When it comes to investments Shares of a listed company in stock markets. This is the best choice as it comes with safety and it is regulated by the government authorities like SEBI. But investing in an unlisted company can be more profitable and a massive opportunity. But comes with huge risks and no regulations. If you only care about high profits with risk then this article is for you. So, let’s understand what are unlisted shares and how to buy unlisted shares as well as investment.
What are Unlisted Shares?
The word unlisted shares itself tells us the meaning which is any securities (shares) or financial instruments. These are not listed on a formal Stock Exchange like BSE(Bombay Stock Exchange) or NSE(National Stock Exchange). The traded Over the Counter (OTC) market is known as Unlisted Shares.
The reason why these unlisted companies do not trade on a formal exchange. It is that these companies are new and small or do not comply with the criteria to list. The stock exchange like a capital requirement or listing fees, etc.
Top 5 differences between unlisted and listed shares.
- Shares of listed companies are traded on stock exchanges. But shares of unlisted companies are traded over the counter means except in formal exchanges they can be traded anywhere.
- Shares of listed companies have high liquidity as it is listed on a formal exchange. It has a demand for buying but shares of unlisted companies. The less liquid as it is traded over the counter.
- Shares of a listed company are regulated by the government bodies like SEBI. But shares of unlisted companies are not the regulation body but comply with the companies act.
- Investment in listed companies is safer than unlisted companies as a listed. Company has more disclosure about the affairs and is governed by the regulatory bodies. But on the other hand, unlisted shares have more risk of loss as it has less disclosure.
- The tax on listed companies’ shares is less than that of unlisted companies. The minimum holding period for the listed company is one year but for the unlisted company is two years.
Should we invest in Unlisted Shares?
Advantages:
- Invest at an early stage: Invest at an early stage because when the company grows substantially and afterward if it comes up with an IPO at that time you may not get that allotment. So if one thinks that he or she should invest before launching an IPO. So here you can get an early entry and an advantage to make a profit.
- Possibility of better returns: This Means early investment in unlisted shares may give you higher returns in a very short period and if it launches its IPO then your holdings may get doubled.
- Diversification: As every individual engaged in investing wants to diversify their portfolio so Unlisted Shares may be a good option for diversification.
Be aware of these factors before investing
- Lack of liquidity: If you invest in an unlisted share that there is the possibility at that point there may not be a seller or a buyer which can be an issue of liquidity.
- Higher Taxes: Tax for unlisted shares for long-term capital gain taxation may be 20% with indexation and for short-term capital gain it will be according to your tax slab which is much higher than listed shares. And the duration for a short-term and long-term period is not 12 months for an unlisted share but is 24 months.
- Limited company-specific data: Just like listed shares, you will not get all data related to a company of unlisted shares and investments.
- High Commission: The seller of unlisted shares may charge a higher commission as compared to listed shares.
- High Ticket size: The minimum ticket size of an unlisted share is very high between 20 lakhs to 30 lakhs but it could be suitable for one if he or she can invest at a minimum ticket size of at least 10 thousand rupees which we are going to check out here.
Key Takeaways and Investments
- Shares that are not publicly traded on the stock market are called unlisted shares and investments.
- There are several types of unlisted stocks, including common stocks, penny stocks, corporate bonds, government securities, and derivatives.
- Investing in start-ups and intermediaries, purchasing ESOPs directly from employees or promoters, or joining PMS or AIF schemes that purchase unlisted shares are some ways to invest in the top unlisted companies in India.
- There are several risks associated with the investments, including illiquidity, capital loss, dilution, and the risk of no dividends.
How to buy Unlisted Shares.
In comparison to listed shares, you cannot trade unlisted shares through stock exchanges. So, if you want to invest, you have to buy:
- Directly from promoters
- From existing employees
- Pre-IPO investments
- PMS and AIF schemes
- Through crowdfunding platforms.
But these methods are not so reliable, So here comes LEADOFF a platform where you can buy unlisted shares just like your investments through Upstocks, and Zerodha in listed shares.
LEADOFF has solved all the problems that we discussed earlier like limited company-specific data, high commissions, and high ticket size.
Some features of LEADOFF. are:
- Low ticket size: A minimum of ₹10,000 you can invest through leadoff to become a private equity shareholder.
- Low commission charge: Leadoff charges only 2% of your ticket size.
- Bank-level security: Leadoff enforces strict policies to prevent the unauthorized disclosure of sensitive personal information
- Research-driven: Leadoff provides financial reports which are extensively researched, analyzed, and documented by SEBI-licensed research analyst
- Fast & Simple and investments: Leadoff provides a hassle-free investment experience.
Steps of buying unlisted shares from Leadoff.
- First of all register yourself with leadoff.com by providing your phone number, email id, name, etc.
- Then select the suitable company shares which you want to buy and go through all the research reports that leadoff has provided based on the research.
- Now put all your Bank details like account no, IFSC, etc.
- Link your Demat account by providing Demat account no.
- Now you have to add funds to your leadoff account so that you can buy unlisted shares through UPI or bank transfer.
- After adding funds now you can finally invest. Just you have to make the payment and it’s done your share transaction is completed and you will be allotted the share within 2 business days.
- And the allotment confirmation will be sent through your email and now you can see your unlisted shares in your portfolio.
Conclusion
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