Investing in equities is one of the most effective ways to build long-term wealth, but not all shares are created equal. Broadly, investors can choose between listed shares, which trade openly on recognised exchanges like NSE or BSE, and unlisted shares, which are not yet available on such platforms.
While listed shares dominate headlines and attract the majority of investors due to their accessibility and transparency, unlisted shares are quietly emerging as an attractive alternative for those seeking early-mover advantage, portfolio diversification, and potentially outsized returns. Let’s understand the major differences between listed and unlisted shares.
Regulatory Oversight
Listed shares are highly regulated by stock exchanges like NSE or BSE and governed under the oversight of the Securities and Exchange Board of India (Sebi). Firms have to comply with disclosure mandates, quarterly filings, insider trading rules, and corporate governance regimes.
Shares are unlisted because they aren’t traded on established exchanges and have lighter regulation. Most accounting rules of Indian business companies are based on the Companies Act, 2013, with relatively few disclosure requirements, especially for private firms.
Liquidity
Share listings are liquid because they trade on an exchange. Investors go in and out of positions swiftly, all while discovering prices.
Unlisted shares are relatively illiquid. Both buyers and sellers are scarce, and most deals take place in negotiated transactions or through employee stock-option plans or private placements.
Valuation and Pricing
Listed shares are market-driven; their value will be determined by supply and demand, earnings of that particular industry, as well as the larger economic situation.
There is a lack of transparency in the valuation of unlisted shares. Value is usually determined by financial modelling using discounted cash flow (DCF), net asset value, or merchant bankers.
Transparency and Disclosure
Publicly listed firms have to announce audited financial performance, company news, and other information. There are also standardised investor relations and governance practices.
Private companies disclose little or no information, generally to shareholders only and for regulatory purposes, which diminishes visibility for potential investors.
Accessibility for Investors
Shares that are listed can be easily bought or sold through trading platforms if one has a demat account. Unlisted shares can also be more difficult to acquire and are typically limited to private equity investors, venture capitalists, employees, or accredited high-net-worth individuals.
Risk and Return Profile
Shares held in listed companies are seen as having a moderate amount of risk because of the combination of transparency, liquidity, and regulated trading. But they’re still subject to stock-market volatility and sentiment-driven swings. Unlisted shares are riskier with uncertain liquidity, poor governance, and reliance on company growth or IPO prospects. They can also provide outsized returns; however, if the company scales or lists successfully.
Taxation
Shares of listed companies are considered long-term after one year. Long-term capital gains over ₹1 lakh are taxed at 10% (without indexation), and short-term gains, at 15%. For unlisted shares, it is two years. The rate of tax on long-term capital gains is 20% with indexation, and most of the time, the effective taxes would be higher.
Corporate Governance
Public companies have to meet SEBI’s governance requirements, including the appointment of independent directors, an audit committee, and voting rights for minority shareholders. Unlisted firms have fewer governance responsibilities, being that decisions are generally centralised around promoter(s) or private investors.
Should You Invest In Unlisted Shares?
Listed shares offer stability and easy tradability, but unlisted shares provide the chance to unlock asymmetric returns. By investing before a company goes public, investors can capture value at its fastest growth stage. Though less liquid and transparent, this often means unlisted shares remain undervalued, making them attractive for long-term, high-growth potential.
