How buying unlisted shares works
Unlisted shares are ordinary equity shares of a company that is not listed on a stock exchange. They are bought and sold privately, settle into the same demat account you use for listed shares, and carry the same rights — but none of the exchange's price discovery or liquidity.
1. Find the company and read the numbers
Unlisted companies still file annual accounts with the Registrar of Companies, so there is real information to work with — three years of profit and loss, balance sheet, cash flow, the board, the shareholding pattern and every form filed.
Start with revenue and profit trend, then look at how the balance sheet is funded. For lenders, price-to-book and return on equity matter more than the price-to-earnings ratio.
2. Check the indicative price and the spread
There is no exchange order book. A dealer quotes a bid (what they will pay you) and an ask (what they will sell at). The gap between them is the spread, and it is the real cost of a round trip.
Liquidity varies enormously. A widely held name may quote a spread under 1%, while a thin counter can be 5% or more and take days to fill.
3. Agree quantity and price
Every counter has a lot size and a minimum quantity. Orders are placed in whole multiples of the lot, so the minimum ticket size can be substantial on a high-priced share.
The price is negotiated. Confirm it in writing along with the settlement date before transferring any money.
4. Settle off-market
You transfer funds to the seller and the seller submits a delivery instruction slip to move the shares from their demat account to yours. This is an off-market transfer, so it does not appear on an exchange.
Settlement usually takes two to five working days. Check your demat holding statement once the transfer is complete.
5. Understand lock-in and exit
If the company lists, shares held by non-promoters before the IPO are generally locked in for six months from the date of listing.
If the company never lists, your exit is another off-market sale — which depends entirely on somebody wanting to buy at that time.
Tax, in outline
| Holding period for long-term treatment | More than 24 months |
| Short-term capital gains | Taxed at your income slab rate |
| Long-term capital gains | Taxed at the applicable long-term rate with indexation rules as they stand |
| Dividends | Taxable in your hands at your slab rate |
Tax rules change and depend on your circumstances. Treat this as orientation, not advice, and confirm the current position with a qualified adviser.
The risks, plainly
- • There is no guaranteed buyer. You may be unable to sell when you want to.
- • Prices are negotiated, not discovered, so two dealers can quote very different numbers.
- • Disclosure is thinner and slower than for a listed company — usually annual, not quarterly.
- • An expected IPO may never happen, and the price can fall a long way in the meantime.
- • Total loss of capital is possible.