What Are Unlisted Shares? A Plain-English Guide for Indian Investors (2026)
Reviewed by Kanishk Dev Bangia, NISM Series XV Certified Research Analyst
Last Updated: June 2026 | Reg. No: NISM-202300182946
The basic definition
An unlisted share is a share in a company that does not trade on stock exchanges like the NSE or BSE. Unlike listed shares, you cannot buy or sell them by clicking "buy" on a trading app because there is no exchange constantly making matches for their buy/sell orders.
Listed shares get traded on an exchange, where there is a real-time order book showing the latest prices to which shares may be bought or sold. Unlisted shares, on the other hand, get traded "off-market," meaning that a match between buyers and sellers happens outside the exchange, normally through an intermediary.
This fundamental distinction determines almost everything else.
Where do unlisted shares come from?
Many established firms may be unlisted at one time in their business life. The available stocks usually arise from:
· IPO companies - firms ready for listing whose stocks get traded on the unlisted market before they get listed.
· ESOP owners - individuals who have exercised their stock options and wish to dispose of the stocks before getting listed.
· Early-stage investors - angel investors or venture capital firms wishing to dispose of a portion of the firm's equity.
Therefore, an unlisted company is neither an unestablished one nor necessarily an obscure firm.
How are unlisted shares different from listed stocks?
The differences are structural, and each one has a practical consequence for you:
The headline takeaways: unlisted shares can be harder to sell quickly, give you less public information to work with, and follow different tax rules. None of that is automatically bad — it just means they ask more of you as an investor.
How are unlisted shares priced?
This confuses new investors the most. Since there's no exchange trading unlisted stock, there's no fixed official price for the stock.
Rather, the price is based on what a buyer and a seller can agree upon with the assistance of some intermediaries. So:
· There will be variations in price among different intermediaries — variations of 5-15% for the same stock are common.
· Prices can fluctuate even on small volumes due to thin stocks lacking the liquidity cushion provided by an order book.
· It is best to check at least three different prices before doing any deals.
Recent rounds of funding and comparisons with similar companies are good for gauging the value of a price. However, they cannot serve as definitive benchmarks.
How are unlisted shares taxed in India?
Taxation is another one of the major practical differences from listed equity:
• Long term vs short term: Gains can be considered as long term only when held for more than 24 months (as against 12 months for listed equities). If sold within 24 months, the gains are short-term and are taxed at your income-tax slab rates.
• Long term capital gains: Current rate is 12.5% (post-2024 budget proposal), non-indexed.
• Holding period: Your acquisition date is determined based on your DEMAT date – make sure you have this document.
Make sure to get the latest regulations and details of the taxation applicable to your case from a Chartered Accountant.
What are the real risks?
That is precisely the idea behind assessing the risks involved, because knowing the risks is all about understanding the nature of the asset:
· Liquidity risk. You may be unable to sell the asset when you need, or at the price you were hoping for, because it may be illiquid.
· Timing risk. What was thought to be an impending initial public offering may turn out to be a few years away, or even non-existent.
· Information risk. Lower levels of disclosure mean that there will be fewer facts to work with compared to a public company.
· Price risk. Absence of a quotation system makes valuation difficult, and quotes tend to be higher.
· Counter-party / process risk. Limited recourse means documentation and dealing with trustworthy intermediaries is key.
Who invests in unlisted shares and why?
The reasons someone might want to invest in an unlisted share are varied; to get involved with the pre-IPO activity of a company, to become part of a business that has opted to remain private, or even if one sees value in the longer term story that a company represents and is prepared to deal with lack of liquidity.
If one requires access to funds in a year, or cannot accept the risk of uncertainty with regards to selling, then unlisted shares may not be the best choice.
Frequently Asked Questions
Q : Is ownership and transfer of unlisted shares legal in India?
Ans : Yes. Ownership and transfer of shares of unlisted/pre-IPO companies are legal if carried out properly using documents like a registered intermediary and off-market DEMAT transfer.
Q : Do I need any special type of account for holding such unlisted shares?
Ans : No. You need a regular DEMAT account NSDL/CDSL – just like what you would have used for listed shares.
Q : Will unlisted shares definitely become listed eventually?
Ans : No. There are many companies who will not become public, while others may decide not to list.
Question: What is the reason for not having a set price for unlisted stocks?
Answer: Because there is no exchange constantly bringing together buyers and sellers.
Question: Is there more risk with unlisted stock than listed stock?
Answer: There is usually more liquidity, information, and timing risk with unlisted stock, but whether this is appropriate varies based on personal preference.
Disclaimer:
This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing.
