What Are Unlisted Shares?
As the name suggests, unlisted shares are financial instruments and securities not listed in the stock market. These shares are traded in over-the-counter (OTC) markets and are thus known as OTC securities. Unlisted share companies are more petite or newer firms that prefer not to trade on any public stock exchange. They don’t meet specific requirements like listing fees, market capitalization, etc. However, one of the main reasons investors buy unlisted shares is the high return post-listing on the stock exchange.
What are some Investment Opportunities for NRIs in Unlisted Companies?
There are different investment opportunities for NRIs if they want to invest in the unlisted companies in India, which include:
- Pre-IPO Investment
Companies that are not listed in the stock market are known as pre-IPO investment companies. Being an NRI, you can invest in such pre-IPO companies without the involvement of exchange houses. The share will be deposited in your NRI Demat Account. Even though the trade is off-the-record, the shares will still be deposited in your NRI Demat account. Investors and traders can purchase and sell company shares in pre-IPO marketplaces before the company is listed on stock exchanges. You can connect with the unlisted share broker to invest in pre-IPO companies.
- Investment in Startups
NRIs can also invest in startup companies for exponential growth and higher investment returns. Though it is riskier to invest in startup companies, investors can make a very high return profit from 100% to 1000%.
- Buying ESOPs Directly From Employees
Another best way to buy unlisted shares in India is ESOPs (Employee Stock Ownership Plans). NRIs can contact unlisted share brokers in India to help them connect with the employees of different companies who want to sell their shares at a specific price.
- KYC and documentation required
For NRIs, investment in unlisted shares in India has become easier with the KYC process. The essential documents required at the time of investment include – a PAN card, NRI Demat account, and other documents.
Can NRIs receive short and long-term capital gains on unlisted shares?
NRIs can invest in unlisted shares in India on a non-repatriation basis. However, they can also buy shares on a repatriation basis, but they must report the transaction to the RBI. The gain on unlisted shares will be considered short-term only if these unlisted shares are sold within two years, and the income will be taxed at the marginal rate.
