How to Buy Unlisted Shares in India: Step-by-Step Guide

Investors in India have the opportunity to buy unlisted shares; however, there are no mechanisms in place to facilitate the purchase like there are for listed stocks. The majority of unlisted stocks do not have an order book for either the NSE or the BSE, and are traded via OTC transactions. This means that it is the buyer’s responsibility to locate a potential seller.

In practice, how to buy unlisted shares in India comes down to verifying six things before any money moves: the company, the security, the price, the seller or intermediary, the transfer process and Demat eligibility. Just because a share is offered at a low price, does not mean that the company is valued at a low number. The buyer must decide if they are comfortable with the illiquidity and if they are okay with the potential inability to time the market for an exit. Just because a company is looking to raise capital via an IPO does not mean that an IPO will occur. Companies may postpone or cancel a planned IPO.

How to Buy Unlisted Shares in India: Quick Process

1. Identify the company and security — confirm the legal company name and exact share class.

2. Check availability and current price — confirm the quantity on offer and when the quote was updated.

3. Research the company and financials — study the business, revenue, profit, cash flow and debt.

4. Evaluate the quoted price and valuation — work out the company valuation the price implies.

5. Verify the seller or intermediary — confirm identity, documents and payment details independently.

6. Check ISIN, Demat eligibility and transfer requirements — make sure the shares can reach your Demat account.

7. Complete payment and transfer — pay only against documented terms and keep records.

8. Verify the shares in your Demat account — check security name, ISIN and quantity once credited.

Listed vs Unlisted Shares: Key Differences

If you are still getting comfortable with how share ownership, Demat accounts and exchange trading work, the stock market basics in India guide covers that foundation.

Step 1: Identify the Company and Security

When looking at unlisted opportunities, start with a company, not a price. Unlisted opportunities are typically heard about through sell side shareholders, investment bankers, private deals, and online secondary markets. Pre-IPO opportunities are shared through these channels, as well as private and unlisted public companies.

Waiting for a company to go public does not ensure a positive return. Pre-IPO status creates a false sense of a limited window opportunity. For more information about unlisted shares, see What Are Unlisted Shares? A Complete Guide for Indian Investors.

What Should You Check First?

• Legal company name, not just a brand name.

• Security type — equity, preference or another class, and its rights.

• ISIN, where applicable.

• Number of shares available.

• Current or indicative quoted price, and whether it is firm.

• Date of the price information.

• Transfer eligibility of the seller's shares.

• Applicable restrictions — lock-in, company approval or right of first refusal.

How to Research Unlisted Companies Before Buying

If you are considering investing in unlisted shares, you should be aware that research plays a more critical role than in the case of listed shares. This is because unlisted shares do not trade on any exchange and, as a result, there is very little information that is made available to the public. Hence, you should research the company, consider the company’s business model, analyze the financials and share price (if available) and evaluate other factors, including the valuation, liquidity, and how easy it would be to buy and sell the shares, and the available exit options.

In order to begin your research, you can consider the information about unlisted companies in India provided on InvestEdge360, including the companies’ shares prices.

Step 2: Check Availability and Current Price

There is no constant supply of shares of privately-held companies. Shares would be made available for purchase only if a company insider decides to sell, and if there are no legal or logistical restrictions to the sale. Just because a company is listed with a share price, it doesn’t mean shares are readily available to the public.

A share price, in the absence of continuous trading, may not reflect the true price at which shares are transacted. A price may have been agreed upon weeks prior, and may not reflect the current market price. When obtaining a share price quote, determine when the price was last verified, and the time within which the share price is expected to be valid.

Step 3: Perform Your Own Due Diligence

Prior to considering purchase of shares of a privately-held company, verify that your analysis supports share purchase even in the absence of an IPO. For privately-held companies, examine the company’s cash outflow and burning cash at a given rate, and analyze the rationale and assumptions the company has developed for reaching profitability.

Audited financial statements, annual reports and statutory filings, where accessible, are the primary sources. If ratios and financial statements are unfamiliar territory, Fundamental Analysis of Stocks: Revenue, Profit, Ratios & Valuation Explained walks through the basics.

Step 4: Evaluate the Unlisted Share Price and Valuation

When you buy unlisted shares, the price for unlisted shares is quoted separately from the NSE or BSE and should not be evaluated in isolation. A share quoted at ₹200 may be cheap or expensive depending on several other factors. For example, a share quoted at ₹200 may be expensive if shares outstanding for that company is low.

The recent transaction price is often an expensive price to pay. In the case of unlisted companies, a reasonable proxy to compare against listed companies may not be available. Also, often, unlisted companies may trade at a higher valuation than their listed peers. This may not be justified.

How Is the Price of an Unlisted Share Determined?

There are multiple approaches to determining a price. Depending on the specific situation, a price may be determined by:

• Private transactions between existing holders and new buyers.

• Buyer–seller negotiation on a specific deal.

• Intermediary quotations at which a facilitator offers or bids.

• Recent transaction prices used as a reference point, even if conditions have changed.

• Funding or valuation references, such as a recent funding round, where applicable.

There are several reasons which inform the level of capital a company raises and at what price. Different methods do not point to the same price for a company.

Illustrative Example: Why a ₹500 Share May Not Be Cheap

This example is only illustrative and does not represent any actual situation or entity. The numbers presented herein are fictional.

• Share price: ₹500

• Relevant outstanding shares: 10 crore

• Illustrative implied equity valuation: ₹500 × 10 crore = ₹5,000 crore

Is the company worth ₹5000 Million? A share price of ₹500, in and of itself, doesn’t convey attractiveness. There may be other reasons, like the company’s potential revenue, profits, cash flow, the company’s debt, the company’s growth, how the company compares to its peers, and the company’s future needs for equity financing, that warrant a ₹5000 Million valuation. See how to value a stock in India for a more comprehensive framework.

Step 5: Verify the Seller or Intermediary

In an unlisted transaction, funds are usually transferred to a party with whom you will not have any prior experience in dealing with, and outside the exchange and clearing framework. Verification of the counteyparty's details will be of great help in protecting your interest. You should not effect payment until you are satisfied with the following:

• Counterparty identity — legal name and verifiable details.

• Company and security identity, matching what you researched.

• Number of shares.

• Agreed price, per share and in total.

• Payment instructions, verified independently.

• Bank account details matching the documented counterparty.

• Transfer process and the confirmation you will receive.

• Applicable charges, disclosed in full.

• Supporting documents such as a transaction confirmation or agreement.

• Transfer or exit restrictions on the shares.

Be wary of anonymous or unverified sellers, and do not accept social-media messages or screenshots as proof of a holding or a completed deal. Pressure to pay immediately, guaranteed returns and guaranteed IPO claims are all reasons to stop. Being offered online does not by itself make a deal lawful, and SEBI has issued warnings about dealings in securities of unlisted public companies.

Step 6: Verify ISIN and Demat Eligibility and Check Transfer Requirements

An ISIN is a unique identification number assigned to a specific security. If the ISIN doesn’t match the issuer and share class you are looking to purchase, that’s a red flag.

Certain unlisted securities are Demat eligibile. For example, CDSL has a process through which it evaluates unlisted companies and, if approved, allows the companies to admit their securities to the depository for full or partial dematerialisation. Not all unlisted company securities that are in Demat form are listed on the NSE and BSE.

Transferring unlisted securities is varied. You must evaluate several factors such, are the shares in Demat form, do you have the company’s and/or shareholders’ approval, is there a lock-in period, is there right of first refusal, who will be completing the transfer, and what will be your evidence of transfer.

If you do not yet have a Demat account, how to open a Demat account online in India explains the process.

Step 7: Complete Payment and Transfer

This steps gives an overview of the steps required to complete a share transaction.

1. Confirm the transaction details — company, security, ISIN, quantity and price.

2. Verify the total payable amount and any transaction charges.

3. Verify the account number of the party who will receive the payment.

4. Complete any additional transfer documentation or payment instructions.

5. Follow the applicable transaction, depository or intermediary process.

6. Keep records: agreement or confirmation, payment receipt, charges, dates and transfer documents.

A debit from your bank account is not the end of the transaction. It is complete only when the shares are credited to your Demat account.

Step 8: Verify Shares Held in Demat Account

After a transfer, verify your holding to ensure the security is listed, the quantity is correct, and the ISIN is provided (if applicable). You should retain the transaction documents for individual securities for tax purposes.

There may be a significant amount of time between the transfer order and the securities credit. This is typically the case with the transfer of unlisted securities. If you do not see a credit for transferred securities, contact the entity you ordered the transfer from.

What Is The Estimated Time For Delivery Of Unlisted Shares?

There is no standard time frame. The type of transaction will dictate the time required to complete the necessary paperwork. The transfer will be carried out according to the procedures of the intermediary. There may be additional requirements at the level of the company and the security. Approval may be required. The time required to process the security will also need to be considered. Again, treat any time frames provided as an estimate.

Costs of Buying Unlisted Shares

The share price is only part of the cost; charges can arise at several stages.

Total cost of acquisition = price paid for the shares + transaction charges + taxes + other costs.

Investors should confirm the total payable amount before transferring funds. Keep the cost records, as purchase cost and expenses can matter when calculating gains or losses on a future sale.

Tax on Unlisted Shares

When a share is sold that is currently not listed on any stock exchange, a transfer of a capital asset is deemed to have occurred and as per the Income Tax Department, such unlisted shares are long term capital assets if held for more than two years, unless otherwise stipulated in a statute. The nature of the security, the terms of the transaction and the period for which the security is held, among other things, would determine the nature of the capital gain, if any. Investors are advised to consult a tax advisor for more information.

The holding of unlisted shares may also determine the income tax return form that is applicable to the investor, and it is advisable to refer the latest return preparation instructions before preparing the return.

What Happens After You Buy Unlisted Shares?

Buying is only the start. The value and liquidity of an unlisted holding depend on how the company evolves, so keep track of:

• Company performance and financial updates.

• Corporate actions such as mergers, demergers, amalgamations or buybacks.

• Fundraising and the dilution it may cause.

• Management or ownership changes, including changes in control.

• Liquidity — whether secondary demand is improving or drying up.

• Possible exit opportunities, such as a buyback, corporate transaction or public offering.

An IPO is one possible outcome, not a guaranteed one; the holding should make sense even if the company stays unlisted for years.

Can You Sell Unlisted Shares At Any Time?

You usually can't. With unlisted shares, there’s no traded market where you can place a sell order. Usually, you have to locate a buyer and then go through the share transfer process, which may include getting the company to authorize the transfer, and may be constrained by restrictions and procedures of intermediaries. It may be that shares can’t be sold easily, if at all.

Before buying, consider if you’d be comfortable with a potentially lengthy period of time where you are unable to sell. Would you be comfortable with an indefinite holding period? Has the intermediary, through its past actions, demonstrated an interest in facilitating secondary sale opportunities? Has the intermediary developed a network of buyers for this security? Of course, a security can always be sold, and an IPO is by no means the only opportunity to sell.

Red Flags to Watch Before Buying Unlisted Shares

Any of these signs should prompt additional diligence, or a decision to walk away:

• Promises of guaranteed returns.

• Claims of a guaranteed IPO or listing, or pitches built entirely on IPO or acquisition rumours.

• Pressure to transfer money immediately.

• Unclear company or security identity.

• Payment details that do not match the documented counterparty.

• Missing documentation, or no verifiable ISIN where Demat credit is expected.

• A quoted price with no explanation of how it was arrived at.

• Unclear fees, or charges disclosed only after payment.

• Unclear or unexplained transfer restrictions.

• No clear answer on the possible exit route.

Unlisted Shares Buying Checklist

Before making a payment, run through this list:

• ☐ Company identity verified

• ☐ Security/ISIN verified where applicable

• ☐ Latest available price information checked

• ☐ Company financials reviewed

• ☐ Valuation considered

• ☐ Seller/intermediary verified

• ☐ Total transaction cost understood

• ☐ Transfer requirements understood

• ☐ Demat eligibility confirmed

• ☐ Liquidity/exit risk understood

• ☐ No guaranteed-return claims relied upon

• ☐ Transaction records retained

Final Thoughts

Knowing how to buy unlisted shares in India is less about finding a seller and more about due diligence on the company, security, price, counterparty, transfer route, total cost and realistic exit options. Keep the focus on the business and its valuation — and when liquidity and transparency are limited, make sure the price you pay accounts for that.

You can research available unlisted companies on InvestEdge360 as a starting point.