Top 5 Things to Know Before Investing in Unlisted Shares – Risks, Valuation & Exit Strategy

Investing in unlisted shares may be a golden opportunity, but if you are planning to invest in unlisted shares, we strongly recommend that you know these 5 things mentioned in this blog. The reason is that the unlisted market has its own risks, challenges and opportunities, and if you do not understand them properly, you may risk losing your investment. 

Let us understand these 5 crucial things to consider before investing in unlisted shares:

Learn how to invest smartly in the unlisted share market. From risks, valuation challenges, liquidity issues, and regulatory factors to exit strategies.

1. Proper Understanding of Unlisted Shares

Unlisted shares are equity securities of companies that are not listed on any stock exchanges like NSE or BSE. These are usually traded over the counter (OTC) or through private transactions. Investing in unlisted shares allows investors to buy into companies at an early stage, potentially reaping significant returns if the company grows and eventually lists on a stock exchange through IPO. The following are some of the key characteristics of unlisted shares:

• Liquidity: Unlisted shares are low on liquidity; thus, selling and buying are very challenging.
• Valuation: Determining the fair value of unlisted shares can be complex due to the absence of a public market, and almost all platforms are selling at different prices per share.
• Regulation: The trading of unlisted shares is less regulated, increasing the risk for investors.

Example: Consider a company like Groww, a digital investment platform. As of late 2025, Groww's unlisted shares are trading at approximately ₹145 per share. While the company has shown significant growth, it is essential to assess its financial health and market position before investing.

2. Risks Associated with Unlisted Shares

There are certain risks when it comes to investing in unlisted shares:

• Lack of Transparency: Limited public information makes it difficult to assess the company's performance accurately.
• Market Risk: The company's performance can be influenced by market conditions, which may not be immediately visible.
• Regulatory Risk: Changes in regulations can impact the company's operations and profitability.

Example: Over the past year, NCDEX's unlisted shares have grown by 150%, as SEBI cleared path for equity, derivatives launch, and valuations rose on investor optimism. However, this rally is subject to market dynamics and regulatory changes, which could affect the company's future performance.

3. Valuation Challenges

Unlike listed companies, unlisted firms do not have a market price to guide valuations. Investors often rely on:

• Comparable Company Analysis: Comparing the company with similar listed entities.
• Discounted Cash Flow (DCF) Analysis: Estimating the company's future cash flows and discounting them to present value.
• Precedent Transactions: Looking at prices paid for similar companies in previous transactions.

Example: ADIANCE TECHNOLOGIES is a company with promising prospects, and is being traded at approximately ₹2,250 per share. However, without a clear benchmark, determining its fair value requires in-depth analysis and understanding of the company's financials and market position.

4. Liquidity and Exit Strategy

One of the most significant challenges with unlisted shares is liquidity. Unlike listed shares, which can be sold on the stock exchange, unlisted shares require finding a buyer through private negotiations or OTC platforms. The following are some of the exit strategies for unlisted shares:

• IPO: If the company goes public, investors can sell their shares on the stock exchange.
• Secondary Platforms: Some platforms, like UnlistedKraft, provide buying and selling services for unlisted shares.
• Direct Sale: Selling shares directly to another investor or entity.

Example: A V Thomas & Co. Limited unlisted shares are trading at ₹12,500. Now, finding a buyer for such a high-priced unlisted share can be challenging. Investors must have a clear exit strategy and be prepared for potential delays in selling their holdings.

5. Regulatory Environment

In the absence of any stringent regulatory framework, governance of unlisted shares is also not on par. The Securities and Exchange Board of India (SEBI) has issued warnings against trading unlisted securities via unauthorised platforms, highlighting the need for investors to exercise caution. The following are some of the key considerations that investors should note:

• Reputed Platforms: Ensure that the platform facilitating the transaction is reputed. You can always rely on UnlistedKraft for all your investment requirements related to unlisted shares.
• Due Diligence: Conduct thorough research on the company and its management before investing.
• Legal Framework: Understand the legal implications of buying and selling unlisted shares.

Example: One of the most valuable unlisted companies, NSE India Limited's unlisted shares are in high demand. However, potential investors must ensure they are trading through authorised channels to avoid legal complications.

Conclusion

Investing in unlisted shares can offer significant returns, but it requires a thorough understanding of the associated risks and challenges. By considering the factors outlined above and conducting proper research, investors can navigate the unlisted share market more effectively. Always remember to check and analyse the company's fundamentals, market conditions, and regulatory environment before making investment decisions.

Frequently Asked Questions

What are unlisted shares, and how are they different from listed shares?

Unlisted shares belong to companies that are not listed on any stock exchange, like NSE or BSE. They are traded privately through authorised intermediaries, unlike listed shares that can be bought or sold on open markets.

Are unlisted shares safe to invest in?

Unlisted shares can offer high returns but also carry higher risk due to limited liquidity, less transparency, and valuation uncertainty. Investors should only invest after thorough research and preferably with the help of authorised platforms like UnlistedKraft.

How can I buy or sell unlisted shares in India?

You can trade unlisted shares through registered intermediaries or platforms that deal in private securities. Always ensure the transaction complies with regulations and that proper documentation is in place.

What is the minimum investment amount for unlisted shares?

The minimum investment amount varies by company and platform.

How are unlisted shares taxed in India?

Profits from unlisted shares are treated as capital gains. If held for more than 24 months, they are taxed as long-term capital gains at 20% with indexation. For shorter durations, they fall under short-term capital gains, taxed as per your income tax slab.

What happens to unlisted shares when a company gets listed?

Once the company goes public, your unlisted shares automatically become listed shares, and you can sell them on the stock exchange after the mandatory lock-in period (usually 6 months as per SEBI rules).

Disclaimer: The information provided in this article is for educational and informational purposes only and should not be considered as investment, financial, or legal advice. Prices, valuations, and company details of unlisted shares mentioned are based on publicly available sources and may change without prior notice.

UnlistedKraft does not guarantee the accuracy, completeness, or reliability of the information provided and shall not be held responsible for any loss or damage, whether direct or indirect, arising from reliance on this content or from trading in unlisted securities.

Investors are strongly advised to conduct their own due diligence, verify all details from official and authorised sources, and seek professional financial advice before making any investment decisions related to unlisted shares.

Author: Diwakar Singh

Diwakar Kumar Singh is a finance writer and BFSI specialist with 7+ years of experience in financial content and research. He has authored hundreds of finance articles, published multiple books internationally, and contributed to research publications. A Gold Medalist MBA from IMT, he brings a strong analytical understanding combined with clear, reader-focused communication. His work focuses on simplifying complex financial topics, including IPO analysis, unlisted shares, financial ratios, and company evaluations, providing well-researched and evidence-based insights to help readers make informed financial decisions.