What UNLISTED EQUITY market means for different categories of investors?
Promoter:
Route for Promoters, especially start-ups, to raise small amount of capital without higher levels of stock dilution through IPO
Provides valuation reference point for further fund raising.
Employees:
Helps in monetising ESOPs by providing exit route for the ESOPs earned.
Exit route if company chooses to remain unlisted for longer period of time.
Investors:
Entry to lucrative new age businesses at reasonable valuations not available in listed space.
Pre IPO investment to ensure confirmed allotment (if available).
Benefits of Investing in Unlisted Equities:
Novel Investment option aiding in diversification of overall portfolio.
Entry to new age businesses at an early stage providing scope of immense future growth.
Availability in smaller ticket sizes allows portfolio creation of unlisted securities.
Confirmed allotment (subject to stock availability)
Limited correlation with listed market space leads to stable prices in short term.
Exposure to vast unlisted small and medium enterprises.
Risks of Investing in Unlisted Equities:
Price/Valuation Discovery of shares’ in unlisted space can be difficult unlike listed space.
Stock Liquidity is mainly dependent on demand and supply If there is a poor demand for any unlisted stock, then it limits the exit option for investor.
Lengthened investment cycle in case of non-listing of the scrip.
Transaction and trading price is outside the Purview of Regulatory Authority; which may lead to malpractices.
One year Lock in after stock listing; exposes investor to higher market risk post listing.
Early stage companies could pose higher risk for a business model failure.
