What are unlisted stocks in India?

Unlisted stocks are shares of companies not listed on NSE or BSE, often including start-ups, pre-IPO firms, and subsidiaries of listed companies.

Can retail investors buy unlisted stocks?

Yes, retail investors can access unlisted stocks through brokers or private deals, but they face high risks due to limited information, low liquidity, and valuation uncertainty.

How are unlisted stocks different from listed stocks?

Unlike listed stocks, unlisted firms don’t publish quarterly reports, trade in open markets, or have SEBI-regulated transparency.

What risks should investors know before buying unlisted shares?

Key risks include lack of disclosures, difficulty in selling, uncertain pricing, and potential scams in grey markets.

Who regulates unlisted stocks in India?

Currently, SEBI doesn’t directly regulate them as it does listed shares, but it issues guidelines for disclosures and is working with the Corporate Affairs Ministry on a framework for safer trading.

The hidden world of unlisted stocks

3-minute read

The stock market isn’t the only place where trading happens. Away from the spotlight lies the world of unlisted stocks.

These are shares of companies not yet trading on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE).

The idea sounds exciting.

But beneath the surface, this market is far less predictable, where information is scarce, valuations are uncertain and exits are anything but easy.

They form a part of the private market, often including:

Start-ups

Pre- Initial Public Offering (IPO) companies

Subsidiaries of listed firms

However, investing here is not as straightforward as buying listed shares.

The Challenges

Limited information

Unlike listed companies, unlisted firms don't have to publish quarterly results or detailed disclosores
Investors often rely on secondary sources or broker reports

Liquidity risk

Selling unlisted shares can be difficult
There is no open market, so finding a buyer may take time and may require selling at a discount

Valuation uncertainty

Without
market-driven pricing, shares may be overvalued or undervalued

The Role of SEBI

Securities and Exchange Board of India (SEBI) does not oversee unlisted shares as it does for listed ones on formal stock exchanges
It simply has guidelines to protect investors in unlisted public companies, focusing on disclosures and ensuring transparency in the grey market

Proposed SEBI Framework

SEBI has proposed collaborating with the corporate affairs ministry to create a regulated platform for pre-IPO or unlisted companies to allow for trading with necessary disclosures.

Unlisted stocks can offer a head start, but they aren’t suitable for everyone.

They demand patience, solid research and the ability to take on higher risk.

For most everyday investors, the listed market remains the safer and more dependable path.