How to grow your wealth with Unlisted Shares?
Unlisted shares are the shares of companies that are not listed on any exchange. Although these shares are not traded, one can buy these shares in an over the counter (OTC) deal from someone who owns these shares. One can either find such sellers directly or through brokers. The transfer of shares has to be done compulsorily in demat account only.
Why Buy Unlisted Shares?
Unlisted shares are an effective tool to add diversification to the portfolio. Anyone who understands the potential of the unlisted shares and doesn’t need liquidity in the near future should add them to his portfolio. One can find many unique businesses such as IPL team stock, like Chennai Super Kings or new age businesses like Online gaming (Nazara Technologies) or hotel aggregators like Oyorooms or money wallets like Paytm, which are not currently listed.
Unlisted shares are the shares of the companies that are at an early stage of business or may require more capital to grow, therefore have not yet listed. They initially raise venture capital to fund their growth phase and then plan IPO. Such Venture capital funds may also sell these unlisted shares held by them. It can also be the case that a company may not meet the listing guidelines or is not willing to list its shares in the near term. Many employees of high growth startups also get ESOPs as part of compensation and may choose to sell these. They may need liquidity and therefore willing to exit.
Unlisted stock also helps promoters know its approximate valuation of their business in case they want to list in future. There have been many blockbuster listings in the past such as RBL bank, ICICI Lombard, Galaxy Surfactants, BSE, Dmart, ICICI Prudential, HDFC Life and many investors have created lot of wealth.
Some of unlisted stocks that are in demand by the investors these days, include
• HDB Financial Unlisted Shares
• Hero Fincorp Unlisted Shares
• ANI Technologies (OLA) Unlisted Shares
• B9 Beverages (Bira) Unlisted Shares
• Mohan Meakin (Old Monk) Unlisted Shares
• One97Communications Paytm Stock
• Barbeque Nation Unlisted Shares
• Oyorooms Unlisted Shares
• Flipkart Stock
• Nazara Technologies Limited Unlisted Shares
• Chennai Super Kings Unlisted Shares
• Studds Accessories Unlisted Shares
Are Unlisted Stocks better than Startup Shares?
Some investors consider unlisted shares market even better than the startup market, as most of the companies in the unlisted space have proven business models and have been successfully running businesses for years. Whereas the startups have uncertain business models and risks are much higher. Investors should consider companies with strong fundamentals, better return ratios, reasonable valuations, robust balance sheets, and reliable promoters as they give good returns to investors.
How to Buy Unlisted Shares?
There are a number of brokers dealing in unlisted stocks and Pre-IPO shares. Another way is to buy unlisted shares directly from the existing shareholders. But it is difficult to find trustworthy brokers or existing shareholders. Therefore you can use a marketplace like Prastaav where you can find various direct unlisted deals from existing shareholders or ESOP holders (employees of the high growth startups) and share price quotes from brokers and dealers as well.
Are Unlisted Stocks better than Startup Shares
The prices of unlisted shares can fluctuate depending upon the prospects and the demand and supply for the shares of that company. Therefore, investors must evaluate the business of the company and arrive at a fair price they are willing to pay before investing. Otherwise, they may end up buying unlisted stocks at a very high price and incur loss.
What are the restrictions on Unlisted Shares?
Most investors buy unlisted stock to to cash out at the time of IPO, but the IPO may never happen or may even get delayed, but as the price is normally based on future prospects, one can also exit in the OTC market. Moreover, investors should also keep in mind that they cannot sell unlisted stocks for one year from the date of IPO, therefore they should either be willing to hold it for such period or exit before the IPO.
What are the risks of buying Unlisted Shares?
Just like listed stocks, there have been few bad instances in unlisted markets, for example Future retail traded in unlisted markets at Rs 30 and IPO was priced at Rs 10, therefore the investors need to fully evaluate the prospects of a company and understand the risks. As there is no formal market for unlisted stocks, the price is primarily driven by demand and supply of a stock and depends on many factors such as business model, fundamentals of the sector, available stock etc. Investors evaluate the prospects of the company and arrive at a price. As there is no formal market, there is lesser speculation in the prices and the price is primarily based on the earning of a company. Occasionally, there can be irrational exuberance even in unlisted stocks, but that is risk of investing.
Finally, four things which you need to investigate before buying any unlisted stock are promoter pedigree, business model, future earnings and the right price. Every investor must consult his / her financial advisor before entering unlisted stocks as this segment belongs to the high-risk, high-return category. Only long-term investors should venture into this and speculation should be avoided.
You may visit Prastaav.com to find best deals on unlisted shares.