Unlisted Shares | Clerk and Clerk Finvest

Why buy unlisted shares through Clerk and Clerk Finvest?

We are a one stop financial supermarket for buying/selling all unlisted and delisted shares.
Goodwill of over 15 years.
500+ HNI clients, Institutions and collective base.
Immediate execution of deals.
No hidden charges.
Most competitive prices.
Hassle free trade.

What are unlisted shares?

There is a huge market of unlisted shares running apart the formal stock exchanges. This is the market for unlisted shares. Unlisted shares trade Over the Counter or in the OTC market. The shares which are not listed on the formal stock exchanges are referred to as unlisted shares/ stocks.

Unlisted shares are riskier than listed shares as its liquidity is limited since it is not listed. They are less transparent but with more stable valuations. If you can pick an unlisted share that has all the potential to get listed and the company has growth potential, your returns can be amplified enormously from that share.

Is it safe to buy unlisted shares?

Unlisted shares trade over-the-counter (OTC) where buyer and seller of these shares directly trade the instruments and they get connected via intermediaries. This market is not and thus trading in unlisted shares bears credit risk. However, unlisted shares are generally traded between companies, big brokerage houses, and HNIs or institutional clients. Going by the reputation of the market participants of unlisted shares, the risks get minimized. The risk also decreases if you can choose the right intermediary for trading in unlisted shares. Clerk and Clerk Finvest has been assisting our customers to invest in unlisted equities.

However, the main risk lies in the investment choice itself, that whether the company, whose unlisted shares you are buying may go public or not, the price of shares will increase or it will the company wind up its business. The only option is to do an in-depth analysis of the company’s fundamentals and other factors before investing in any unlisted share.

Difference between unlisted & delisted shares

Unlisted shares are different from Delisted shares. Both of these types are completely different. While unlisted shares are those which are not listed on the stock exchanges yet, delisted shares are those which were once listed but dropped out from the listed shares category due to certain reasons.

You can trade and invest in unlisted shares on OTC markets but you cannot invest or trade any delisted shares. Delisted shares are not available on any platform whether it is formal stock exchanges or OTC.

Companies have unlisted shares when they may not have plans for issuing IPO or they do not meet the requirements of SEBI to list the shares on any stock exchange like NSE or BSE. On the other hand, companies have delisted shares when they either do not adhere to any disclosure guidelines provided by SEBI and stock exchanges and thus they get delisted from stock exchanges, or the management of the company wants to delist the company itself.

Tax Implications

Since unlisted shares are different from listed ones, the tax implications are different as well. Unlisted shares if sold within 24 months, then short-term capital gain tax is applicable on the profits and thus taxed at marginal tax rate. However, if it is sold after 24 months, then long-term capital gain tax will be applicable @20% and you get the benefit of indexation as well. However, the profits are calculated as per FMV until the shares get listed on any formal stock exchange. Once and if the unlisted shares you have purchased get listed on the stock exchange and then you sold your investment, the tax implication will be as listed equity shares only, that is long-term capital gain tax @10% on profits above Rs. 1 lakh without the benefit of indexation.

Conclusion

Unlisted shares can turn out to be that hidden gem if you can pick the right one. It can provide exponential returns to the investors. The most important factor which needs to be considered while choosing unlisted stock is the companies’ fundamentals and the intermediary via which you will buy the shares. Clerk and Clerk Finvest has been providing services related to unlisted shares and since trust is essential while investing in unlisted shares, you need to choose a reliable intermediary.

Unlisted shares Valuation

The valuation of unlisted shares is done following the Fair market value (FMV) method. Since they are not on the stock exchange and thus no actual market price exists for unlisted shares, FMV is calculated by the underwriters or the investments bankers.

For calculating the fair market value, the book value of all the liabilities of the company (L) is deducted from the book value of all the assets the company (A) possesses. Then the amount derived is multiplied by the paid-up value (PV) of equity shares and then divided by the total amount of paid-up equity share capital (PE) as per the balance sheet of the company.

FMV = (A-L) * PV/PE

There is another way of calculating the value of unlisted shares and that is DCF or Discounted Cash Flow method. Here all the future cash flows are anticipated and then discounted at a particular rate to get the present value of the shares. However, this method is difficult as all the cash flows are not real but anticipated ones but this method is quite popular amongst the unlisted share investors.