A Complete Step-by-Step Guide for Investors
Unlisted shares are equity shares of companies that are not currently traded on stock exchanges such as NSE or BSE.
Unlike listed shares, there is no regular exchange order book where an investor can simply place a buy or sell order. Transactions are generally facilitated through private secondary-market transactions and are ultimately settled through demat accounts via off-market transfer.
Unlisted securities can be held in demat form, and CDSL describes an off-market transfer as a transfer of securities between two beneficial-owner demat accounts.
PART 1 — HOW TO BUY UNLISTED SHARES
STEP 1 — Select the Company
The first step is to identify the unlisted company you want to invest in.
Before investing, review:
• Business model
• Revenue and profitability
• Debt and liabilities
• Promoters and management
• Valuation
• Existing shareholders
• Funding history
• IPO plans, if any
• Industry opportunity
• Competition
• Potential risks
• Exit opportunities
Remember that an IPO is not guaranteed merely because a company is currently available in the unlisted market.
STEP 2 — Check the Current Unlisted Price
Unlike listed shares, unlisted shares do not have a continuously quoted NSE/BSE market price.
The price is determined by the prevailing private-market demand and supply.
Before confirming a transaction, ask for:
• Current price per share
• Number of shares available
• Minimum quantity, if applicable
• Total transaction value
• ISIN
• Expected settlement process
• Applicable charges/taxes
The quoted price may change depending on availability and market demand.
STEP 3 — Complete KYC
The investor generally needs to provide KYC and demat details to complete the transaction.
Typical documents include:
• PAN Card
• Aadhaar / other KYC document
• Demat account details
• Client Master Report (CMR/CML), where required
• Bank details
• Cancelled cheque, where required
The name on the KYC documents and demat account should match.
STEP 4 — Confirm the ISIN and Security Details
Before making payment, verify the security details.
The most important identifier is the ISIN — International Securities Identification Number.
Verify:
Company Name → ISIN → Face Value → Quantity → Price
This is particularly important because different securities of the same company may have different ISINs, such as equity shares, preference shares or other securities.
STEP 5 — Confirm the Deal
Once the investor is satisfied with the company, price and quantity, the transaction is confirmed.
Example:
Company: XYZ Limited
Quantity: 1,000 shares
Price: ₹500/share
Total Value: ₹5,00,000
The transaction details should be confirmed in writing before settlement.
STEP 6 — Make the Payment
The payment is made according to the agreed transaction and settlement arrangement.
For safety:
• Pay only to the verified account specified for the transaction
• Verify the beneficiary name
• Keep proof of payment
• Do not transfer money to an individual’s personal account merely because you received a message or call
• Retain the invoice/order confirmation and payment receipt
Where available, an escrow or structured settlement arrangement can provide additional transaction controls.
STEP 7 — Seller Initiates the Off-Market Transfer
After the transaction is confirmed, the seller transfers the shares from their demat account to the buyer’s demat account.
This is generally an off-market transfer, because the transaction is not being executed through an NSE/BSE order book.
CDSL states that an off-market transaction involves transfer between beneficial-owner accounts and can be initiated through a Delivery Instruction Slip (DIS) or eligible electronic facilities.
Depending on the depository/DP and transaction setup, the seller may need to provide:
• Buyer’s DP ID
• Buyer’s Client ID / BO ID
• ISIN
• Quantity
• Reason for transfer
• Consideration, where applicable
• Required authentication/OTP
STEP 8 — Complete Depository Authentication
The seller may be required to authenticate the off-market transaction through the relevant depository/DP process.
CDSL’s current investor material specifically describes OTP-based authentication for off-market transfers.
The exact process can differ depending on whether the account is with CDSL or NSDL and the facilities provided by the investor’s Depository Participant.
STEP 9 — Shares Are Credited to the Buyer’s Demat Account
Once the transfer is successfully processed, the shares appear in the buyer’s demat account.
The investor should independently verify:
Company Name + ISIN + Number of Shares
Do not rely only on a screenshot or confirmation message.
Check the actual holdings statement from your demat account.
STEP 10 — Preserve All Transaction Documents
Keep the complete transaction trail:
• Purchase confirmation
• Invoice / transaction statement
• Payment proof
• Demat statement
• ISIN details
• Share transfer records
• Corporate communications
• Future sale documentation
These records are important for future sale, taxation and maintaining the cost of acquisition.
BUYING FLOW — AT A GLANCE
Select Company
↓
Research the Business
↓
Check Unlisted Price & Availability
↓
Complete KYC
↓
Verify ISIN & Demat Details
↓
Confirm Quantity & Price
↓
Make Payment as per Settlement Arrangement
↓
Seller Initiates Off-Market Transfer
↓
Depository/DP Authentication
↓
Shares Credited to Demat
↓
Verify Holdings
↓
Maintain Transaction Records
PART 2 — HOW TO SELL UNLISTED SHARES
Selling unlisted shares works differently from selling listed shares on NSE/BSE because there is generally no continuous public exchange order book.
STEP 1 — Check Whether You Can Sell
Before initiating a sale, verify:
• Number of shares held
• ISIN
• Holding period
• Any lock-in/restriction
• Company-specific transfer restrictions
• Existing buyer demand
• Current market price
If the company has subsequently listed, additional regulatory restrictions may apply to certain pre-IPO holdings. For example, SEBI’s ICDR framework contains lock-in provisions for pre-issue capital, subject to specified exceptions.
STEP 2 — Obtain Your Current Demat Holding Details
Keep your latest:
• CMR/CML
• Demat statement
• PAN
• Bank details
• ISIN
• Number of shares available for sale
This helps verify that the securities are actually available for transfer.
STEP 3 — Find a Buyer / Submit Your Sell Requirement
You can approach a specialised unlisted-share intermediary/platform or identify a private buyer.
Provide:
Company Name
ISIN
Quantity Available
Expected Price
Demat Details
The intermediary may check available buyer demand and provide a prevailing market quote.
STEP 4 — Confirm the Selling Price
Before accepting an offer, confirm:
• Price per share
• Quantity
• Total consideration
• Settlement process
• Applicable charges
• Applicable stamp duty/taxes
• Expected transfer date
Once the seller accepts the offer, the transaction can proceed to settlement.
STEP 5 — Complete the Required Transfer Documents
The seller may need to submit the required off-market transfer instructions to the Depository Participant.
Depending on the DP/depository process, this may involve:
• DIS
• Electronic off-market instruction
• Buyer demat details
• ISIN
• Quantity
• Consideration details
• Authentication/OTP
CDSL confirms that DIS can be used for off-market and inter-depository transactions, while eligible users can also use electronic facilities.
STEP 6 — Transfer the Shares
The seller authorises the transfer from their demat account to the buyer’s demat account.
The shares are debited from the seller’s demat account once the instruction is successfully processed.
STEP 7 — Buyer Confirms Receipt
The buyer verifies that the shares have been credited.
The transaction is considered operationally complete once:
Seller’s Demat → Shares Debited
and
Buyer’s Demat → Shares Credited
STEP 8 — Receive the Sale Consideration
The sale proceeds are settled according to the agreed transaction arrangement.
Always retain:
• Payment confirmation
• Sale invoice/transaction statement
• Demat debit statement
• Buyer/seller communication
• Tax records
SELLING FLOW — AT A GLANCE
Check Shares in Demat
↓
Verify ISIN & Quantity
↓
Check Restrictions / Lock-in
↓
Find Buyer
↓
Receive & Confirm Quote
↓
Agree Quantity & Price
↓
Complete Transfer Documentation
↓
Authorise Off-Market Transfer
↓
Shares Debited from Seller
↓
Shares Credited to Buyer
↓
Sale Consideration Settled
↓
Maintain Tax & Transaction Records
PART 3 — BUYING VS SELLING
| Particular | Buying Unlisted Shares | Selling Unlisted Shares |
|---|---|---|
| Find company/buyer | Select company | Find buyer |
| Price | Agree private-market price | Agree selling price |
| KYC | Required | Required |
| Demat | Required | Required |
| ISIN | Verify | Verify |
| Settlement | Off-market transfer | Off-market transfer |
| Exchange order | No NSE/BSE order | No NSE/BSE order |
| Liquidity | Can be limited | Can be limited |
| Documentation | Payment + purchase records | Sale + transfer records |
| Exit | Depends on buyer/IPO/other liquidity event | Depends on buyer demand |
PART 4 — IMPORTANT TAX CONSIDERATIONS
Unlisted shares have specific tax treatment.
For income-tax purposes, unlisted shares generally qualify as long-term capital assets when held for more than 24 months.
The actual tax payable depends on factors such as:
• Purchase price
• Sale price
• Date of acquisition
• Date of sale
• Whether the shares are held as a capital asset or stock-in-trade
• Applicable tax provisions
• Whether the company has become listed
• Applicable surcharge and cess
• Other income-tax provisions applicable to the investor
Investors should calculate the tax liability based on the specific transaction rather than applying listed-equity tax rules automatically.
PART 5 — WHAT HAPPENS IF THE COMPANY GETS LISTED?
One of the potential liquidity events for an unlisted investment is an IPO.
However:
Buying an unlisted share does NOT guarantee an IPO.
If the company eventually lists, the investor may obtain an exchange-traded security, subject to applicable regulations and any lock-in/restrictions attached to the shares.
SEBI’s ICDR regulations contain lock-in provisions for certain pre-IPO holdings, including a general six-month framework for specified pre-issue capital held by non-promoters, subject to exceptions.
Therefore, investors should check the company’s final offer document and applicable regulations rather than assuming that all pre-IPO shares will become immediately sellable after listing.
PART 6 — KEY RISKS OF UNLISTED SHARES
1. Liquidity Risk
There may not be an immediate buyer when you want to sell.
2. Price Discovery Risk
There is no continuously traded NSE/BSE market price.
Private-market quotes may differ significantly between transactions.
3. Valuation Risk
A company can raise capital at one valuation and later raise capital at a lower valuation.
4. IPO Risk
A company may delay, modify or cancel its IPO plans.
5. Information Risk
Private companies generally have less publicly available information than listed companies.
6. Transfer Restrictions
Certain companies may have restrictions under their Articles of Association, shareholder agreements or applicable laws.
7. Lock-in Risk
Certain shares may be subject to regulatory or transaction-specific lock-ins.
8. Counterparty Risk
The transaction should be completed only through a properly verified settlement process.
9. Tax Risk
The tax treatment can differ from listed-equity transactions.
10. Concentration Risk
Investors should avoid assuming that an unlisted investment will behave like a liquid listed security.
PART 7 — BUYER’S DUE-DILIGENCE CHECKLIST
Before buying an unlisted share, verify:
☐ Company incorporation details
☐ Latest financial statements
☐ Revenue and profitability
☐ Debt
☐ Promoter/shareholding structure
☐ Latest valuation/fundraise
☐ Existing investors
☐ Number of outstanding shares
☐ Face value
☐ ISIN
☐ Current market quote
☐ IPO/DRHP status, if applicable
☐ Transfer restrictions
☐ Lock-in conditions
☐ Exit/liquidity options
☐ Tax implications
☐ Seller/intermediary details
☐ Payment account details
PART 8 — DOCUMENTS TO KEEP AFTER PURCHASE
The investor should maintain a complete transaction file containing:
1. KYC Documents
PAN and applicable identity/address documents.
2. Demat Details
CMR/CML and demat account information.
3. Transaction Confirmation
Agreed quantity and price.
4. Payment Proof
Bank transaction/payment confirmation.
5. Share Transfer Proof
Demat credit statement showing the securities.
6. ISIN Details
Record the exact ISIN purchased.
7. Tax Records
Purchase cost and future sale consideration.
PART 9 — SIMPLE EXAMPLE
Suppose an investor purchases:
1,000 shares
at
₹500 per share
Total investment:
₹5,00,000
The process would look like:
Investor selects company
↓
Price confirmed at ₹500
↓
KYC + demat details verified
↓
Investor confirms 1,000 shares
↓
Payment made according to agreed settlement arrangement
↓
Seller initiates off-market transfer
↓
Depository/DP authentication completed
↓
1,000 shares credited to investor’s demat
↓
Investor verifies ISIN and quantity
↓
Transaction documents preserved
Later, if the investor sells the shares at ₹900:
Sale value = ₹9,00,000
The taxable capital gain would generally be calculated with reference to the applicable tax rules, acquisition cost and transaction-specific circumstances.
PART 10 — THE COMPLETE UNLISTED-SHARE TRANSACTION
BUY
Research → Select → Price Check → KYC → ISIN Verification → Payment → Off-Market Transfer → Demat Credit → Verify
HOLD
Track Company → Monitor Financials → Monitor Corporate Actions → Monitor IPO/Exit Opportunities
SELL
Check Holding → Check Restrictions → Find Buyer → Agree Price → Transfer Shares → Receive Consideration → Maintain Tax Records
IMPORTANT
Unlisted shares are different from listed shares.
There is:
No regular NSE/BSE order book
No continuous market liquidity
No guaranteed exit
No guaranteed IPO
The investor should therefore evaluate the business, valuation, liquidity, transaction counterparty and exit strategy before investing.
The actual transfer procedure can vary depending on the depository (CDSL/NSDL), Depository Participant and transaction structure. CDSL and NSDL provide the underlying mechanisms for off-market securities transfers.
For transactions facilitated through a platform such as UnlistedCart – Unlisted Shares, investors should follow the platform’s specific transaction and documentation instructions for the particular security.
Disclaimer: This material is for educational and informational purposes only and should not be construed as investment, legal or tax advice. Unlisted securities involve liquidity, valuation, business, regulatory and exit risks. Investors should conduct their own due diligence and consult an appropriately qualified professional for transaction-specific legal or tax advice.
For more such unlisted stocks visit UnlistedCart – Unlisted Shares
