The unlisted space — quieter, less reactive — has delivered extraordinary growth in recent years. FY25, in particular, was a landmark for investors and shareholders in unlisted companies. Giants like Tata Capital, Studds Accessories, Nayara Energy, Motilal Oswal Home Finance, Cochin International Airport, NSE, and MSEI saw surges in both price and trading activity.
The National Stock Exchange (NSE) delivered a staggering 115% return in just one year, creating not just wealth but also visibility for unlisted equities as a serious asset class. Yet, this segment comes with its own rules and risks, often unknown to the average investor.
Risks & rewards
Despite its appeal, the unlisted space can be unforgiving.
Valuation gaps: Without market-driven pricing, valuations rely on deep financial analysis — and often, speculation.
Liquidity constraints: Concentrated ownership among founders and early investors means fewer buyers and sellers. Exits can be difficult.
Lower investor protection: Regulatory oversight is weaker compared to listed markets, leaving investors more exposed to fraud or mismanagement.
HDB Financial Services, for example, traded as high as ₹1,200 shortly before its initial public offer (IPO) was priced at ₹740. NSDL saw pre-IPO trades at ₹1,100 before listing at ₹800. Such mismatches are not solely about supply and demand — they reflect structural quirks of the market.
Still, many are drawn by the exclusivity of owning rare stocks, the potential for high returns, and guaranteed allotments in certain deals.
As an asset class, unlisted equities has created its niche, so the relevant question is how to stay ahead in this market.
How to invest?
There are various platforms such has Unlisted Zone, Shareskart, Precize, etc that have created a market for unlisted shares. Apart from them, several brokers are actively doing deals through their networks which are usually trust based transactions with little or no due diligence.
Returns from unlisted companies have surged lately, luring investors to jump in without much analysis. Deals are often closed in 2-3 working days — money is wired to the seller and shares land in the buyer’s Demat account — with no share purchase agreement, stamp duty, or regulatory oversight. While this ease has expanded the market, it also leaves investors exposed to poor investment choices and compliance risks.
Why AIFs dominate
A more structured route is via Sebi-regulated Alternate Investment Funds (AIFs), which specialise in research, networking, and valuation discipline. As of 31 March 2025, AIFs had deployed ₹5.3 lakh crore, with ₹3.26 lakh crore in unlisted securities.
Because AIFs are managed by registered fund managers with strong due diligence processes, they avoid many of the traps that individual investors face. Their growing success has prompted Sebi to encourage AIF-led expansion to formalise the market.
Sebi’s push for structure
Realising the potential of unlisted investments and need for regulation, Sebi is acting both on the demand and supply side to create an efficient market place. Recently it was proposed to Cat II AIFs to invest more than 50% of their funds in unlisted securities, enhancing liquidity and participation. With growing investor interest in the listed small & mid-cap companies, Sebi has constantly worked on making it easy for unlisted companies to get listed in the public markets. This makes investments in unlisted companies more legit and gives a clear path of exit to investors.
According to a Motilal Oswal report, over 1,300 unlisted Indian companies each earned profits exceeding ₹1 billion in the last year, totalling ₹7.5 trillion. These companies represent one of the largest untapped investment opportunities in recent times.
The road ahead
For investors, the opportunity is real and the upside is big — but so are the risks. Success will depend on careful evaluation of both the companies and the intermediaries involved.
The future looks bright, but investors must be disciplined in their approach to valuation, liquidity, and compliance.
In short: unlisted is no longer “unseen” — but it’s still a market where informed moves matter most.
Kush Gupta is director at SKG Investment & Advisory.
