All About Unlisted Equity Shares | Liquidity, Valuation, Risks & Investing

All About Unlisted Equity Shares: Meaning, Benefits, Risks, and Liquidity Options

Unlisted equity shares are often talked about as if they sit outside the normal rules of investing. Some people treat them like insider-only opportunities. Others see them as unnecessary risk. The truth is less dramatic and more practical.

Unlisted shares simply exist in a market that moves more slowly. There are no flashing prices. No instant exit. No guarantee that interest will show up when you want it to. That alone changes how decisions are made.

Over the years, interest in unlisted equity shares has grown in India, especially among employees holding ESOP shares and investors willing to wait. Not because they are safer. But because they offer exposure to companies before everything becomes public.

What Are Unlisted Equity Shares?

Unlisted equity shares belong to companies that are not listed on any recognised stock exchange in India. These are usually private companies, startups, or businesses still building scale.

A company has to meet several conditions before it can list. Size, compliance history, governance, disclosures. Many companies do not meet these requirements yet. Some meet them and still choose not to list.

When a company stays private, its shares are not available on NSE or BSE. They move through the unlisted market instead. Quietly. Privately. Often without much visibility.

That difference matters more than most people expect.

Common Types of Unlisted Shares

In actual transactions, unlisted shares fall into familiar buckets.

Pre-IPO shares come from companies that plan to go public at some point. The timing is rarely fixed. Expectations change. Delays happen.

ESOP shares are issued to employees through an Employee Stock Option Plan. After vesting and exercise, these become unlisted equity shares. Many first-time holders only realise later that selling them is not automatic.

Delisted shares belong to companies that were once listed and are no longer traded on exchanges. The business may still exist. The liquidity usually does not.

Each type behaves differently, even though all are unlisted securities.

Are Unlisted Shares Liquid?

Yes, unlisted shares are liquid. But not in the way listed shares are.

Liquidity here does not mean speed. It means possibility. A buyer might exist. A transaction might happen. The timing is uncertain.

Since the unlisted market in India has fewer active participants, trades depend on demand lining up with availability. That does not happen every day. Sometimes it takes weeks. Sometimes longer.

This is why unlisted shares' liquidity should always be assumed to be limited, even when value exists.

Listed vs Unlisted Shares in Practical Terms

The listed vs unlisted shares debate is usually framed around regulation. That is part of it, but not the full picture.

Listed shares trade on stock exchanges and are regulated by the Securities and Exchange Board of India. Prices are public. Disclosures are frequent. Liquidity is built into the system.

Unlisted securities do not operate in that environment. Information is selective. Pricing is negotiated. Trust in the counterparty matters more than charts or volume.

That shift makes unlisted shares harder to evaluate and easier to misunderstand.

Is It Safe to Buy Unlisted Equity Shares?

Unlisted equity shares are riskier than listed shares. That should not be softened.

There is less transparency. Fewer disclosures. No guaranteed exit. Valuations can vary depending on who is involved in the transaction.

At the same time, unlisted shares attract investors who are not looking for short-term movement. They are looking for participation. Early entry. Long-term growth.

Safety here comes from understanding what you own, not from expecting protection.

How the Fair Value of Unlisted Shares Is Estimated

Unlisted shares do not have a fixed market price. They are traded in the over-the-counter market, where pricing depends on context.

The book value method looks at tangible assets and liabilities. It works best when assets matter more than future projections.

The last transaction price method uses the most recent trade as a reference. It is simple, but often outdated.

The net asset value method adjusts assets and liabilities to current market value. Sometimes, only tangible assets are considered. Sometimes intangible assets are included as well.

In reality, valuation of unlisted shares is rarely precise. It is negotiated, not discovered.

How to Buy Unlisted Equity Shares

Buying unlisted equity shares is straightforward, but not casual.

Research comes first. Not surface-level reading. Actual understanding of the business, management, and financial direction.

Most investors buy unlisted shares through dealers or platforms operating in the unlisted market. These transactions happen off-market and are settled through demat account transfers.

The usual flow is simple:

●     Identify the company

●     Finalise price and quantity

●     Transfer funds

●     Receive shares in demat

What matters most is who you transact with.

Why People Sell Unlisted Shares

Selling unlisted shares usually has nothing to do with panic.

Employees sell ESOP shares to create liquidity. Investors sell to rebalance. Sometimes the price feels right. Sometimes cash is needed.

Since selling unlisted shares is not instant, timing and flexibility play a role. Price expectations often adjust during the process.

Risks of Unlisted Shares

The risk of unlisted shares is not hidden. It is structural.

Liquidity can dry up. Valuations can change. Companies can delay exits. Information can be incomplete.

These are not flaws. They are characteristics. Anyone investing here should treat them as such.

Final Thoughts

Unlisted equity shares are not shortcuts. They are commitments.

They suit investors and employees who are patient, informed, and comfortable with uncertainty. For everyone else, listed markets exist for a reason.

Understanding that difference is what separates expectation from experience.

FAQs

Are unlisted shares legal in India?

Yes, private buying and selling of unlisted shares is legal.

Can unlisted equity shares be held in demat form?

Yes, they are transferred and held through demat accounts.

Do unlisted shares always become listed?

No. Many companies never list.

Is liquidity guaranteed?

No. Liquidity depends on demand and timing.