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Unlocking Value: How to Sell Unlisted Shares?
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Unlisted shares are those that are not traded on any recognised stock exchanges. They could be shares of startups, private limited companies, or companies planning to go public in the future (pre-IPO).
While people are generally aware of how to buy unlisted shares, selling unlisted shares becomes confusing for many people. This article will guide you if you also want to understand how to sell unlisted shares.
Why Consider Selling Unlisted Shares?
People sell unlisted shares to lock in profits, get some cash, or reduce risk in their portfolio. You can consider selling unlisted shares to:
- To Make Profit: If the company's valuation has increased, selling the shares can help you make profits.
- For Liquidity: As selling unlisted shares is not as easy as selling listed ones, if you find the right buyer, you can sell unlisted shares if you need money.
- To Rebalance Investments: If you want to reduce your holdings of unlisted shares or invest the money in other types of assets, you can consider selling unlisted shares.
Consider These Things Before Selling Unlisted Shares
The market situation guides your decision to buy and sell shares, meaning your transactions will depend on the current market conditions. So, when you are considering to sell your unlisted shares, keep these factors in mind:
Company’s Financial Performance
It is important to monitor the company’s financial statements to know when the time is right to sell its shares. By evaluating the company's financial reports, you can determine whether it is profitable or not and, depending on the situation, make your decision to sell unlisted shares.
Significant Corporate Events
All companies go through different stages and experience various ups and downs. As an investor, you should keep an eye on all significant events in the company, especially events or developments that could negatively affect the company’s reputation. When you are aware and alert of the current situation and can anticipate future events based on the current scenario, it can help you get an idea of when you should sell your unlisted shares.
Share Valuation and Pricing
Understanding the current market valuation of the shares is important before you decide to sell your unlisted shares. Share valuation is based on the price-to-earnings ratio (P/E), which can indicate when the shares are of higher value. Selling unlisted shares when the share valuation is high will help you maximise your returns.
How to Sell Unlisted Shares?
There are many reliable options for selling unlisted shares in India. Here are some of the most efficient and regularly used methods:
Online Investment Platforms
Many online platforms, like InCred Money, offer a secure way to trade unlisted shares. These platforms connect sellers with verified buyers and manage the entire transaction process, making it easy and convenient to sell your unlisted shares.
Brokers and Dealers
Specialised brokers and dealers can assist you in selling unlisted shares. They help identify potential buyers, negotiate pricing, and facilitate smooth transactions. It’s important that you work with only credible brokers and dealers to avoid any risks or fraud.
Direct Transactions with Investors
If you have access to investors or have contacts in the investment community, such as angel investors or private equity players, you can directly sell unlisted shares to them. When you negotiate the price directly with them, there is a chance of getting better prices.
Selling ESOP Shares
Employees who hold unlisted shares via Employee Stock Ownership Plans (ESOPs) may sell them through private agreements or through platforms that specialise in these transactions.
Private Placements
Many times, large stakeholders like company promoters or venture capitalists buy back unlisted shares through privately negotiated deals, which generally happen at much higher valuations.
Conclusion
Selling unlisted shares can be a smart way to cash in on your investment, meet urgent financial needs, or adjust your overall portfolio. While it's not as quick and straightforward as selling listed shares, knowing when to sell can help you get better returns. Always monitor the company’s performance, share valuation, and key events to know the right time to sell.
You can sell unlisted shares through trusted online platforms, brokers, or even directly to investors. Just make sure to do your research and follow the proper steps to sell unlisted shares. With the right approach and market research, selling unlisted shares can be both safe and rewarding.
DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.
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Frequently Asked Questions
Yes, selling unlisted shares in India is completely legal. However, the transaction must comply with company regulations, RBI norms (if applicable), and proper share transfer procedures.
You can find buyers through online unlisted share platforms, registered brokers, private dealers, or by directly approaching investors such as angel investors, HNIs, or private equity firms.
The price of unlisted shares is usually based on demand and supply, recent transactions, company financials, valuation multiples (like P/E ratio), and future growth prospects, including IPO expectations.
Yes, capital gains tax applies when you sell unlisted shares. Long-term capital gains (held for more than 24 months) are taxed at 20% with indexation, while short-term gains are taxed as per your income tax slab.
The selling process can take anywhere from a few days to a few weeks, depending on buyer availability, price negotiation, documentation, and share transfer approval from the company.
