Does anyone familiar with the
investment and stock market understand a listed company? How can you
invest in unlisted companies? But have you come across the term unlisted stocks
or unlisted companies? There are so many eminent start-ups happening in India
every year. Seeing the mammoth funding rounds or astronomical valuations, would
you also like to invest in unlisted companies such as OYO, LAVA, or CSK
today? Wondering how? Continue reading on!
Ways to Invest in
Unlisted Companies -
There are primarily five ways
by which you can invest in the unlisted companies-
1. Investing through
third-party and start-ups that facilitate unlisted investing
Various start-ups presently
offer the facility to invest in unlisted companies. These third parties assist
in forming a connection between buyers and sellers with the unlisted companies
to meet their particular needs. The minimum funds needed to invest in unlisted companies generally ranges from 10,000 to 50,000.
2. Buying ESOPs from
An investor can speak to the
staff having ESPOs. They can process the investment through
brokers/intermediaries and privately sell the shares. This procedure needs a
lot of negotiation as the public share value of the firm remains inaccessible.
In this method, the transaction is directly performed between the seller and
3. Buying directly form
Buying directly from promoters
is also referred to as private placement. In this method, the supporters do the
personal selling of shares. Also, many third parties are involved in the
private sale process, like wealth managers, banks, investments, etc.
4. Alternative Investment
Funds (AIF) & Portfolio Management Services (PMS)
This mechanism is similar to
the mutual fund investment process for the listed company. In this process, the
investors invest in alternative investment funds and portfolio management
services, supporting unlisted firms. The only difference is the
decision-making power concerning investment and who will perform the
transactions lies in the hands of the investment manager. This means the
investor will not have direct control over the decision.
5. Purchasing through
angel funds or direct funding platform
This form of investment
requires meagre investment, that is, on the firm and its financial
Benefits of buying the
While you plan to invest in
the unlisted companies, do read some of its benefits to ensure you are taking
the right decision-
- High-value investment: As the shares are not that liquid, they are
often undervalued, overvalued or undervalued for long periods. Therefore,
the investors can easily invest in the undervalued claims and get a good
return on investment.
- Diversification of risk: The shares of the unlisted company are a
unique class asset by themselves, because of which they have diversified
risk of investment.
- Peace of mind: The share prices of the unlisted companies
are mostly stable, which eases the investors' worries concerning price
- High growth investments: Generally, unlisted companies are
smaller in size, because of which investing in them increases the chances
of high growth returns.
Henceforth, these are the ways
or mechanisms by which you can invest in unlisted companies and leverage
their associated benefits, such as high-value investment, diversification of risk,
peace of mind, and high-growth investments.