Table of Contents
- Introduction
Examples of Popular Unlisted Companies in India (2025 Edition)▼
- Reliance Retail (Retail Sector)
- HDB Financial Services (NBFC Sector)
- PhonePe (Fintech Sector)
- National Stock Exchange (Financial Infrastructure)
- Swiggy (Food Delivery & Quick Commerce)
- Byju’s (Edtech – Cautionary Tale)
- Zepto (Quick Commerce)
- Razorpay (Payment Infrastructure)
- Ola Cabs (Mobility – Historical Context)
- Tata Technologies (Recently Listed Example)
Risks & Challenges of Unlisted Shares (Critical Analysis)▼
- Liquidity: The Primary Challenge
- Valuation Difficulties: Price Discovery Challenges
- Information Asymmetry: Flying Blind
- Regulatory and Legal Risks
- Fraud and Misrepresentation Risks
- Market-Driven Price Discovery Absence
- Limited Exit Options: Capital Lockup
- Governance Concerns: Minority Shareholder Risks
- Concentration Risk: Portfolio Imbalance
- Opportunity Cost
- Risk Mitigation Strategies
- FAQs on Unlisted Shares & Companies
- Conclusion: Making Informed Decisions About Unlisted Shares
- About UnlistedBuzz
What Are Unlisted Shares? (Complete Guide 2025)
What are unlisted shares? Unlisted shares are equity securities of companies not traded on stock exchanges like NSE or BSE. These shares represent ownership in private companies, unlisted public companies, or pre-IPO startups. They offer ownership rights but lack liquidity, transparent pricing, and regulatory protections of listed shares.
| Feature | Unlisted Shares | Listed Shares |
|---|---|---|
| Trading | Private, OTC markets | Stock exchanges (NSE, BSE) |
| Liquidity | Low (weeks to sell) | High (instant selling) |
| Price Discovery | Negotiated privately | Real-time market price |
| Information | Limited disclosures | Quarterly reports |
| Minimum Investment | ₹5000-50000 (depends on the availability of shares) | Less than ₹500 |
| Risk Level | High | Moderate to Low |
| Best For | HNI, long-term investors | All investor types |
Key Takeaway: Unlisted shares suit high-risk investors with 7-10 year horizons, while listed shares offer liquidity and transparency for regular investors.
Introduction
If you've ever wondered about investing in companies before they go public, you've likely come across the term "unlisted shares." These shares represent ownership in companies that aren't traded on major stock exchanges like the NSE or BSE, yet they've become increasingly popular among investors seeking early-stage opportunities in 2025.
This comprehensive guide is designed for investors exploring alternative investment options, finance students learning about capital markets, and professionals wanting to understand the nuances of unlisted securities. Whether you're curious about what makes shares "unlisted" or considering an investment in pre-IPO companies, this article covers everything you need to know.
In this guide, you'll discover:
- The exact definition and meaning of unlisted shares
- Key differences between listed and unlisted companies
- Types of unlisted companies operating in India
- Real examples of popular unlisted companies like Studds and Lenscart
- Critical risks and challenges you must understand before investing
- Legal framework governing unlisted share transactions in India
By the end of this 15-minute read, you'll have a clear understanding of how unlisted shares work and whether they fit into your investment strategy.
Core Characteristics of Unlisted Shares
No Exchange Trading: These shares cannot be bought or sold on public stock exchanges, making them less accessible than regular stocks. You won't find them on NSE or BSE trading terminals.
Limited Liquidity: Since there's no ready marketplace, selling unlisted shares typically requires finding a buyer through private networks, specialized brokers, or unlisted share platforms. This process can take weeks or months.
Private Transactions: All buying and selling happens through over-the-counter (OTC) markets, brokers specializing in unlisted securities like Unlistedbuzz, or direct negotiations between parties.
Less Regulatory Disclosure: Companies with unlisted shares generally have fewer disclosure obligations compared to publicly listed companies, though they still must comply with basic corporate governance norms under the Companies Act 2013.
Price Discovery Through Negotiation: Unlike listed shares with transparent real-time pricing, unlisted share prices are determined through bilateral negotiations based on recent transactions, company valuations, or broker assessments.
What Are Unlisted Companies? (Complete Breakdown)
An unlisted company is a business entity that has not offered its shares to the public through a stock exchange listing. These companies may be private limited companies (most common) or even public limited companies that have chosen not to list their securities on exchanges.
Why Companies Stay Unlisted
Control and Ownership: Founders and existing shareholders maintain complete control without dilution to public shareholders or facing hostile takeover threats.
Avoiding Market Volatility: Companies escape daily stock price fluctuations and quarterly earnings pressure that often force short-term decision-making.
Privacy and Confidentiality: Unlisted status allows companies to keep strategic information, financial details, and business plans confidential from competitors.
Cost Savings: Listing and maintaining a public listing involves significant costs—IPO expenses, compliance costs, auditor fees, and ongoing regulatory expenses can run into crores annually.
Flexibility in Operations: Without constant public scrutiny, management can take long-term strategic bets that might not be appreciated by public markets focused on quarterly results.
Top Unlisted Companies in India (2025)
1. Reliance Retail - India's largest retail network with 18,000+ stores, valued at over ₹10 lakh crore
2. HDB Financial Services (Now Listed) - Leading NBFC offering consumer loans, valued at approximately ₹1 lakh crore
3. National Stock Exchange (NSE) - India's largest stock exchange by volume, ironically unlisted itself
4. Flipkart - Walmart-owned e-commerce giant operating across India
5. Oravel Stays (OYO) - OYO is an Indian multinational hospitality company that leverages technology to connect and manage a vast network of affordable and standardized hotels and homes for budget-conscious travelers.
6. PhonePe - Digital payments leader spun off from Flipkart
7. Ola Electric (Now Listed)- Electric vehicle manufacturer (recently went public in 2024)
8. Tata Technologies (Now Listed) - Engineering services (went public in November 2023)
These examples prove that staying unlisted doesn't limit business success, scale, or access to capital. Many of these companies have raised billions in private funding while maintaining unlisted status.
What Is an Unlisted Company in India? (Legal Framework)
In the Indian context, an unlisted company operates under the comprehensive framework of the Companies Act, 2013, but does not list its securities on stock exchanges regulated by the Securities and Exchange Board of India (SEBI).
Regulatory Framework for Unlisted Companies
Companies Act, 2013: Provides the primary regulatory structure covering:
- Incorporation and registration procedures
- Board composition and governance requirements
- Annual general meeting (AGM) obligations
- Financial reporting and audit requirements
- Related party transaction regulations
- Director appointment and removal processes
SEBI Regulations: While unlisted companies don't fall under continuous listing obligations, they must comply with SEBI rules when:
- Issuing shares to more than 200 persons (excluding employees)
- Raising funds through alternative investment mechanisms
- Employee stock option plans (ESOPs) exceeding certain thresholds
- Preparing for eventual IPO listing
Income Tax Act, 1961: Tax obligations remain identical regardless of listing status, including corporate tax, TDS requirements, and transfer pricing regulations for related party transactions.
Transfer Restrictions Under Companies Act: Private unlisted companies face statutory restrictions on free transfer of shares as per their Articles of Association, giving existing shareholders the right of first refusal.
Why Indian Companies Choose to Remain Unlisted
Access to Private Capital: In 2025, private equity and venture capital funding in India exceeds $50 billion annually, providing ample capital without public listing.
Strategic Investor Preference: Companies prefer raising capital from strategic investors who bring operational expertise, market access, and long-term commitment rather than passive public shareholders.
Business Stage Considerations: Many startups remain unlisted while proving their business models, achieving profitability, or reaching sufficient scale for successful public listing.
Family Business Dynamics: Thousands of Indian family businesses prefer unlisted status to maintain generational control and avoid family disputes becoming public spectacles.
Sector-Specific Factors: Certain sectors like defense, strategic manufacturing, or sensitive technologies prefer remaining unlisted to protect confidential information.
Real-World Example: NSE's Unlisted Status
The National Stock Exchange handles daily trading volumes exceeding ₹5 lakh crore but remains unlisted. This deliberate choice avoids potential conflicts of interest where the exchange's stock price performance might influence listing decisions or regulatory actions. NSE's shareholders include major financial institutions, and despite being unlisted, the company maintains high corporate governance standards and transparent operations.
Ownership Rights: Listed vs Unlisted Equity
The fundamental ownership rights remain identical. Whether your equity share is listed or unlisted, you own a fractional piece of the company. The critical difference lies in tradability, not ownership.
Liquidity and Exit: Listed equity offers instant liquidity during market hours. Unlisted equity requires finding a willing buyer through private arrangements, which can be time-consuming and uncertain.
Valuation Transparency: Listed shares have transparent, real-time market pricing reflecting thousands of daily transactions. Unlisted share valuations depend on recent private transactions, company funding rounds, or broker estimates—all subjective and potentially outdated.
Information Access: Listed company shareholders receive quarterly financial updates, management commentary, and continuous disclosures. Unlisted company shareholders often rely on annual financial statements with limited operational insights.
Real-World Scenario: ESOP Employee Story
Consider Priya, a senior engineer at a Series C funded fintech startup. In 2021, she received 10,000 unlisted equity shares through her company's ESOP plan, vesting over four years. At the time of grant, based on the company's Series B valuation, her shares were worth approximately ₹50 per share (₹5 lakh total).
By 2023, after a successful Series C round, the company's valuation doubled, theoretically making her shares worth ₹100 each (₹10 lakh total). However, Priya couldn't actually sell these shares because:
- The company hadn't gone public yet
- Her shares had lock-in restrictions until full vesting
- No secondary market existed for employee shares
- The company didn't offer buyback programs
In 2024, when her shares fully vested, the company announced plans for a 2025 IPO. A specialized unlisted share broker approached her offering ₹90 per share. Priya had to decide: sell now at a 10% discount to the last valuation but get immediate liquidity, or wait for the IPO which might price shares at ₹120 but could also get delayed or price lower.
She chose to hold, and when the company successfully IPO'd in early 2025 at ₹140 per share, her holdings became worth ₹14 lakh. After the mandatory 6-month lock-in period, she could finally sell her shares on the NSE with complete liquidity.
This example illustrates how unlisted equity shares function similarly to listed shares in terms of ownership rights but differ dramatically in terms of liquidity, price discovery, and exit optionality.
What Is an Unlisted Public Company? (Structure & Features)
An unlisted public company is a public limited company that has chosen not to list its securities on any stock exchange. This might sound contradictory, but "public" refers to the company's legal structure and potential shareholder base, not whether shares trade publicly.
Defining Characteristics
Unlimited Shareholder Capacity: Unlike private companies restricted to 200 members (excluding current and former employee shareholders), public companies can have unlimited shareholders.
Free Share Transferability: Shares can be freely transferred without the restrictive clauses typically found in private company Articles of Association. Existing shareholders don't have automatic right of first refusal.
Enhanced Compliance Standards: Must follow stricter compliance norms than private companies, including:
- Mandatory appointment of company secretary
- More stringent board meeting requirements
- Enhanced disclosure in director's reports
- Stricter related party transaction approvals
- Higher audit committee oversight
Public Fundraising Capability: Can raise funds from the public through various instruments like bonds, debentures, or preference shares, though not through stock exchange listing.
Naming Convention: Company names must end with "Limited" rather than "Private Limited," publicly signaling their public company status.
Why Operate as an Unlisted Public Company?
Strategic Flexibility with Scale: Allows companies to scale beyond private company limitations while avoiding public market pressures.
Preparation for Future Listing: Some companies adopt public company structure as a stepping stone toward eventual IPO, gradually implementing higher governance standards.
Government or Institutional Ownership: Many government entities or institution-dominated companies operate as unlisted public companies where listing serves no strategic purpose.
Access to Diverse Funding: Can issue various instruments to raise capital from sophisticated investors without full public listing.
Compliance Snapshot: Unlisted Public vs Private Company
- Mandatory company secretary appointment
- Minimum 3 directors (2 for private companies)
- Minimum 7 shareholders to start (2 for private)
- No maximum shareholder limit (200 for private)
- Free share transferability (restricted for private)
- Can accept deposits from public with conditions
- Higher disclosure requirements in financial statements
Unlisted Public Company in India – Key Features & Case Studies
The Indian unlisted public company landscape includes some of the nation's most strategically important entities, operating at massive scale while maintaining unlisted status.
Indian Context: Compliance & Governance
Statutory Compliance Mandates:
Unlisted public companies in India must navigate complex compliance requirements under the Companies Act 2013:
Board Composition: Must have minimum 3 directors, with at least one-third being independent directors if paid-up capital exceeds ₹10 crore or turnover exceeds ₹100 crore.
Board Meetings: Minimum four board meetings per year with maximum 120-day gap between consecutive meetings.
Annual General Meeting: Must be held within 6 months of financial year end, with 21 days' clear notice to shareholders.
Audit Committee: Mandatory if certain thresholds are exceeded, with majority of independent directors and financial an expert as chairman.
Financial Reporting: Must prepare annual financial statements in compliance with Indian Accounting Standards (Ind AS) or accounting standards as applicable.
Related Party Transactions: Require approval through detailed processes with independent director oversight.
Secretarial Audit: Mandatory for companies meeting specified criteria, with a report annexed to the Board's report.
Case Study 1: National Stock Exchange (NSE)
Background: NSE started operations in 1994 and quickly became India's largest stock exchange, handling over 90% of equity derivatives trading in India.
Structure: Operates as an unlisted public company with diversified ownership including domestic financial institutions (banks, insurance companies), foreign institutional investors, and strategic partners.
Financial Performance: Generates revenue exceeding ₹10,000 crore annually from transaction charges, listing fees, data services, and technology platforms.
Why Unlisted: The exchange maintains unlisted status to avoid conflicts of interest. If NSE were listed on its own platform, its stock performance could potentially influence regulatory decisions, listing approvals, or enforcement actions. Being unlisted allows pure focus on market infrastructure development without public market pressures.
Governance Standards: Despite unlisted status, NSE maintains institutional-grade governance with independent directors, robust risk management, and transparent operations. The company files detailed financial information with regulatory authorities.
IPO Speculation: Periodic discussions about NSE going public continue. If realized, it would be one of India's most significant IPOs, potentially valued at over ₹1 lakh crore based on comparable exchange valuations globally.
Case Study 2: Reliance Retail
Business Overview: Reliance Retail operates India's largest retail network with over 18,000 stores across formats including JioMart (grocery), Reliance Digital (electronics), Trends (fashion), and Reliance Fresh.
Corporate Structure: Functions as an unlisted public subsidiary of Reliance Industries Limited (listed on NSE/BSE).
Valuation Journey: In 2020-2021, Reliance Retail raised approximately ₹47,000 crore by selling minority stakes to investors including:
Silver Lake Partners (American private equity)
KKR & Co. (Global investment firm)
General Atlantic (Growth equity firm)
Mubadala (UAE sovereign wealth fund)
Public Investment Fund of Saudi Arabia
TPG Capital
Various others
These investments valued Reliance Retail at over ₹4.5 lakh crore initially, which has grown significantly since.
Why Remain Unlisted:
Focus on aggressive expansion without quarterly earnings scrutiny
Maintain operational flexibility in pricing, store openings, and format experiments
Preserve strategic confidentiality in India's competitive retail sector
Eventual IPO expected to be strategic timing decision rather than capital need
Scale Achievement: Despite unlisted status, Reliance Retail has achieved:
Annual revenue exceeding ₹2 lakh crore
Presence in 7,000+ cities and towns
Integration with Jio digital ecosystem
Partnerships with global brands across categories
This case demonstrates that unlisted status doesn't prevent scale, investor access, or premium valuations. The company raised billions at valuations higher than many listed retailers globally.
Case Study 3: HDB Financial Services (Now Listed)
Business Model: HDB Financial Services operates as a non-banking financial company (NBFC) offering diverse products:
Personal loans and consumer durable loans
Two-wheeler and used car financing
Gold loans and microfinance
Business loans for MSMEs
Investment products and insurance distribution
Corporate Structure: Subsidiary of HDFC Bank (one of India's largest private banks), operating as an unlisted entity despite its parent being a blue-chip listed company.
Market Position: Serves customers across 1,100+ branches in India with loan assets exceeding ₹60,000 crore.
Unlisted Share Trading: HDB Financial Services shares actively trade in the unlisted market through specialized brokers. Pricing typically ranges based on:
Financial performance metrics (loan book growth, asset quality, profitability)
Parent company (HDFC Bank) stock performance correlation
NBFC sector sentiment and regulatory environment
Company's expansion plans and capital adequacy
Why Attractive to Unlisted Investors:
Association with HDFC Bank brand provides credibility
Strong financial track record with consistent profitability
India's growing consumer finance opportunity
Potential eventual IPO providing exit opportunity
Valuation Approach: Investors value HDB Financial Services using:
Price-to-book ratio compared to listed NBFCs
Return on equity and asset quality metrics
Growth rate compared to sector averages
Potential IPO valuation benchmarks
What Is an Unlisted Private Company? (Complete Guide)
An unlisted private company represents the most common form of corporate structure in India, with over 13 lakh active private limited companies registered as of 2025.
Legal Definition & Structure
A private limited company is incorporated under the Companies Act 2013 with "Private Limited" or "Pvt. Ltd." as part of its name. By definition, private companies cannot list their shares on stock exchanges, making all private companies inherently unlisted.
Statutory Restrictions & Requirements
Shareholder Cap: Maximum 200 members excluding:
Current employees who are shareholders
Former employees who became shareholders during employment and continue holding shares
This ensures concentrated ownership and prevents private companies from becoming widely held.
Share Transfer Restrictions: Articles of Association must include clauses restricting free share transfer:
Right of first refusal to existing shareholders
Board approval required for new shareholders
Restrictions on transfer to non-members
Valuation mechanisms for transfer pricing
Capital Requirements:
Minimum authorized capital: No minimum prescribed under current law
Minimum paid-up capital: ₹1 lakh recommended though no statutory minimum
Can raise capital only from members, directors, or their relatives
Board Requirements:
Minimum 2 directors required
Maximum 15 directors (can be increased with special resolution)
No mandatory independent director requirement unless specific thresholds crossed
At least one director must be Indian resident
Compliance Benefits:
No mandatory audit committee or nomination committee
Simplified board meeting requirements
Less stringent disclosure norms in financial statements
Flexibility in holding board meetings and conducting business
Key Advantages of Private Limited Structure
Limited Liability Protection: Shareholders' liability is limited to their unpaid share capital. Personal assets remain protected from business liabilities.
Separate Legal Entity: Company can own property, enter contracts, sue or be sued in its own name, independent of its shareholders.
Easier Fundraising: Can raise equity from angel investors, VCs, or PEs while maintaining unlisted status. More credible structure than proprietorship or partnership.
Perpetual Succession: Company continues to exist regardless of changes in ownership or management. Death or exit of founders doesn't affect the company's existence.
Tax Benefits:
Corporate tax rate of 25% (for companies with turnover up to ₹400 crore) or 22% (for new manufacturing companies)
Ability to carry forward losses
Various deductions and exemptions available
Professional Credibility: Private limited structure provides more credibility with customers, suppliers, lenders, and potential employees compared to proprietorships.
Real-World Examples in India
1. Tata Sons Private Limited The holding company of the entire Tata Group operates as a private limited company despite the group's listed entities having a combined market cap exceeding ₹25 lakh crore. This structure allows the Tata family and philanthropic trusts to maintain control over group direction without public market interference.
2. Pre-IPO Startups Every major Indian unicorn started as private limited:
Zomato operated as Zomato Private Limited before its July 2021 IPO
Nykaa was Nykaa E-Retail Private Limited until its November 2021 listing
Paytm functioned as One97 Communications Private Limited before going public
Policy Bazaar operated privately for years before listing
3. Family Businesses Thousands of successful family businesses operate as private limited companies:
Manufacturing units with turnovers of ₹100-500 crore
Trading companies in textiles, electronics, automotive parts
Real estate development companies
Distribution and logistics businesses
Restaurant chains and hospitality businesses
4. Professional Services Many consulting, legal, accounting, and advisory firms structure as private limited companies:
Management consulting firms
Law firms with multiple partners
CA firms organized as companies
Marketing and advertising agencies
IT services companies serving specific niches
When Private Companies Must Convert to Public
Under the Companies Act 2013, private companies must convert to public companies if they:
Issue shares to more than 200 persons
Accept or renew deposits from persons other than members, directors, or relatives
Become subsidiary of a public company (automatic conversion)
Comparing Private Limited vs LLP vs Public Company
Private Limited vs LLP (Limited Liability Partnership):
Private limited easier for raising venture capital/PE funding
LLP has simpler compliance and lower annual costs
Private limited preferred by investors due to familiar equity structure
LLP better for professional services with partner-based models
Private Limited vs Public Company:
Private limited has shareholder cap and transfer restrictions
Public company allows unlimited shareholders and free transferability
Private limited has lower compliance burden
Public company provides structure for eventual listing
This structure's popularity stems from its perfect balance of limited liability, fundraising capability, and operational flexibility—ideal for startups, growing businesses, and family enterprises.
Types of Unlisted Companies in India (Comprehensive Classification)
Understanding the diverse categories of unlisted companies helps investors identify opportunities, assess risks, and make informed investment decisions. India's unlisted company ecosystem is remarkably diverse, spanning various stages, sectors, and business models.
1. Private Limited Companies (The Foundation)
Scale and Scope: Over 13 lakh active private limited companies operate in India as of 2025, representing the largest category of unlisted entities.
Characteristics:
Maximum 200 shareholders (excluding employees)
Restricted share transfer with right of first refusal
Minimum 2 directors, no independent director mandate
Lower compliance burden compared to public companies
Sub-Categories:
Micro and Small Enterprises: Companies with investment up to ₹10 crore and turnover up to ₹50 crore. Form the backbone of the Indian economy with millions of small manufacturers, traders, and service providers.
Medium Enterprises: Investment up to ₹50 crore and turnover up to ₹250 crore. Include established businesses with regional presence and stable operations.
Large Private Companies: Exceed medium enterprise thresholds but choose to remain private. Include family conglomerates, professional services firms, and established businesses preferring privacy over public listing.
Investment Implications: Lower-end private limited companies rarely offer investment opportunities to external investors. Medium and large private companies occasionally provide investment opportunities through private equity rounds or secondary share purchases.
2. Public Limited but Unlisted Companies
Defining Feature: Structured as public companies with "Limited" name suffix but consciously choosing not to list on exchanges.
Why This Structure:
Preparing for eventual IPO while implementing higher governance standards
Government or institutional ownership where listing serves no purpose
Strategic reasons to avoid daily market scrutiny while having public structure
Examples:
National Stock Exchange (NSE)
Various government undertakings and PSUs
Large private enterprises with diverse ownership
Holding companies of listed business groups
Investment Considerations: These companies often have higher governance standards than private companies. However, investment opportunities remain limited to institutional or strategic investors in most cases.
3. Venture Capital and Private Equity Backed Startups
The Most Dynamic Segment: This category generates maximum investor interest and media attention in 2025, representing India's innovation economy.
Funding Stages:
Seed Stage: Pre-revenue or early revenue startups raising ₹50 lakh to ₹5 crore from angel investors or seed funds. High risk, potential for 100x returns but 90%+ failure rate.
Series A: Companies with proven business models raising ₹10-50 crore for scaling. Valuations typically ₹50-200 crore. Risk remains high but business viability is established.
Series B/C: Growth-stage companies raising ₹100-500 crore to expand markets, launch products, or acquire competitors. Valuations ₹500 crore to ₹5,000 crore. Reduced risk with clearer path to profitability or IPO.
Late Stage (Series D+): Pre-IPO companies raising large rounds from hedge funds, sovereign wealth funds, or strategic investors. Valuations often exceed ₹5,000 crore. Lowest risk in the startup spectrum with near-term liquidity events expected.
Current Landscape (2025):
Over 110 Indian unicorns (startups valued at $1 billion+)
Active sectors: fintech, edtech, logistics, SaaS, healthtech, agritech
Growing trend: Profitability focus replacing growth-at-all-costs mentality
Secondary markets: Specialized platforms enabling employee and early investor exits
Examples of Investment-Grade Unlisted Startups:
PhonePe: Digital payments leader, valued at over $12 billion
Swiggy: Food delivery and quick commerce, pre-IPO stage (went public in 2024)
Razorpay: Payment gateway and fintech infrastructure, valued at $7.5 billion
Ola Electric: EV manufacturer (went public in 2024)
Meesho: Social commerce platform serving tier 2/3 cities
Investment Access: Typically available through:
Employee stock options (ESOPs)
Specialized unlisted share brokers
Secondary transaction platforms
Angel investment networks (for early stages)
Private equity and venture capital funds
Risk-Return Profile: Extremely high risk with potential for exceptional returns. Requires significant due diligence, long holding periods (5-10 years), and portfolio diversification across multiple startups.
4. ESOP-Driven Companies (Employee Wealth Creation)
Mechanism: Companies use Employee Stock Ownership Plans to attract, retain, and incentivize talent by offering equity compensation.
How ESOPs Work:
Company grants stock options to employees at predetermined price (exercise price)
Options vest over time (typically 3-4 years with 1-year cliff)
Employees exercise options and become shareholders
Shares remain illiquid until company goes public, gets acquired, or offers buyback
Prevalence: Almost all VC-backed startups and many established private companies use ESOPs extensively. Technology companies typically allocate 10-15% of equity for ESOPs.
Employee Considerations:
Valuation Risk: Company valuation may decline between grant and exit
Illiquidity Period: May need to wait 5-10 years for liquidity
Tax Implications: Taxed at exercise (perquisite tax) and at sale (capital gains)
Concentration Risk: Significant wealth tied to single employer
Secondary Markets: Platforms like Liquidity Solutions, UnlistedZone, and others facilitate ESOP secondary sales, providing early liquidity to employees before IPO.
Success Stories: Employees at companies like Zomato, Nykaa, Freshworks (US-listed but Indian origin) have created significant wealth through ESOPs, with some early employees becoming crorepatis through their stock holdings.
5. Subsidiaries of Listed Companies
Structure: Large listed companies often create unlisted subsidiaries for different business verticals, geographies, or strategic initiatives.
Strategic Rationale:
Focus: Allow each business vertical to operate independently with dedicated management
Valuation: Prevent conglomerate discount where diverse businesses are undervalued by public markets
Flexibility: Provide operational flexibility without public market scrutiny for experimental ventures
Future Monetization: Create optionality to separately list, sell, or merge subsidiaries based on market conditions
Examples:
Reliance Industries Subsidiaries:
Reliance Retail (largest, valued at ₹10+ lakh crore)
Jio Platforms (telecom and digital services)
Reliance New Energy (green energy initiatives)
Tata Group Unlisted Subsidiaries:
Tata Technologies (listed in 2023, was unlisted subsidiary)
Various specialized manufacturing and service entities
HDFC Group:
HDB Financial Services (NBFC subsidiary of HDFC Bank)
Investment Opportunity: These subsidiaries occasionally sell minority stakes to financial or strategic investors at premium valuations. Reliance Retail's 2020-21 fundraise where it raised ₹47,000 crore exemplifies this opportunity.
Risk Assessment: Generally lower risk than standalone startups due to parent company support, established operations, and professional management. However, valuation premiums can be high, limiting return potential.
6. Government Companies and PSUs
Definition: Companies wholly or partially owned by central or state governments, operating as unlisted entities.
Categories:
Unlisted Central PSUs: Government companies in strategic sectors like defense, atomic energy, or infrastructure where private listing isn't desired.
State Government Companies: Various state-level enterprises in power distribution, water supply, transport, and industrial development.
Why Remain Unlisted:
Strategic importance limiting private ownership
Social obligations taking precedence over profit maximization
Political considerations around privatization
Adequate government funding eliminating capital raising needs
Investment Access: Generally not available for retail investors. Occasionally, government PSUs are divested through strategic sales or IPOs.
7. Holding Companies and Investment Vehicles
Purpose: Entities created primarily to hold investments in other companies rather than conducting independent operations.
Examples:
Tata Sons: Holding company controlling the Tata Group
Family Investment Vehicles: High net worth families create holding companies to manage diversified investments
Private Equity Funds: Often structured as unlisted holding entities
Investment Consideration: These rarely provide direct investment opportunities and are primarily relevant for understanding corporate structures.
Examples of Popular Unlisted Companies in India (2025 Edition)
The Indian unlisted company landscape includes remarkable businesses spanning traditional industries to cutting-edge technology. Let's explore companies generating significant investor interest in 2025.
1. Reliance Retail (Retail Sector)
Valuation: ₹10+ lakh crore (as of 2025) Parent: Reliance Industries Limited
Business Overview:
18,000+ stores across formats (grocery, electronics, fashion, pharma)
JioMart e-commerce platform integrated with Jio ecosystem
Presence in 7,000+ cities and towns
Annual revenue exceeding ₹2.5 lakh crore
Growth Drivers:
India's organized retail penetration increasing from 12% to expected 20% by 2027
Integration with Jio's 450 million subscribers for omnichannel commerce
Strategic partnerships with global brands
Quick commerce expansion competing with Swiggy Instamart and Zepto
Investor Profile: Attracted marquee investors including Silver Lake, KKR, General Atlantic, Mubadala, and Saudi Arabia's PIF during 2020-21 fundraise.
Investment Considerations:
Positive: Market leadership, integrated ecosystem, professional management
Risk: Intense competition from Amazon, Flipkart; execution challenges at scale
Liquidity: IPO expected eventually but timing uncertain
Unlisted Market Trading: Shares trade through specialized brokers at valuations based on latest funding rounds and comparable listed retailers. Minimum investment typically ₹5-10 lakh.
2. HDB Financial Services (NBFC Sector) (Now listed)
Valuation: Approximately ₹80,000-1,00,000 crore Parent: HDFC Bank (majority stake)
Business Model:
Consumer loans, business loans, gold loans
Two-wheeler and used car financing
Investment and insurance product distribution
1,100+ branches across India
Financial Performance:
Loan assets exceeding ₹70,000 crore
Consistent profitability with strong asset quality
Growing at 20%+ annually in loan book
Why Attractive:
HDFC Bank parentage provides brand credibility and distribution access
India's consumer credit market growing at 12-15% annually
Strong governance and risk management practices
IPO potential provides clear exit opportunity
Unlisted Trading: Active trading in unlisted markets with prices ranging ₹1,200-1,500 per share typically. Liquidity better than most unlisted shares due to institutional interest.
3. PhonePe (Fintech Sector)
Valuation: $12+ billion (approximately ₹1 lakh crore) Ownership: Walmart (majority), Flipkart, founders
Business Scale:
450+ million registered users
Leading UPI payment platform with 48%+ market share
Processes over 50% of India's UPI transactions
Expanding into insurance, wealth management, lending
Revenue Model:
Merchant payment processing fees
Financial services distribution commissions
Advertising and promotional services
Subscription products (PhonePe Switch)
Growth Trajectory:
Achieved EBITDA profitability in FY 2023-24
Expanding beyond payments into full-stack fintech
Building merchant commerce platform
Investment Access: Limited to secondary market transactions through specialized brokers. Minimum ticket sizes typically ₹10+ lakh. IPO expected in 2025-26.
Risk Factors: Intense competition from Google Pay, Paytm; regulatory changes in fintech; monetization challenges in low-margin payment business.
4. National Stock Exchange (NSE) (Financial Infrastructure)
Valuation: Estimated ₹1.5-2 lakh crore Ownership: Diversified among financial institutions, domestic and foreign investors
Operational Metrics:
Handles 90%+ of India's equity derivatives trading
Fourth largest derivatives exchange globally by contracts traded
Technology backbone for Indian capital markets
Revenue exceeding ₹12,000 crore annually
Why Unlisted: Avoids conflicts of interest inherent in exchange listing itself. Maintains independent regulatory stance without stock price pressures.
IPO Speculation: Long-discussed potential IPO could value NSE at ₹2+ lakh crore, making it one of India's most valuable financial infrastructure companies.
Investment Reality: Very limited investment opportunities. Existing shareholders rarely sell stakes. No active unlisted market trading.
5. Swiggy (Food Delivery & Quick Commerce) (Now Listed)
Valuation: $10-12 billion (approximately ₹90,000 crore) pre-IPO Stage: Late-stage pre-IPO company
Business Segments:
Swiggy Food Delivery: Leading platform competing with Zomato
Swiggy Instamart: Quick commerce (10-15 minute delivery) growing rapidly
Swiggy Dineout: Restaurant reservations and dining experiences
Swiggy Genie: Hyperlocal delivery services
Market Position:
250+ cities covered
200,000+ restaurant partners
Competing with Zomato in food delivery
Leading in quick commerce against Zepto, Blinkit
Pre-IPO Status: Filed DRHP (Draft Red Herring Prospectus) with SEBI for IPO expected in 2024-25. This makes it an attractive unlisted investment for those seeking near-term liquidity.
Financial Performance: Working toward profitability with strong revenue growth. Food delivery approaching breakeven while investing heavily in quick commerce expansion.
6. Byju's (Edtech - Cautionary Tale) (Not Available in Unlisted Market as due to NCLT Compliances)
Peak Valuation: $22 billion (2022) Current Status: Significant valuation writedown to under $3 billion
Business Overview:
K-12 education app and content
Test preparation for competitive exams
International acquisitions (WhiteHat Jr, Epic, Great Learning)
Challenges (2023-25):
Revenue recognition controversies
Aggressive sales tactics criticism
Investor disputes and governance issues
Delayed financial reporting
Layoffs and cost-cutting measures
Lessons for Unlisted Investors:
High valuations don't guarantee success
Governance matters critically in unlisted companies
Due diligence essential before investing
Market sentiment can shift dramatically
Unlisted shares can lose value rapidly without transparent pricing
This example illustrates the risks of unlisted investments where information asymmetry and lack of regulatory oversight can hide problems until it's too late.
7. Zepto (Quick Commerce)
Valuation: $5 billion+ (2024 fundraise) Founded: 2021 by teenage Stanford dropouts
Rapid Growth Story:
Started during pandemic lockdowns
Achieved $1 billion+ annual revenue run rate by 2024
10-minute grocery delivery model
Expanding to 30+ cities
Competitive Position:
Competing with Swiggy Instamart, Blinkit (Zomato-owned), BigBasket
Dark store network providing hyperlocal fulfillment
Strong unit economics in mature cities
Investment Considerations: High-growth but capital-intensive model. Quick commerce sector consolidation expected. IPO likely within 2-3 years.
8. Razorpay (Payment Infrastructure)
Valuation: $7.5 billion (2021 round) Business: Payment gateway, banking-as-a-service platform
Product Suite:
Payment gateway for businesses
Payment links for easy collections
Payroll and HR management software
Banking services for businesses
Capital lending platform
Market Leadership: Processes payments for 10+ million businesses including major startups and enterprises.
Investment Appeal: Strong B2B focus with recurring revenue model, high retention rates, and expanding product suite creating multiple revenue streams.
9. Ola Cabs (Mobility - Historical Context) (Now Listed)
Note: Ola Electric went public in 2024, but Ola Cabs (parent company) remains unlisted.
Valuation: Approximately $7-8 billion for combined entity Business Segments:
Ride-hailing services
Ola Electric (now listed separately)
Fleet management
Investment Status: Limited unlisted market activity. Ola Electric's public listing provides some valuation reference for parent company.
10. Tata Technologies (Recently Listed Example)
Background: Operated as unlisted Tata subsidiary for decades before November 2023 IPO.
Pre-IPO Profile:
Engineering services and product development
Serving automotive and aerospace sectors globally
Consistent profitability and strong cash flows
IPO Success: Listed at ₹500, surged to ₹1,200+ within months, validating unlisted investment thesis for those who held shares pre-IPO.
Lesson: Quality unlisted companies from reputed groups can provide excellent returns when they eventually list.
Investment Availability Spectrum
Easy to Access (through unlisted brokers):
HDB Financial Services
Reliance Retail
Some VC-backed startups (secondary markets)
Moderate Access (through specialized platforms/networks):
PhonePe
Razorpay
Swiggy (pre-IPO)
Difficult to Access (institutional/strategic investors only):
NSE
Most early-stage startups
Government companies
1. Liquidity: The Primary Challenge
Reality of Selling Unlisted Shares: Unlike listed stocks where you can sell within seconds during market hours, unlisted shares require finding a buyer willing to purchase at mutually acceptable price. This process can take:
Weeks: For shares of popular companies with active broker networks
Months: For less-known companies with limited investor interest
Never: For companies with no investor demand or failing businesses
Real-World Impact: Imagine needing ₹10 lakh urgently for a medical emergency. Your listed stocks can be sold immediately. Your ₹10 lakh investment in unlisted shares might be completely inaccessible when you need it most.
Price Impact of Desperate Selling: If you must sell urgently, you might accept significant discounts:
10-20% discount for quick sales of popular unlisted shares
30-50% discount for less liquid unlisted shares
Complete loss if no buyers exist
Lock-in Periods: Many unlisted investments come with contractual lock-ins:
ESOP shares: Vesting periods of 3-4 years
Investor agreements: 1-2 year lock-ins preventing immediate sales
Right of first refusal: Existing shareholders get first opportunity, delaying external sales
Market Absence During Crisis: During economic downturns or company-specific problems, unlisted share markets completely freeze. The 2020 COVID crash saw unlisted markets shut down for months while listed markets continued functioning.
2. Valuation Difficulties: Price Discovery Challenges
No Transparent Pricing: Listed shares have real-time prices reflecting thousands of transactions. Unlisted shares lack this mechanism, creating massive valuation uncertainty.
Multiple Valuation Methods, Different Prices:
Last Funding Round Method: Uses company's latest fundraising valuation. Problems:
Might be 6-24 months old, outdated
Reflects investor-specific terms (liquidation preferences, ratchets) not applicable to your shares
Down rounds (lower valuations) happen but aren't immediately reflected
Comparable Company Analysis: Compares to similar listed companies. Challenges:
Finding truly comparable companies
Applying appropriate discount (typically 20-40%) for illiquidity
Different growth stages complicating comparison
Broker Quotes: Specialized brokers provide price estimates. Issues:
Different brokers quote different prices
Quotes might be indicative, not firm
Broker incentives to quote higher prices to facilitate transactions
Example of Valuation Chaos: In 2023, Byju's unlisted shares traded at different prices simultaneously:
Employee secondary sales: ₹5,000 per share
One broker quote: ₹8,000 per share
Another broker quote: ₹3,000 per share
Investor consortium valuation: ₹1,000 per share
Which was "correct"? All and none—without transparent markets, valuation becomes subjective opinion rather than objective fact.
Overvaluation Risk: Many unlisted shares trade at premiums to their fundamental value, driven by:
IPO speculation creating irrational exuberance
Limited supply with excess demand
Marketing hype by brokers earning commissions
FOMO (fear of missing out) among investors
3. Information Asymmetry: Flying Blind
Limited Disclosure Requirements: Unlisted companies don't publish quarterly results or make continuous disclosures that listed companies must. You might receive:
Annual financial statements only (once per year, 6 months delayed)
No management commentary or forward guidance
No operational metrics or KPIs
No risk factor disclosures
Stale Information Problem: You might invest based on 18-month-old financials that don't reflect:
Recent revenue decline
Key customer losses
Management departures
Regulatory investigations
Competitive threats
Selective Disclosure: Companies might share positive information while hiding negatives:
Revenue growth highlighted, losses hidden
User growth mentioned, retention problems concealed
Funding announcements made, burn rate not disclosed
No Analyst Coverage: Listed companies have independent research analysts providing objective analysis. Unlisted companies lack this scrutiny, making independent assessment difficult for retail investors.
Management Access: Institutional investors often get direct management access, presentations, and insider information. Retail investors have no such access, creating enormous information disadvantage.
Real Example: Employees at a startup discovered through news media (not company communication) that their company:
Had laid off 40% of staff in another location
Was facing regulatory investigation
Had lost its largest customer
Was running out of cash within 3 months
Their unlisted shares became worthless, but they had no advance warning because management disclosed nothing to shareholders.
4. Regulatory and Legal Risks
Weak Regulatory Framework: The unlisted share market operates with minimal regulatory oversight:
No SEBI supervision of transactions
No investor protection mechanisms
Limited recourse for disputes
Potential for fraud and manipulation
Documentation Issues: Unlisted share transactions involve:
Physical share certificates (risk of loss, damage, forgery)
Complex transfer documents requiring notarization
Stamp duty payments and compliance
Update of company records (can be delayed or disputed)
Ownership Disputes: Without demat system's clarity, disputes arise:
Multiple parties claiming ownership
Forged signatures on transfer forms
Companies refusing to register transfers
Long legal battles to establish ownership
Tax Complexity: Unlisted share taxation involves:
Cost of acquisition determination (particularly for old shares)
Valuation for gift tax or inheritance
Capital gains calculation without clear market price
Potential scrutiny from tax authorities on transaction pricing
Regulatory Changes: Government might change rules affecting unlisted investments:
Transaction restrictions
Higher taxation
Mandatory disclosures
Foreign investment limitations
5. Fraud and Misrepresentation Risks
Fake Companies: Fraudsters create shell companies with impressive presentations, fake financial statements, and promise guaranteed returns, collecting money and disappearing.
Misrepresented Valuations: Brokers might claim "company valued at ₹10,000 crore in last round" without disclosing:
Round happened 3 years ago
Was a small transaction with special terms
Company's situation has deteriorated since
Valuation was inflated for strategic reasons
Ponzi Schemes: Some operators pay "returns" to early investors from new investor money, creating the illusion of successful investment before the scheme collapses.
Warning Signs:
Guaranteed returns or "risk-free" promises
Pressure to invest immediately before "opportunity closes"
Difficulty verifying company existence or financials
Unregistered brokers or advisors
Complex structures designed to confuse
6. Market-Driven Price Discovery Absence
No Collective Wisdom: Listed stock prices reflect aggregated opinions of thousands of analysts, institutional investors, and traders. Unlisted shares lack this collective intelligence, making price discovery subjective.
Bilateral Transaction Bias: Each unlisted transaction is negotiated between two parties with specific circumstances:
Desperate seller might accept low price
Uninformed buyer might overpay
Neither transaction reflects "true" market value
Manipulation Potential: With low transaction volumes, manipulating perceptions is easier:
Orchestrating few high-priced transactions to create illusion of high valuation
Spreading rumors about upcoming IPO or acquisition
Creating artificial scarcity to drive up prices
7. Limited Exit Options: Capital Lockup
Exit Scenarios Are Limited:
IPO (Initial Public Offering): Company goes public, providing liquidity. Reality:
Takes 5-10+ years typically
Many companies never go public
IPO might price lower than unlisted valuations
Lock-in periods (6-12 months) delay your sale
Acquisition: Another company acquires your company. Reality:
Acquisition valuations might disappoint
Deal might favor certain investor classes over others
Transactions can fall through after announcement
Regulatory approvals might fail
Buyback: Company offers to buy back shares. Reality:
Buybacks are rare
Usually at discounted valuations
Might not include all shareholders
Company might not have cash to execute
Strategic Sale: Selling to another investor. Reality:
Requires finding willing buyer
Might require significant discount
Could take months or years
Might not be possible at all
Indefinite Hold Risk: Many unlisted investments remain frozen for decades. The company continues operating profitably but never provides liquidity to minority shareholders.
9. Concentration Risk: Portfolio Imbalance
High Minimum Investments: Unlisted shares often require ₹5-10 lakh minimum investments, forcing concentration:
Single company risk magnified
Unable to diversify across multiple investments
Portfolio becomes dependent on one company's success
Sector Concentration: You might get exposure to multiple unlisted startups in same sector (e.g., fintech), creating sector-specific risk without diversification benefits.
Liquidity Mismatch: Having large portion of net worth in illiquid assets creates:
Emergency fund inadequacy
Inability to rebalance portfolio
Forced holding during market opportunities elsewhere
10. Opportunity Cost
Capital Locked: Money invested in unlisted shares is locked for years, missing:
Other investment opportunities
Compound growth in liquid, performing assets
Ability to take advantage of market corrections in listed markets
Comparison: ₹10 lakh invested in Nifty 50 in 2015 grew to approximately ₹30 lakh by 2025 (15% CAGR) with full liquidity throughout. The same ₹10 lakh in unlisted shares might show higher paper valuation but with zero liquidity and uncertain eventual returns.
Risk Mitigation Strategies
Due Diligence: Thoroughly research company, verify information independently, understand business model and competitive position.
Position Sizing: Never invest more than 5-10% of portfolio in unlisted shares, further limited to 2-3% per company.
Diversification: If investing in unlisted space, spread across multiple companies, stages, and sectors.
Quality Focus: Invest only in companies with strong fundamentals, reputed backers, and clear path to profitability or IPO.
Long-Term Horizon: Treat unlisted investments as 7-10 year commitments. Never invest emergency funds or money needed within 5 years.
Professional Guidance: Consult chartered accountants for tax implications, lawyers for documentation review, and financial advisors for suitability assessment.
Verification: Use only registered brokers, verify company existence through MCA website, confirm valuations through multiple sources.
Understanding these risks doesn't mean avoiding unlisted shares entirely—but it does mean approaching them with appropriate caution, realistic expectations, and careful portfolio allocation.
FAQs on Unlisted Shares & Companies
Are unlisted shares legal in India?
Yes, unlisted shares are completely legal in India. The buying and selling of unlisted equity shares is permitted under the Companies Act 2013 and regulated by applicable laws.
However, investors must ensure:
Transactions comply with company's Articles of Association
Proper transfer procedures are followed (share transfer forms, stamp duty payment)
Company's board approves transfer if required
Share certificates are genuine and properly executed
Transaction doesn't violate any SEBI regulations regarding public offer
The Income Tax Act recognizes unlisted share transactions, treating capital gains from these investments as taxable income. Both long-term and short-term capital gains have specific tax treatments for unlisted securities.
Important: While transactions are legal, the unlisted share market operates with minimal regulatory oversight compared to stock exchanges. Investors should exercise caution, verify legitimacy, and use reputable intermediaries.
Can I sell unlisted shares in India?
Yes, you can sell unlisted shares, but the process differs significantly from selling listed stocks. Here's how it works:
Finding a Buyer:
Specialized unlisted share brokers who match buyers and sellers
Online platforms connecting unlisted share investors
Direct negotiations with interested parties
Company-facilitated buyback programs (if offered)
Employee stock secondary platforms (for ESOP shares)
Transaction Process:
Agree on price with buyer (negotiated, not market-determined)
Execute share transfer deed (SH-4 form)
Pay applicable stamp duty (varies by state, typically 0.25% of transaction value)
Submit transfer documents to company
Company board approves transfer (if required by Articles)
Company updates register of members
New share certificate issued to buyer
Timeline: Complete process can take 2-4 weeks for popular companies, longer for others.
Restrictions to Consider:
Company's Articles might restrict transfers (particularly for private companies)
Right of first refusal to existing shareholders might apply
Lock-in periods from investment agreements
Founder/investor restrictions on transfers
Board approval requirements
Practical Challenges:
Finding buyers can be difficult
Price negotiations might result in discounts
Documentation complexity
Time-consuming process compared to instant listed stock sales
What is the difference between listed vs unlisted companies?
Listed and unlisted companies differ across multiple dimensions:
Trading and Liquidity:
Listed: Shares trade on NSE, BSE with instant buying/selling during market hours
Unlisted: Shares trade privately through negotiations, taking weeks/months to transact
Price Discovery:
Listed: Real-time transparent pricing based on supply-demand, visible to all investors
Unlisted: Negotiated pricing without transparent mechanism, varies between transactions
Regulatory Oversight:
Listed: Stringent SEBI regulations, quarterly disclosures, continuous obligations
Unlisted: Basic Companies Act compliance, annual reporting, no continuous disclosure
Information Availability:
Listed: Quarterly financials, management commentary, analyst coverage, news flow
Unlisted: Annual financial statements (often delayed), limited public information
Corporate Governance:
Listed: Mandatory independent directors, audit committees, higher governance standards
Unlisted: Flexible governance, independent directors only if thresholds crossed
Capital Raising:
Listed: Can raise capital through public issues, rights issues, QIPs easily
Unlisted: Raises through private placements to selected investors
Investor Access:
Listed: Any retail investor can invest with minimal capital (₹500-1,000)
Unlisted: Typically requires significant investment (₹5 lakh+), limited accessibility
Valuation Transparency:
Listed: Market capitalization visible real-time based on share price
Unlisted: Valuation based on funding rounds, projections, or comparable analysis
Exit Options:
Listed: Sell anytime during market hours at market price
Unlisted: Exit depends on IPO, acquisition, or finding private buyer
Shareholder Base:
Listed: Typically thousands to lakhs of shareholders including retail investors
Unlisted: Limited shareholders - founders, employees, institutional investors
Cost of Compliance:
Listed: High compliance costs (₹1-5 crore+ annually for medium companies)
Unlisted: Lower compliance burden and costs
Are unlisted shares riskier than listed ones?
Generally yes, unlisted shares carry higher risks, though the specific risk profile depends on the individual company. Here's a nuanced comparison:
Liquidity Risk: Much Higher for Unlisted Unlisted shares can be impossible to sell quickly, while listed shares offer instant liquidity. This is the most significant risk differential.
Information Risk: Higher for Unlisted Limited disclosures create information asymmetry. Listed companies provide transparent, regular updates.
Valuation Risk: Higher for Unlisted Without market pricing, determining fair value is subjective and prone to error. Listed shares have objective market prices.
Regulatory Risk: Lower for Unlisted (but double-edged) Less regulation means flexibility but also less investor protection. Listed companies face stricter oversight protecting investors.
Business Risk: Depends on Company A well-established unlisted company (like Reliance Retail) might be less risky than a speculative listed penny stock. Business fundamentals matter more than listing status.
Governance Risk: Generally Higher for Unlisted Without public scrutiny, governance standards might be weaker, though reputed unlisted companies often maintain high standards voluntarily.
Market Risk: Lower for Unlisted Unlisted shares don't face daily volatility from market sentiment swings. This can be advantage or disadvantage depending on perspective.
Fraud Risk: Higher for Unlisted The unregulated unlisted market has higher potential for misrepresentation, fake valuations, and fraud.
Concentration Risk: Higher for Unlisted High minimum investments force portfolio concentration, magnifying company-specific risks.
Who Should Invest:
Unlisted shares suitable for:
High net worth individuals with diversified portfolios
Long-term investors (7-10 year horizon)
Those with high risk tolerance
Investors who can afford complete capital loss
Those with expertise to conduct thorough due diligence
Unlisted shares NOT suitable for:
Retail investors with limited capital
Those needing liquidity or having short timeframes
Risk-averse investors
Investors unable to conduct proper due diligence
Anyone investing emergency funds or borrowed money
Risk-Adjusted Returns: While unlisted shares can provide exceptional returns (10x-100x in successful cases), the probability of complete loss is also significantly higher than listed large-cap stocks.
How are unlisted shares taxed in India?
Taxation of unlisted shares depends on the holding period:
Long-Term Capital Gains (LTCG):
Holding Period: More than 24 months
Tax Rate: 20% with indexation benefit
Indexation: Cost of acquisition adjusted for inflation using Cost Inflation Index, reducing taxable gains
Example: Bought at ₹1,00,000 in 2021, sold at ₹3,00,000 in 2025. After indexation, taxable gain might be ₹1,50,000 instead of ₹2,00,000, resulting in tax of ₹30,000 instead of ₹40,000
Short-Term Capital Gains (STCG):
Holding Period: Less than 24 months
Tax Rate: Added to your income and taxed at applicable slab rates (up to 30% + cess)
No Indexation: Full gain is taxable without inflation adjustment
Dividend Income:
Dividends from unlisted companies are taxable in shareholder's hands
Taxed at applicable income tax slab rates
No TDS deducted if annual dividend is less than ₹5,000
Securities Transaction Tax (STT):
STT not applicable to unlisted share transactions
Only applicable to listed securities
Points to Remember:
Date of Acquisition: Holding period starts from date mentioned in transfer deed/agreement
Cost of Acquisition: Purchase price plus transaction costs (brokerage, stamp duty, legal fees)
Sale Consideration: Actual sale price received
Documentation: Maintain all documents proving purchase price, dates, and transaction costs
Valuation Issues: If sold to related parties, fair market value might be substituted by tax authorities if price seems unreasonable
GST on Brokerage: Brokerage or commission paid for unlisted share transactions attracts 18% GST, which can be claimed as input tax credit if you're GST-registered.
What is the minimum investment required for unlisted shares?
There's no statutory minimum investment for unlisted shares, but practical minimums exist:
Typical Investment Ranges:
Popular Companies (Reliance Retail, HDB Financial):
Minimum: ₹5 lakh to ₹10 lakh
Reason: High per-share prices (₹1,000-2,000/share) and brokers' minimum lot sizes
Mid-Tier Unlisted Companies:
Minimum: ₹2 lakh to ₹5 lakh
More accessible but still substantial amounts
Startup Secondary Markets (ESOP buying):
Minimum: ₹1 lakh to ₹3 lakh
Platforms often set minimum transaction values
Direct Private Placements:
Minimum: ₹10 lakh to ₹1 crore+
When investing directly in funding rounds
Broker-Set Minimums: Many unlisted share brokers set minimum transaction values for operational efficiency, typically ₹1-2 lakh.
Recommendation: Even if you can invest smaller amounts, allocate at least ₹5-10 lakh to make the research effort and illiquidity worthwhile. Smaller investments in unlisted shares rarely make economic sense given the risks and effort involved.
How do I verify the authenticity of unlisted shares?
Verifying unlisted share authenticity is crucial to avoid fraud:
1. Verify Company Existence:
Check MCA (Ministry of Corporate Affairs) website
Search company by CIN (Corporate Identification Number) or name
Verify incorporation date, registered office, directors
Check company status (active/dissolved)
2. Verify Seller's Ownership:
Request copy of share certificate
Verify seller's name on certificate matches ID proof
Check company's register of members (Form MGT-1 filed with MCA)
Confirm seller appears as registered shareholder
3. Examine Share Certificate:
Physical certificate should have:
Company name, logo, and registered office
Share certificate number
Shareholder name clearly printed
Number of shares and distinctive numbers
Proper company seal and authorized signatory signatures
Security features (watermarks, special paper)
4. Verify Through Company:
Contact company's registrar and transfer agent
Confirm seller's shareholding
Check if any encumbrances (pledges, liens) exist
Verify if shares are freely transferable or have restrictions
5. Check Company Financials:
Request latest audited financial statements
Verify auditor's name on MCA website
Check if auditor is practicing and registered with ICAI
Review financial health and business operations
6. Use Reputable Brokers:
Choose established unlisted share brokers with track record
Check broker references and client reviews
Verify broker's GST registration and business address
Avoid brokers making unrealistic promises
7. Legal Documentation Review:
Have lawyer review share purchase agreement
Verify stamp duty calculation is correct
Ensure transfer deed (Form SH-4) is properly executed
Check Articles of Association for transfer restrictions
8. Verify Valuation Claims:
Cross-check claimed valuations with multiple sources
Verify last funding round details through news articles or filings
Compare with similar companies' valuations
Be skeptical of valuations that seem too good
9. Background Check on Company:
Search news about the company
Check for litigation or regulatory issues
Verify claimed business operations
Contact industry experts if possible
10. Red Flags to Watch:
Seller unable to produce original certificates
Company not traceable on MCA website
Unusually high guaranteed returns
Pressure to invest immediately
Unwillingness to allow documentation review
Vague or evasive answers to questions
Request for payment before documentation
Payment Safety:
Never pay cash
Use banking channels for full traceability
Pay only after verifying all documents
Ensure payment is after share transfer completion
Keep all transaction records
Professional Assistance: Consider hiring chartered accountant or lawyer for due diligence on investments above ₹5 lakh. Their fees (₹10,000-50,000) are insurance against fraud.
Can foreign investors buy unlisted shares in India?
Yes, but subject to regulations under Foreign Exchange Management Act (FEMA) and sector-specific rules:
Foreign Direct Investment (FDI):
Permitted in unlisted Indian companies across most sectors
Automatic route available for most sectors (no prior approval needed)
Government approval route for sensitive sectors (defense, telecom, media, etc.)
Sectoral caps apply (e.g., insurance, banking have ownership limits)
Minimum pricing regulations apply (based on valuation)
Foreign Portfolio Investment (FPI):
FPIs have restrictions on investing in unlisted securities
Can invest in unlisted debt securities with certain conditions
Equity investment in unlisted companies more restrictive
Process for Foreign Investment:
Ensure sector allows foreign investment and under which route
Indian company passes board resolution approving investment
Shares allotted/transferred to foreign investor
Company files Form FC-GPR with RBI within 30 days
Annual return on foreign liabilities and assets (FLA return) filed
Restrictions and Conditions:
Investment must be at or above fair market value (FMV)
FMV determined by registered valuer using prescribed methods
Transfer pricing regulations apply for related party transactions
Prior RBI/government approval needed for restricted sectors
Investment from Pakistan and Bangladesh requires government approval
Beneficial ownership declaration required
Repatriation:
Foreign investors can repatriate sale proceeds and dividends
Subject to applicable taxes (including capital gains tax)
Proper documentation and compliance with FEMA required
Consultation Recommended: Foreign investors should engage Indian legal and tax advisors specializing in FEMA to ensure full compliance. Violations can result in penalties and legal complications.
How long should I hold unlisted shares?
Unlisted shares are inherently long-term investments. Here's a realistic timeline:
Minimum Recommended Holding Period: 5-7 Years
This duration allows:
Company to execute business plan and achieve milestones
Multiple funding rounds to potentially increase valuation
Path to IPO or acquisition to become clearer
Tax efficiency (LTCG after 24 months, but exit often takes much longer)
Typical Holding Periods by Company Stage:
Early-Stage Startups (Seed/Series A):
Expected holding: 7-10 years
Time needed for company to mature and reach exit stage
Higher risk but potentially higher returns
Growth-Stage Companies (Series B/C):
Expected holding: 4-6 years
Companies closer to profitability or IPO
More visibility on exit timeline
Pre-IPO Companies:
Expected holding: 1-3 years
IPO plans typically announced or imminent
Shortest holding period with lower risk
Established Unlisted Companies:
Expected holding: Indefinite
Companies like HDB Financial might not IPO soon
Returns depend on finding buyers at higher valuations
Reality Check:
Many unlisted investments remain illiquid for 10+ years
Some companies never provide exit opportunities
Investment might outlast your original timeframe
Plan for capital being locked indefinitely
Investment Strategy: Only invest money you won't need for a minimum 7-10 years. Treat unlisted shares as part of long-term wealth creation, not medium-term goals.
What happens to unlisted shares if company fails?
If an unlisted company fails or goes bankrupt, shareholders typically lose their entire investment. Here's what happens:
Liquidation Hierarchy: When a company is wound up, assets are distributed in this order:
Secured creditors (banks, financial institutions with collateral)
Unsecured creditors (suppliers, vendors, employees)
Preference shareholders (if any preference shares exist)
Equity shareholders (common stockholders like you)
Practical Reality: In most startup and small company failures, equity shareholders receive nothing. By the time secured creditors and operational liabilities are paid, no assets remain for equity holders.
Investor Protections: Some institutional investors negotiate special protections:
Liquidation preference: Get paid before common shareholders (typically 1x-2x their investment)
Participating preferred: Get preference amount plus share in remaining assets
Secured positions: Convert equity to debt in distress situations
Retail investors in unlisted shares rarely have these protections.
Tax Treatment: Capital loss from worthless shares can be set off against capital gains in the same year or carried forward for 8 assessment years.
Warning Signs of Potential Failure:
Delayed salary payments to employees
Vendor payment delays
Multiple layoff rounds
Funding round failures
Key management exits
Regulatory actions or litigation
Revenue decline or customer churn
Risk Mitigation:
Diversify across multiple unlisted investments
Never invest more than you can afford to lose completely
Monitor company health regularly
Have clear exit triggers to cut losses early
Are unlisted shares better than listed shares for investment?
Neither is inherently "better"—they serve different purposes in a portfolio:
Unlisted Shares Advantages:
Potential for exceptional returns: Early investors in successful companies can see 10x-100x returns
No daily volatility: Not subject to market mood swings
Access to pre-IPO opportunities: Invest before public listing premium
Long-term forced holding: Illiquidity prevents emotional selling
Listed Shares Advantages:
Liquidity: Sell anytime during market hours
Transparency: Complete information availability
Regulatory protection: Strong investor safeguards
Diversification: Easy to build diversified portfolio
Lower minimums: Can invest small amounts
Valuation clarity: Real-time pricing
Portfolio Allocation Recommendation:
For most investors:
85-90%: Listed equities, mutual funds, ETFs (liquid, regulated)
5-10%: Unlisted shares (high-risk, high-potential)
5%: Other alternatives (gold, REITs, etc.)
For high net worth investors:
70-80%: Listed securities
15-20%: Unlisted shares/PE/VC funds
5-10%: Other alternatives
When to Prefer Unlisted:
You have high risk tolerance
Long investment horizon (7-10+ years)
Significant capital (₹10 lakh+ for unlisted allocation)
Ability to conduct due diligence
Diversified liquid portfolio already established
Access to quality unlisted opportunities
When to Avoid Unlisted:
Risk-averse investor
Need liquidity within 5 years
Limited investment capital
Cannot afford losses
Lack expertise for evaluation
Emergency fund not established
Conclusion: Listed shares should form the core of most portfolios. Unlisted shares are satellites for those who can afford the risk and illiquidity for potential outsized returns.
Conclusion: Making Informed Decisions About Unlisted Shares
Unlisted shares represent a fascinating and potentially rewarding segment of India's investment landscape. As we've explored throughout this comprehensive guide, these securities offer ownership in companies ranging from early-stage startups disrupting industries to established businesses like Reliance Retail and HDB Financial Services that have chosen to remain private.
Key Takeaways to Remember
Understanding the Basics: Unlisted shares are equity securities not traded on stock exchanges like NSE or BSE. They can be shares of private limited companies (the most common type), public companies that haven't listed, venture-backed startups, or subsidiaries of listed corporations. The fundamental ownership rights mirror listed shares, but the trading mechanism, liquidity, and regulatory environment differ dramatically.
The Indian Ecosystem: India's unlisted company landscape includes over 13 lakh private limited companies, 110+ unicorn startups, and numerous high-value entities like NSE and Reliance Retail. This diverse ecosystem offers opportunities across different stages, sectors, and risk-return profiles.
Legal Framework: Companies Act 2013 governs unlisted companies with varying compliance requirements based on company type. While unlisted status provides operational flexibility, it also means less stringent disclosure requirements compared to listed peers, creating information asymmetry challenges for investors.
Investment Opportunities: Quality unlisted companies like HDB Financial Services, PhonePe, and Swiggy attract investor interest due to their growth potential, market leadership, and eventual exit possibilities through IPO or acquisition. However, accessibility varies significantly—some shares trade actively in unlisted markets while others remain available only to institutional investors.
Critical Risks: The three major risks—illiquidity, valuation difficulty, and information asymmetry—make unlisted shares unsuitable for most retail investors. Additional challenges include regulatory uncertainties, fraud potential, governance concerns, and the very real possibility of complete capital loss. These aren't theoretical risks; countless investors have experienced them firsthand.
Success Requires Discipline: Successful unlisted investing demands thorough due diligence, professional guidance, portfolio diversification, realistic timeframe expectations (7-10 years minimum), and strict position sizing (maximum 5-10% of portfolio, preferably less).
Who Should Invest in Unlisted Shares?
Unlisted shares are appropriate for:
High net worth individuals with diversified portfolios
Investors with genuine long-term horizons (not just claimed)
Those capable of absorbing complete loss without lifestyle impact
Individuals with expertise or access to professional advisors
Patient investors comfortable with illiquidity
Unlisted shares are NOT appropriate for:
Retail investors with limited capital (under ₹50 lakh investable assets)
Anyone needing liquidity within 5 years
Risk-averse investors
Those without established emergency funds
Investors unable to conduct proper due diligence
The Verdict: Opportunity or Trap?
Unlisted shares are both—simultaneously offering exceptional return potential and significant loss risk. The outcome depends entirely on:
Company selection: Investing in fundamentally strong businesses with clear paths to value creation
Valuation discipline: Paying reasonable prices rather than inflated valuations driven by hype
Portfolio management: Maintaining appropriate position sizes and diversification
Timing luck: Sometimes success depends on factors beyond analysis—economic conditions, regulatory changes, or market sentiment during exit
Early investors in companies like Zomato, Nykaa, or Reliance Retail have created substantial wealth. Simultaneously, countless investors have lost everything in failed startups with impressive pitches but flawed business models.
Moving Forward: Your Next Steps
If you're considering unlisted share investments after reading this guide:
Step 1: Assess Suitability Honestly evaluate whether unlisted shares fit your financial situation, risk tolerance, and investment goals. If you have any doubts, the answer is probably no.
Step 2: Build Foundation First Ensure you have:
6-12 months emergency fund in liquid assets
Adequate insurance coverage (life, health)
Well-diversified portfolio of listed securities
Clear financial goals with appropriate asset allocation
Step 3: Educate Yourself Continue learning through:
Case studies of successful and failed unlisted investments
Understanding valuation methodologies
Following unlisted market developments
Connecting with experienced unlisted investors
Step 4: Start Small If you decide to proceed:
Begin with one quality company with strong fundamentals
Invest amount you can afford to lose completely
Use reputable brokers or platforms
Maintain detailed documentation
Monitor investment regularly
Step 5: Explore Related Topics
To deepen your understanding, explore our related guides:
How to Buy Unlisted Shares in India: A detailed walkthrough of the complete process—from finding opportunities to completing transactions, understanding documentation requirements, selecting brokers, and navigating the legal framework.
Listed vs Unlisted Companies: An in-depth comparison exploring the strategic, financial, and operational differences between listed and unlisted entities, helping you understand which structure suits different business stages and investor needs.
Pre-IPO Shares Guide: Everything you need to know about investing in companies planning to go public soon—understanding DRHP filings, lock-in periods, IPO pricing mechanisms, and strategies for pre-IPO investments.
Unlisted Share Valuation Methods: Learn how to value unlisted companies using DCF analysis, comparable company multiples, precedent transactions, and venture capital methods—essential skills for making informed investment decisions.
Tax Planning for Unlisted Investments: Comprehensive coverage of capital gains taxation, indexation benefits, gift tax implications, and tax-efficient structures for unlisted share holdings.
Final Thoughts
The unlisted share market in India is maturing rapidly, with better infrastructure, increased transparency, and growing investor participation. Platforms facilitating unlisted trading, improved regulatory attention, and success stories of IPO wealth creation are making this asset class increasingly mainstream.
However, increased accessibility doesn't reduce inherent risks. The fundamental challenges—illiquidity, valuation subjectivity, and information gaps—remain regardless of market sophistication.
Approach unlisted shares with eyes wide open. Understand that for every success story highlighted in the media, dozens of failed investments never make headlines. The glamorous narrative of early investor wealth creation obscures the reality that most unlisted investments underperform or lose value.
If you choose to participate in this market, do so as a small part of a well-diversified portfolio, with professional guidance, thorough due diligence, and realistic expectations. The potential rewards can be substantial, but only for those who navigate this complex landscape with discipline, patience, and informed decision-making.
Remember: In investing, what you don't lose is often more important than what you gain. Preservation of capital through careful selection and position sizing matters more than chasing the next unicorn.
About UnlistedBuzz
We help investors navigate India's unlisted share market with transparent information, verified opportunities, and expert guidance. Whether you're exploring your first unlisted investment or expanding your alternative assets portfolio, our platform provides the research, connections, and support you need to make informed decisions.
Disclaimer: This guide is for educational purposes only and does not constitute investment advice. Unlisted share investments carry significant risks including potential complete loss of capital. Past performance of unlisted companies does not guarantee future results. Consult with qualified financial advisors, tax professionals, and legal experts before making any investment decisions. Always conduct thorough due diligence and invest only what you can afford to lose.
Published: September 2025 | Last Updated: September 2025 Reading Time: 45 minutes | Word Count: 15,000+
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