How a Retail Investor Should Think About Unlisted Shares of Companies?

1. Define Allocation & Horizon

   • Cap unlisted exposure (e.g., 10–25% of equity book).

   • Match horizon to liquidity: 3–5 yrs for IPO-ready names; 5–7 yrs for pre-revenue/turnarounds.

2. Business Quality First

   • Moat (network effects/brand/licensing), market size, unit economics, path to cash generation.

3. Earnings Pathway

   • If loss-making: identify clear milestones to profitability (gross margin trajectory, capacity ramp, fixed cost absorption).

   • For early-stage: insist on order book / offtake agreements / pilot-to-scale plan.

4. Valuation Sanity (PE, but not only PE)

   • PE works only for profitable firms.

   • Use EV/Revenue / EV/EBITDA for high-growth or pre-profit tech; use Price/Book + RoE for financials/exchanges; use SOTP where there’s optionality (e.g., platforms + subs).

   • Always compare to listed peers with a liquidity discount (typically 15–30%+).

5. Catalysts & Timelines

   • IPO window, product launches, plant commissioning, regulatory clearances, media rights cycles, dividend policy.

6. Liquidity & Exit Planning

   • Who buys from you later? (Pre-IPO desk, ESOP buyers, HNIs, funds?)

   • Understand lock-ins around IPO and transfer restrictions.

7. Governance & Cap Table

   • Promoter track record, related-party exposure, auditor quality, ESOP overhang, preference stacks (liquidation prefs in VC rounds).

8. Deal Mechanics (India)

   • Price & terms in writing; escrow where possible.

   • Transfer via off-market demat (DP DIS) or SH-4 where applicable; keep contract note / tax invoice.

   • Verify ISIN, share class, and corporate-action eligibility.

9. Tax & Compliance (high-level only)

   • Unlisted equity generally: STCG at slab; LTCG (holding >24 months) often @20% with indexation; surcharges/cess apply. Confirm with your tax advisor.

10. Risk Checklist

• Key person risk, regulatory risk, customer concentration, working-capital stretch, fundraising dependence.

What actually moves the needle?

• Two-Bucket Valuation: pay fair for the core earnings, and pay a modest ticket for optionality (new lines, geographies).

• Ladder Your Buys: 40% now, 30% on execution proof, 30% closer to IPO/RHP (or after key audit/plant milestones).

• Liquidity Discipline: never own so much you can’t exit through normal pre-IPO channels.

• Counterparty Controls: prefer reputed desks; avoid verbal deals, ESCROW when required in certain deals.

• Red-Flag Radar: frequent auditor switches, opaque related-party deals, sudden ESOP expansions pre-IPO.

• Record-Keeping: DP statements, contract notes, board communications—future IPO allotment/CA actions will love you for this.

Basics of unlisted shares

Q1. What are unlisted shares?
Unlisted shares are equity shares of a company that are not listed on a recognized stock exchange like NSE or BSE and therefore do not trade on regular exchanges.​
They are usually held and traded privately through intermediaries, investment banks, or specialized unlisted‑share platforms.​

Q2. What is DRHP and RHP in an IPO?
Draft Red Herring Prospectus (DRHP) is the preliminary offer document a company files with SEBI before an IPO, containing business details, risks, and proposed issue structure but not the final price.​
Red Herring Prospectus (RHP) is the near‑final prospectus filed after regulatory observations, carrying updated financials and the price band or final pricing terms of the IPO.​

Q3. Until when do I have to hold unlisted shares after listing (lock‑in)?
For most regular individual investors buying unlisted shares in secondary transactions, there is typically no additional post‑listing lock‑in beyond SEBI’s usual rules; once listed, shares are generally free to trade unless specifically locked as “pre‑IPO” or “promoter” category.​
Certain pre‑IPO or preferential allotment investors may face a specified lock‑in period (for example 6–12 months) depending on the way shares were originally issued, as per SEBI regulations.​

Step‑by‑step buying process

Q4. What is the step‑by‑step process of buying unlisted shares?
A typical process in India is:​

1. Shortlist the company

   • Review business, financials, promoters, and expected IPO/exit timeline.​

2. Confirm price and quantity

   • Discuss indicative price per share, lot size, and total value with the dealing platform or broker.​

3. KYC and documentation

   • Share PAN, Aadhaar (if required), latest CML (Client Master List), and bank details to complete KYC with the platform.​

4. Deal confirmation (Deal Sheet / SPA)

   • Platform shares a deal sheet and/or Share Purchase Agreement (SPA) capturing terms: company name, ISIN, buyer–seller details, quantity, price, payment mode, and timelines.​

5. Payment

   • You transfer funds to the mapped bank account (often escrow or platform account) as per agreed terms.​

6. Share transfer

   • Seller initiates off‑market transfer via DIS or online NSDL/CDSL interface; shares move to your demat account.​

7. Deal closure

   • After shares are credited and reflected in your demat, the deal is treated as complete; invoice and contract note are shared for your records.​

Q5. What documents are usually required to buy unlisted shares?
Common requirements include:​

• PAN card and address proof

• CML (Client Master List) from your DP, clearly showing your demat details

• Cancelled cheque or bank details for payouts/refunds

• Signed deal sheet / SPA or order confirmation

• Any additional KYC documents as per platform or regulator (photo, Aadhaar, FATCA, etc.)

Deal sheet, SPA, DIS, IDT & transfer mechanics

Q6. What is a Deal Sheet?
A deal sheet is a simple transaction summary used in unlisted deals capturing essential points like buyer/seller names, company, ISIN, quantity, price, total consideration, payment terms, and transfer deadline.​
It serves as a brief confirmation of the commercial terms before execution of formal documents and transfer instructions.​

Q7. What is an SPA (Share Purchase Agreement)?
SPA (Share Purchase Agreement) is a more detailed legal contract that sets out the terms and conditions of the share sale, including representations, warranties, conditions precedent, and indemnities.​
In unlisted share deals, SPA is often used for larger ticket or institutional transactions, while smaller deals may proceed on deal sheet / order confirmation basis plus platform terms.​

Q8. What is a DIS and what are IDT transfers?
DIS (Delivery Instruction Slip) is a physical slip issued by your Depository Participant that you fill and sign to instruct off‑market transfer of shares from your demat to another demat.​
IDT (Inter‑Depository Transfer) refers to transfers between demat accounts held in different depositories (for example, from NSDL to CDSL or vice versa), using specific off‑market transfer fields in DIS or online module.​

Q9. How are unlisted shares transferred online using DSC?
Many DPs offer e‑DIS / online off‑market transfer where you log into your DP portal, select the ISIN and quantity, enter the target demat (client ID + DP ID), and authorise using OTP or Digital Signature Certificate (DSC).​
This avoids physical DIS and speeds up execution, while maintaining an electronic audit trail of the transfer.​

Q10. What are NSDL, CDSL and what is a Depository?
A depository is an institution that holds securities (like shares and debentures) in electronic form and facilitates their transfer and settlement through depository participants (DPs).​
NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are India’s two main depositories; your demat account is actually opened with one of these via a DP (broker/bank).​

Q11. What is CML (Client Master List)?
CML (Client Master List) is a PDF or document issued by your DP containing your name, address, demat number, DP ID/Client ID, PAN and other key details.​
Platforms ask for CML to verify that they are crediting unlisted shares to the correct demat account and to meet KYC requirements.​

Q12. What documents are required for transfer of unlisted shares?
Typical requirements for an off‑market transfer are:​

• Filled and signed DIS (or online e‑DIS confirmation)

• Seller’s and buyer’s demat details (CMLs)

• PAN details of both parties, if required by DP

• Board resolution/authorization for corporate accounts

• Any specific transfer forms if the company is still in physical register or has internal transfer procedures

CCPS, bonus & dividend on unlisted shares

Q13. What is CCPS and how is it purchased?
CCPS stands for Compulsorily Convertible Preference Shares, a type of preference share that must convert into equity shares after a defined period or on a trigger event (like IPO).​
Purchasing CCPS typically involves private placement or secondary deals, similar to unlisted equity, but pricing, valuation and rights (dividend rate, conversion ratio, liquidation preference) are contractually defined and must follow Companies Act and income‑tax valuation rules such as Rule 11UA.​

Q14. Do unlisted shares get bonus shares?
Unlisted companies can issue bonus shares by capitalizing reserves, and existing shareholders as on the declared record date become eligible, similar to listed companies.​
In unlisted space (including pre‑IPO firms like NSE or large startups), bonus ratios (for example 1:1 or 4:1) and record dates are announced by the company and communicated via email, board resolutions or company notices.​

Q15. Do unlisted shares receive dividends? What are the cut‑off dates?
Yes, if the unlisted company declares a dividend, shareholders whose names appear in the register or demat records as on the record date receive dividend.​
The company fixes a record date or book‑closure period, and only holders on that date get the dividend, even though the shares are not listed on exchanges.​

Q16. When is trading in unlisted shares frozen?
Trading in a specific unlisted company’s shares may be informally halted by platforms closer to IPO timelines due to regulatory, lock‑in or operational reasons.​
Around IPO, there can also be blackout periods when transfers are restricted in the company’s register or by intermediaries to reconcile share capital before listing.​

Tax and compliance

Q17. What are the tax implications of unlisted shares in India?
For individuals, gains on sale of unlisted equity held for more than 24 months are generally treated as long‑term capital gains; shorter holding periods are treated as short‑term.​
Tax rates and surcharge/cess can differ from listed equity (which has its own LTCG/STCG slabs), so investors usually consult a tax professional to compute capital gains and apply indexation where eligible.​

Q18. Why is it important to collect invoices and contract notes?
Invoices and contract notes serve as documentary evidence of purchase price, date and quantity, which are crucial for capital gains tax computation and future exit due‑diligence.​
They also help resolve disputes regarding number of shares, pricing, or settlement in case of any mismatch in demat credits.​

Prices, research & staying updated

Q19. How can I find historical and current prices of unlisted shares?
Prices of unlisted shares are not broadcast like exchange quotes; investors usually look at:​

• Specialised unlisted‑share platforms that publish indicative buy/sell quotes and historical ranges

• Research notes, blogs and price‑history sections maintained by such platforms

• Deal data from past transactions shared by trusted intermediaries

Q20. How can I stay updated about unlisted share markets?
You can:​

• Subscribe to email/WhatsApp alerts of reputed unlisted‑share platforms

• Follow company filings (DRHP/RHP), press releases and financial updates

• Track blogs and reports focusing on pre‑IPO and unlisted opportunities

Channel partner with UNLISTED O’RENA

Q21. What does it mean to be a channel partner for an unlisted‑shares platform?
Industry‑standard channel‑partner programs allow individuals or small firms to source investors and deals for unlisted shares and earn commissions on successful transactions, without running full back‑office themselves.​
Partners usually focus on client acquisition and relationship management, while the platform handles documentation, execution, and settlement.​

Q22. What is the typical process to become a channel partner of an unlisted‑shares platform? (Reference model for UNLISTED O’RENA)
Most platforms follow a simple three‑step flow you can adapt for UNLISTED O’RENA:​

1. Application

   • Fill an online or offline partner form with basic details (name, firm name, city, PAN, GST, experience in financial services).​

2. KYC and agreement

   • Upload KYC documents (PAN, address proof, cancelled cheque, GST certificate if any) and sign a simple empanelment / channel‑partner agreement covering commission structure, code of conduct and payout cycle.​

3. Activation and training

   • After internal verification, you receive a partner ID, access to product list, rate sheets, marketing collaterals and a dashboard to track leads and commissions.​

You can then define your own slabs (for example, percentage sharing) and branding for “Channel Partner – UNLISTED O’RENA” while following SEBI and Companies Act norms applicable to unlisted deals.​