Investors’ interest in unlisted shares has grown significantly. India has seen the rise of several unlisted firms that are performing well financially. Numerous investors have been attracted to success tales of companies fetching exorbitant valuations.
Unlisted businesses realize the value of the company shares following the initial public offering, at which point they become available to retail investors. However, other individuals wish to purchase these shares before their listing to profit.
While purchasing shares listed on a recognized stock market is relatively straightforward, purchasing unlisted shares presents several challenges. Before looking up the Paytm share price, one has to ask how does the procedure of purchasing unlisted shares works?
Off-Market Transactions vs Market Transactions
There are two sorts of share transactions: off-market and market. Market transactions take place on stock exchange platforms, whilst off-market transactions take place between two parties.
They are over the counter (OTC) in nature. The Indian depository system permits “Off Market” transactions, in which shares may be moved between accounts, therefore transferring ownership. Thus, anyone interested in purchasing unlisted shares can do so using a Demat account.
While there are several reasons why someone would invest in unlisted shares, below are some of the more often cited benefits:
High-value investments: Due to the lack of liquidity, high-value assets are frequently mispriced or overpriced over extended periods. Thus, if an individual can invest during a period of undervaluation, they can earn a substantial return on the investment.
Diversification of risk: Because unlisted shares are a distinct asset class, they provide some risk diversification for investors who are heavily engaged in the listed stock markets.
Peace of mind: Unlike listed equity shares, unlisted equity shares have typically steady values; thus, the investor need not be concerned about price swings.
How to acquire unlisted securities
Purchasing unlisted securities is not simple. When businesses are unlisted, they seek investors who can provide a sizable sum of money. Inviting numerous people to invest in their shares is inefficient from a cost and process standpoint.
That is why they choose venture and private equity money. However, ordinary investors can also purchase unlisted shares. Numerous workers who receive shares of their businesses through an Employee Stock Option Plan may target unlisted shares acquisition.
However, locating such workers may be a time-consuming task. Numerous internet platforms have arisen in recent years that seek angel investors to finance firms in their infancy. Investments on such platforms may not be minimal, and an investor may be needed to begin with at least Rs. ten lakhs. Additionally, many businesses are in their infancy and are rife with danger.
Several online brokerage businesses sell unlisted shares as well. Similarly, there are unlisted share dealers who sell shares in an offline way. Finally, but certainly not least, your connections to market players will assist you in purchasing unlisted shares so that you can look up Paytm Share Price without worry.
Precautions to take while purchasing unlisted securities
Investing in unlisted stocks is not a surefire path to riches. Today, not every unlisted company has to be a wealth producer. Additionally, determining the fair value of unlisted firms’ shares is difficult due to the scarcity of available information.
Indeed, purchasing shares in an unlisted firm entails some risks. If an unlisted business does not become listed soon, selling shares in such companies may also become difficult.
In other terms, there may be liquidity issues. Shares of firms that are not listed on recognized stock exchanges are taxed at a higher rate. Additionally, maintaining these shares in a Demat account comes with a premium. Purchasing unlisted shares necessitates an investor-led due diligence procedure. Only risk-averse investors should participate in unlisted shares, and most investors should limit their exposure to unlisted shares to a tiny portion of their portfolio.