By Admin 
Investing is not confined to the familiar realm of listed stocks; rather, it extends into the fascinating domain of unlisted shares and securities. These assets operate in the shadows, outside the public eye, presenting investors with distinctive possibilities and challenges.
In this article, we will explore the complexities of unlisted shares and securities, shedding light on what they entail, the complexities of investing in them, the peril and rewards they offer, and why seeking external guidance is imperative in exploring this intricate terrain in the world of finance.
What are unlisted shares and securities?
Unlike their listed counterparts that trade on regulated exchanges, unlisted shares, and securities dwell in the over-the-counter (OTC) market. This decentralized network involves dealers facilitating trades directly in the middle buyers and sellers.
Unlisted investments include a variety of options, including equity in private companies, pre-IPO shares, non-exchange-traded bonds, and complex structured products.
- Unlisted shares: Equity issued by private companies not listed on exchanges.
- Pre-IPO shares: Shares of companies planning an initial public offering (IPO).
- Bonds: Debt instruments issued by companies or governments, not traded on exchanges.
- Structured products: Complex financial instruments combining multiple assets.
Investing in unlisted shares and securities:
Investing in unlisted shares and securities deviates from traditional stock market transactions, requiring a distinct approach:
- Limited access: Opportunities are often discovered by cultivating relationships with investment banks, brokers, or specialized platforms dealing in unlisted assets.
- Negotiation: Unlike standardized exchange trades, prices are negotiated directly with the seller, demanding negotiation ability and market knowledge.
- Due diligence: Assessing the financials, business models, and prospects of the underlying company becomes crucial due to limited public information.
- Lock-in period: Unlisted investments commonly come with lock-in periods, restricting their sale for a specific duration.
How to invest in unlisted securities in India
Investing in unlisted shares in India might seem complex, but there are straight ahead avenues to consider:
Investment Banks and Brokers:
- Established banks can help you with unlisted shares.
- They have the know-how and connections to link you with sellers and guide you through the process.
Specialized Platforms:
- Some online platforms you can explore that specialize in unlisted shares and pre-IPO offerings.
- They offer a variety of options and serve as a good starting point for exploring the market.
Angel Investor Networks:
- If you’re keen on startups, join angel investor networks like Mumbai Angels or Indian Angel Network.
- These networks connect you with promising early-stage companies and provide exclusive access to deals.
Wealth Management Firms:
- High-net-worth individuals can check out wealth management firms offering services linked to unlisted investments.
- These firms have access to exclusive deals and can offer personalized investment advice.
- Peril and rewards of investing in unlisted shares and securities
- Venturing into unlisted territory presents both potential rewards and inherent peril:
Peril:
- Liquidity Unlisted assets are less liquid, making quick sales challenging.
- Valuation Determining fair value can be challenging due to limited market data and transparency.
- Information asymmetry: Investors may have less access to company information compared to listed companies.
- Regulation OTC markets have fewer regulations, increasing the peril of deception or manipulation.
Rewards:
- High-growth potential: Early-stage companies with unlisted shares may offer significant growth potential.
- Diversification Unlisted investments can diversify portfolios beyond traditional assets.
- Lower valuations: Shares may be acquired at lower prices compared to listed companies with similar potential.