Guide to Unlisted Shares in 2023

Have you ever wondered how to invest in unlisted firms and buy unlisted shares for future growth? While unlisted firms are not traded on stock markets, they can provide attractive profits. However, investing in them differs significantly from purchasing normal stocks since SEBI and the Securities and Exchange Board of India do not regulate them.

What is Unlisted Shares

Unlisted shares are those held by a company that is not listed or traded on a recognized stock exchange. These shares are not publicly traded and are generally held by a small number of individuals or entities, such as promoters, founders, shareholders, or investors.

Types of Unlisted Shares

Unlisted shares, while not as widely discussed as their listed counterparts, come in various types based on their ownership structure, issuance, and specific characteristics. Here are some common types of unlisted shares:

Founders Shares:

These shares belong to the founders or promoters of a company. They typically hold a significant stake and have a vested interest in the company's success. These shares might not be easily available for sale due to ownership commitments and restrictions.

Employee Stock Ownership Plans:

ESOPs represent shares offered to employees as a part of their compensation or benefits. These shares allow employees to own a stake in the company, aligning their interests with the company's growth and success.

Shares with Preferential Allotment:

Companies sometimes issue preferential shares to specific individuals or entities, providing them with certain preferential rights over other shareholders. These could include priority in dividends or voting rights.

Venture Capital or Private Equity Shares:

Companies in their early stages often raise funds through venture capital or private equity investors. These investors receive shares in the company in exchange for their investment, usually at the startup or growth stage.

Secondary Market Shares:

Unlisted shares bought and sold in the secondary market. These shares might change hands between private investors or through specialized platforms dealing with unlisted securities.

Convertible Preference Shares:

These shares come with an option to convert them into equity shares after a predetermined period or under specific conditions. They often carry preferential rights like fixed dividends and preference in repayment during liquidation.

Debentures and Bonds:

Though not strictly shares, unlisted debentures and bonds represent debt instruments issued by companies. They offer fixed interest payments and can be bought and sold but don't provide ownership stakes like shares.


Similar to ESOPs, RSUs are shares granted to employees as part of their compensation packages. They often have vesting periods and conditions that need to be met before they can be fully owned by the employees.

Shares of the Promoter Group

Aside from the founders or prime promoters, secondary or extended promoters may own stock in the company. This could include family members or close friends involved in the operations of the company.

Right Issue Shares

Companies sometimes issue additional shares to existing shareholders in proportion to their current holdings. These shares are offered at a predetermined price and can be subscribed to by existing shareholders.

What Do Unlisted Equity Shares Mean?

These shares are typically held by a company's promoters, founders, or early investors. They offer an opportunity for investors to hold a stake in a potentially promising company before it goes public. Investing in unlisted shares could mean a chance to be part of a company's growth story from an early stage.

Can We Buy Unlisted Shares in India?

Yes, individuals can buy unlisted shares in India. However, it is essential to note that purchasing involves a different process than buying listed stocks. These shares are often traded through private deals, where buyers and sellers negotiate prices directly.

How to Buy Unlisted Shares in India

Here are some ways you can buy unlisted shares, which will help you understand and navigate this investment tool more effectively:

  1. Investing in pre-IPO companies:
    Invest in companies that plan to go public in the future, known as pre-IPO companies. These companies often have high growth rates, and early investments can be lucrative. Typically, the share of such deposits is credited directly to your Demat account, passing through the bank. However, it is important to work with a reputable intermediary for a successful investment.
  2. Opportunities in startups:
    India’s startup sector is known for its dynamism and growth potential. You can invest in startups with promising growth prospects. Most start-ups require a minimum investment, usually around Rs 50,000, and the shares are deposited directly into your Demat account.
  3. Acquisition of Employee Stock Options (ESOPs):
    ESOPs are shares issued to employees at a special price. Some brokers can help you connect with entrepreneurs looking to sell their ESOPs, giving you the opportunity to invest in unlisted companies.
  4. Direct buying encouragers:
    If you want to own a majority stake in an unlisted company, you can hire trusted investment banks, money managers, or brokers. They can help you buy shares directly from the promoter of the company through private placement.
Taxation on Unlisted Shares

Taxation on unlisted shares differs from listed stocks. The taxation structure for gains made on unlisted shares is subject to the holding period:

Short-term Capital Gains:

If the shares are held for less than 24 months, the gains are taxed per the individual's applicable income tax slab.

Long-term Capital Gains:

If held for more than 24 months, LTCG on unlisted shares is taxed at 20% with indexation benefits.

Capital Gain on Unlisted Shares

Calculating capital gains on unlisted shares involves considering the acquisition cost, sale price, holding period, and applicable tax rates. Keeping track of these factors is crucial for accurate tax calculations.


Knowing how to buy unlisted shares provides access to many investing opportunities, from promising startups to pre-IPO ventures. Whether looking for significant growth potential or direct involvement in unlisted companies, the above options can help you plan your investing journey. Before investing in unlisted shares, it is critical to undertake thorough research, locate reliable intermediaries, and weigh the risks and rewards.


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