Fundamentally speaking, there are two different kinds of financial securities and instruments: One — the listed kind and two — the unlisted kind.
Company shares that are bought and sold on an official stock exchange like the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) are called listed shares. Enterprises like ITC, Infosys, and HDFC are listed on stock exchanges and stocks of these companies can be traded through a broker or an online brokerage account. Listed shares are also constantly monitored by the market regulator Securities and Exchange Board of India (SEBI).
On the other hand, you won’t be able to trade unlisted stocks on stock exchanges as they do not meet certain listing requirements. They are also commonly known as OTC securities as they are traded in Over-The-Counter (OTC) markets. And unlike listed companies that are heavily regulated by the SEBI, unlisted shares are put through fewer regulatory requirements.
Unlisted stocks are issued by unlisted companies. Such companies are held privately as they are yet to go through an IPO process.
Some examples of unlisted companies include new-age companies like BYJU’S, Paytm, Ola, and OYO. While several investors have shown a keen interest in maximising profits by investing in tech-first, innovative startups that are at a pre-IPO stage, there is yet another category of unlisted companies. These include subsidiaries of well-known listed parent companies. For instance, Hero Corp is an unlisted subsidiary of the listed parent company — HeroMotoCorp, and Reliance Retail is an unlisted retail initiative of the listed parent entity — Reliance Group.
Unlisted shares become available to be traded when employees or existing investors dissolve their stock options before a company lists itself on the market. And when these stocks get placed with investors privately, the float of unlisted shares increases in the market.
So how exactly can you get your hands on unlisted shares?
One way to directly invest in unlisted shares would be to look for start-ups and pre-IPO companies that have the potential to become multibaggers. You could also use your Demat to buy unlisted stocks through your brokerage account. Some investors who wish to make huge investments take the Private Placement route. They rely on an investment bank, wealth manager, or broker to connect them to an unlisted company’s promoters while also giving them a whole list of privately held companies they could invest in. Another popular way of investing in unlisted companies is Portfolio Management Systems (PMS). In this case a portfolio manager actively trades holdings based on market trends to maximise profits. This may also involve procuring unlisted shares based on the investment strategy.
If you are interested in investing in unlisted shares get in touch with Unlistedkart. We’ve created a vast ecosystem of pre-IPO and new-age companies for HNI, investors, and retailers to create wealth. And if you are a company seeking liquidity for ESOPs, we could add you to our network of potential buyers to help you grow your business.