navigate through the complexities of investing in such companies.
  4. Stay Updated: Keep yourself updated with the latest news and developments related to the unlisted companies you have invested in or plan to invest in. This will enable you to identify any potential risks or opportunities that may arise.
  5. Evaluate Exit Options: Consider exit options before making an investment decision. Understand how and when you can sell your shares if needed – whether through secondary market transactions or IPOs – as this impacts liquidity.
  6. Be Patient: Investing in unlisted companies often requires patience as these investments tend to be long-term commitments with limited liquidity options initially

Remember that while investing in unlisted companies offers significant growth potential, it also comes with its own set of risks that should not be overlooked.


In conclusion, making an investment in unlisted companies in India may be a rewarding possibility for those looking to diversify their investment portfolio and doubtlessly earn high returns. However, it’s crucial to method this form of funding with warning and thorough research.

Before investing, conduct complete due diligence at the company you are inquisitive about, analyzing elements including financials, business version, management crew, and growth potential. It is also essential to recognize the risks related to investing in unlisted companies, inclusive of illiquidity and shortage of transparency.

Seeking recommendations from experienced investors or attracting the services of a monetary guide can offer treasured insights and guidance in the course of the funding system. Additionally, growing a go-out strategy and staying up to date on regulatory changes and enterprise traits are crucial to efficiently manipulate your investments in unlisted agencies.

With careful analysis and a long-term view, investing in unlisted companies in India can present unique possibilities for growth and wealth advent.

FAQs – How to Invest in Unlisted Companies in India?

Can we invest in unlisted companies in India?

A pre-IPO business is not listed yet, but it plans to be listed eventually. You can invest in pre-IPO companies because there is no exchange participation and the shares are delivered straight to your Demat account, even though the trade is off-record.

Which is the best platform to buy unlisted shares in India?

One of the top companies in India for the efficient and legally compliant purchase and sale of unlisted shares is Stockify. You can also do so with unlisted shares. You can get a thorough and objective analysis of nearly all of the industry’s key unlisted shares at Stockify.

Does SEBI apply to unlisted companies?

While stringent disclosure rules apply to listed firms, unlisted companies are exempt from the same levels of disclosure requirements. The capital markets regulator, Sebi, wants to impose disclosure obligations on unlisted firms that are a part of corporate groups.

What is the lock-in period for unlisted shares?

Unlisted shares have a six-month lock-in term that prevents them from being sold right away following listing.

Disclaimer: This article is only for informational purposes and should not be considered as financial advice. Always do thorough research before making any investment decisions.

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