How To Buy Unlisted Shares? A Complete Guide To Investing In Unlisted Shares
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- Published 16 Apr 2026
Ever wished you could invest in a company before it becomes the next big thing? Well, here’s the good news you can! Welcome to the world of unlisted shares, investing in which can help you unearth some hidden gems. So, how do you invest in unlisted shares? Let’s find out.
What Are Unlisted Shares?
Imagine a company that’s doing great business but hasn’t yet listed its shares on the stock exchange. These companies might be startups, pre-IPO firms, or even subsidiaries of big corporations. Their shares aren’t traded on platforms like the NSE or BSE, which means they’re unlisted shares. You might make a good profit if the company grows and eventually goes public.
Types Of Unlisted Financial Instruments
The types of unlisted financial instruments are as follows:
1. Unlisted Shares
Unlisted shares are equity shares of companies that are not listed on a stock exchange. They are typically traded privately between investors or through specialised platforms. These shares offer early investment opportunities but may involve lower liquidity, higher risk, and limited public financial information compared to listed stocks.
2. G-Secs
Government Securities (G-Secs) are the debt instruments issued by the government to borrow money from investors. Although most of them are traded in controlled markets, a few of them might be privately issued. G-Secs are regarded as low-risk investments since they are government-backed and therefore have predictable returns in terms of regular payments of interest.
3. Convertible Securities
Convertible securities are financial instruments that can be converted into equity shares at a later date. These may include convertible bonds or convertible preference shares. They give investors a fixed-income advantage upfront and have the potential to get into equity growth should they be converted.
4. Preferential Shares
Preferential shares are equity instruments that provide shareholders with priority over common shareholders in dividend payments and during liquidation. However, they usually carry limited or no voting rights. These shares are commonly used by companies to raise capital without significantly diluting management control.
5. Employee Stock Ownership Plan (ESOP)
ESOPs are a type of company compensation which is based on equity. Through this structure, workers are granted the option of purchasing shares in the company at a fixed price after a set period in the company (Vesting). ESOPs assists in aligning the interests of employees with the growth of the company and persuading employees to be retained in the long run.
6. Swaps
Swaps are derivative contracts where two parties exchange financial obligations or cash flows. Common examples include interest rate swaps or currency swaps. Institutions normally utilise these tools to manage financial risks, hedge exposures or optimise the costs of borrowing through tailor-made agreements.
7. Forwards
Forward contracts are tailor-made derivative contracts between two parties to either sell or purchase an asset at an agreed price at a future date. The forwards, unlike the exchange-traded futures, are privately negotiated. Businesses and investors usually employ them to hedge the price movement of commodities, currency or financial assets.
8. Debentures
Debentures are long-term debt instruments issued by companies to raise capital from investors. They typically pay fixed interest over a specific period and are repaid at maturity. Unlike secured bonds, debentures may not always be backed by collateral, relying instead on the issuer’s creditworthiness.
9. Bonds
Bonds are securities that are fixed-income and are raised by corporations, financial institutions or governments. Investors invest money in the bonds in exchange for periodic interest payments and repayment of the principal upon maturity. The use of bonds is very common in financing projects, infrastructure and long-term expansion of business.
How To Buy Unlisted Shares?
There are several ways through which you can invest in unlisted shares. Some of them are:
Investing In Pre-IPO Companies
Before a company goes public, its shares are available as pre-IPO shares. If you invest in these, you get in before they get listed. This can be profitable. However, it’s crucial to go through trusted brokers or financial institutions. They’ll help you buy pre-IPO shares safely and ensure they land in your Demat account.
Exploring Opportunities In Start-Ups
If you love the start-up world, this one’s for you. Many high-growth start-ups offer shares to private investors before they expand. However, early investment may appraise if you choose the right start-up. Just make sure to research the company thoroughly to ensure you are not on a sinking ship.
Buying Employee Stock Options (ESOPs)
Companies often give employees stock options as a reward. Some employees choose to sell these ESOPs in the open market, and that’s where you come in! Brokers and financial platforms can help you connect with these sellers. It’s a great way to grab the shares of a promising, unlisted company at a fair price.
Direct Purchase From Promoters
If you're looking to buy a significant stake in a company, you can negotiate directly with the promoters. This method is common among high-net-worth investors. You'll likely need investment banks or wealth managers to facilitate the deal, ensuring everything is done legally and smoothly.
Invest In PMS And AIF Schemes That Pick Up Unlisted Shares
Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) can invest a part of their portfolio in unlisted companies. Investing via these professional investment vehicles provides investors with exposure to privately held companies and allows them to enjoy the benefits of professional research, diversification and professionally managed investments.
Differences Between Listed And Unlisted Shares
Listed and unlisted shares represent ownership in a company, but they differ mainly in where they are traded, how they are regulated, and how easily they can be bought or sold. The differences are as follows:
Trading Platform | Listed shares are traded on recognised stock exchanges such as NSE or BSE through a regulated marketplace. | Unlisted shares are privately bought and sold on a direct sale, by brokers or on a specialised off-exchange platform. |
Liquidity | These shares are highly liquid because they can be bought or sold easily during market trading hours. | Unlisted shares are less liquid, as the sellers and buyers have to get matched in private. |
Price Discovery | Market demand and supply on the exchange are used to calculate prices in real time. | Prices are negotiated privately between buyers and sellers without a public market mechanism. |
Regulation | The market regulators require listed companies to adhere to stringent regulatory and disclosure provisions. | Unlisted companies do not have the same disclosure requirements and are not so transparent to the public. |
Information Availability | The financial outcomes, announcements, and corporate disclosures are made publicly available to the investors. | Company performance information can be selective and, in most cases, is distributed only to select investors since reporting is not mandatory. |
Investment Risk | Typically viewed as comparatively risk-averse because of transparency, regulation, and ease of exit. | May involve a higher risk due to limited information, lower liquidity, and uncertainty in price discovery. |
Investor Access | Retail investors can easily buy listed shares through stockbrokers and trading accounts. | Access may be limited and often involves private placements, institutional deals, or specialised intermediaries. |
Why Investors Need To Consider Unlisted Shares?
1. Private Placements
Private placements allow companies to raise capital directly from a select group of investors instead of issuing shares publicly. This is the way investors can have a chance to engage in promising businesses before they are listed on the stock markets. To investors, it is a pre-public market opportunity in companies that can eventually gain a lot of growth until becoming a publicly traded company.
2. Direct Transactions
Direct transactions include the buying of unlisted shares by current shareholders, including promoters, employees or by early investors. This is an arrangement of deals which are privately negotiated and outside the stock exchange. This is a route that is commonly used by investors to buy a holding in a privately owned but still widely known company that is likely to expand or eventually become listed.
3. Unlisted Brokers
Unlisted brokers act as intermediaries between buyers and sellers in the private share market. They assist in determining possible opportunities, negotiating, and assisting in transactions. Brokers can assist investors in entering into privately held investments in a more transparent and confident way by giving them access to curated deals and market insights.
4. Venture Capitalists
Venture capitalists invest in high-growth startups and emerging companies with strong potential. They usually invest in the early or growth phase before they go to the market. Venture capital participation by investors is often seen as a chance to promote innovation and, at the same time, make high returns in case the business achieves scale-up successfully.
5. Angel Investors
Investors who like to use their own money to fund startups and small private companies are called angel investors. They can also provide mentorship and industry knowledge, in addition to financial assistance. Angel investors engage in angel investments to get exposure to new business ideas and stand to reap the rewards of high growth in the long run.
Benefits of Investing In Unlisted Shares
The benefits of investing in unlisted shares are as follows:
1. High Growth Potential
Unlisted firms are usually young or growing with expansion, and growth may be very fast. Investors joining at this point might have an advantage in case the company expands successfully or in the future gets listed publicly. Investing in well-grounded enterprises at an early stage can yield great returns in the long run.
2. Early Access to Investment
Unlisted shares enable investors to invest in companies prior to the time they are listed on a stock exchange. This early entry can provide exposure to businesses that may later attract strong market demand. Investing before an IPO may enable investors to benefit from future valuation increases.
3. Diversification
Adding unlisted shares to a portfolio can help diversify investments beyond traditional stocks and bonds. Private market investments may behave differently from listed markets, reducing dependence on public market performance and offering exposure to emerging sectors and innovative businesses.
4. Attractive Valuations
Unlisted shares are often available at valuations that may be lower than potential future market prices. The fact that they are not affected by day-to-day market speculation means that investors can get opportunities to invest in promising businesses at a good entry point before the rest of the market notices.
5. Control and Influence
In some private investments, especially for larger stakeholders, investors may gain voting rights, board participation, or strategic influence. This participation enables the investors to be involved in business decision-making, take close performance checks, and ensure the company's strategies align with long-term expansion goals.
Things To Keep In Mind Before Investing
Before you rush off to buy unlisted shares, here are a few words of wisdom:
1. Liquidity Is Low
Unlike listed shares, you can’t sell them instantly. Finding a buyer might take time.
2. Risk Is Higher
Not all unlisted companies will make it big. Do your research!
3. Regulations Differ
Investing in unlisted shares isn’t as straightforward as buying stocks on the exchange. Ensure to check the legal aspects.
Wrapping It Up
Investing in unlisted shares can be exciting and rewarding if done right. Whether you choose pre-IPO investments, startups, ESOPs, or direct purchases, always do thorough research and work with reliable intermediaries. And remember, patience is key in this game.
FAQs For Buying Unlisted Share
The taxation of unlisted shares relies on the holding period. In case a period exceeding 24 months is held, the gains qualify as long-term capital gains (LTCG) and are taxed at 12.5% without indexation. When the sale is made in less than a year, the gain is treated as a short-term capital gain (STCG) and is taxed as per the income tax bracket of the investor.
Unlisted companies encompass a diverse group: startups, private limited companies, those gearing up for an initial public offering, and subsidiaries of publicly traded firms. Numerous rapidly growing businesses keep their status private, opting to expand privately before eventually going public. Furthermore, some well-established companies deliberately choose to remain private, valuing the increased control and operational freedom it affords them.
Unlisted shares are viewed by investors as an early entry into high-growth companies before they are listed on the stock exchanges. Such investments can provide good valuation and diversification. In case the company is doing well or becomes public in the future, the investors can enjoy possible value additions.
Unlisted shares go into your demat account, as in the case of listed shares. Investors would be able to see them on their demat statement/ broker platform. Sometimes, the shares can be initially in physical form, but they are always converted to dematerialised form to facilitate easy transfer and tracking.
Yes, Non-Resident Indians (NRIs) are permitted to invest in unlisted shares, which are regulated by the Foreign Exchange Management Act (FEMA). The investments are typically done with the help of NRE or NRO bank accounts and they have to be subject to sectoral limits and reporting standards as per the Indian regulatory authority.
Unlisted shares are sold through private transactions, often facilitated by brokers, specialised platforms, or direct buyers. The seller and buyer negotiate the price and terms, after which the shares are transferred through the demat system using off-market transactions.
Yes, unlisted companies can also declare dividends in case they make profits and choose to share the profit with the shareholders. Dividends, though, are not as frequent as those of large, publicly traded companies and depend on the company's performance and board decisions.
Unlisted shares may turn out to be lucrative when the company expands tremendously or when it finally enters a stock exchange. But there are no guarantees that you will get returns. Given that such investments are risky and less liquid, profitability is heavily conditional on the success of the business and the performance of the company in the long-term.
Unlisted shares are likely a better fit for those with a long-term investment horizon. Because they're less liquid, they might not be the best choice if you need to access funds quickly. It can also take a while for their value to increase. Typically, investors hold onto them for several years, hoping for a worthwhile return.
This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Brokerage will not exceed the SEBI-prescribed limit. The securities are quoted as an example and not as a recommendation. SEBI Registration No-INZ000200137 Member Id NSE-08081; BSE-673; MSE-1024, MCX-56285, NCDEX-1262.
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