When people start investigating ownership possibilities, they often struggle with the distinction between equity and unlisted shares, particularly with respect to listed vs unlisted companies in India.
The equity vs Unlisted Shares debate has become even more pertinent with the increasing expansion of private companies and the Indian listed markets.
The purpose of this blog is to provide information on listed vs unlisted companies in India in a balanced manner so that the investors can decide which of the options is more aligned with their investment goals as well as their financial comfort level.
No term is promoted over the other, but rather this article aids the reader on their path to making an informed decision.
Understanding Equity vs Unlisted Shares
It is important to understand the difference between equity and unlisted shares, as both operate under distinct market structures and ownership frameworks.
What are Equity Shares?
Equity shares relate to ownership in corporations listed on recognised stock exchanges such as NSE and BSE, forming the publicly traded segment of equity shares vs unlisted shares.
These companies abide by rules and regulations concerning disclosure as well as trading and exchange.
The principal characteristics of equity shares are:
- Listed on stock exchanges.
- Periodic disclosure of relevant data related to financial as well as governance structures.
- Price is continually assessed.
- Have standard settlement cycles.
- There is a broad participation across the public market.
What Are Unlisted Shares?
Unlisted shares belong to companies that are not publicly listed on stock exchanges, forming an important part of unlisted shares in India.
When buyers and sellers deal with each other, shares are traded through private deals.
These shares are of early-stage companies, or their subsidiaries, and/or companies that are choosing to remain private, usually for strategic reasons.
To comprehend how unlisted Shares work in India, one must pay attention to their main attributes and private market framework.
Many businesses follow this model for strategic reasons, which explains why companies choose to remain unlisted even after achieving scale.
- No trading system based on exchange.
- Limited publicly available information.
- Pricing based on negotiations between buyers and sellers.
- Limited liquidity.
Equity vs Unlisted Shares: Key Difference
When examined across structure, access, liquidity, and holding periods, the difference between equity and unlisted shares becomes significantly clearer.
Understanding these distinctions is very important for investors in order to score the greatest success in the market.
Access and Entry Mechanism
Equity Shares:
Equity shares can be purchased during trading hours on stock exchanges and, once documentation related to accounts is finished, one can easily enter the market.
Unlisted shares:
Access to unlisted shares is determined by existing shareholders and is more difficult than purchases in public stock markets.
These shares are accessed through private-market mechanisms, which differ fundamentally from exchange-based participation in listed vs unlisted companies in India.
Information Availability and Disclosure
The flow of information is a key point of difference in comparing equity shares and unlisted shares.
Equity Shares:
For listed companies, there are mandated disclosure timelines, such as regular updates to stakeholders and reports on financial results.
Unlisted shares:
In the Unlisted share space, there is limited information available to the general public.
In case there is any update regarding an unlisted share company, it is communicated in private to the shareholders, as opposed to being reported publicly on an ongoing basis.
Pricing Methodology
Equity Share Valuation:
Equity Share pricing is determined daily depending on the attention participants are giving in the exchanges, along the demand, supply, and the market sentiments.
Unlisted Shares Valuation:
Unlisted share pricing is primarily determined through negotiated arrangements, as explained in detail under how unlisted share prices are assessed.
Also, the fundamentals of the firm, and other financial parameters, plays an important role in deciding the unlisted share price.
Liquidity and Holding Period
The evaluation of equity vs unlisted shares for long term depends on liquidity needs, information comfort, and planning horizon.
Equity share:
Liquidity is generally higher in the case of equity shares, enabling investors to change their exposures with much less friction.
Unlisted Shares:
Unlisted Share offers limited liquidity to the investors. The evaluation of equity vs unlisted shares for long term depends on liquidity needs, information comfort, and planning horizon.
Exposure to Market Volatility
Another important difference between equity vs unlisted shares is the way they respond to market swings.
Equity Shares:
Prices can change in response to news and global events in a matter of seconds.
Unlisted Shares:
There is no impact on unlisted shares by any short-term market movements. The investors’ interest evolves with the company’s progress.
Equity Vs. Unlisted Shares: Comparison At Glance
| Feature | Equity Shares (Listed) | Unlisted Shares |
| Listing Status | Listed on NSE/BSE | Not listed on exchanges |
| Trading Platform | Public stock exchanges | Private market mechanisms |
| Liquidity | Generally high | Limited |
| Price Discovery | Continuous, market-driven | Negotiated arrangements |
| Information Availability | Mandatory public disclosures | Limited public information |
| Market Volatility Impact | Reacts to daily market movements | Not impacted by short-term volatility |
| Holding Period | Flexible | Typically longer-term |
| Compliance Structure | Exchange-regulated | Company-specific processes |
| Suitability | Active tracking & flexibility | Long-term business alignment |
Risk Factor: Equity Vs. Unlisted Shares
There are many forms of ownership and, as such, there is a measure of risk in every portion of ownership. In the case of equity and unlisted shares, the risk comes from different areas.
Risks Considerations in Equity Share:
- Market fluctuations
- Investor sentiment
- Price movement as per market mood
Risk Considerations in Unlisted Shares:
- Limited information is available to the public.
- Presence of finite liquidity.
- Dependence on the available information by the company.
Equity and Unlisted Shares for Long-Term Planning
The evaluation of equity vs unlisted shares for long term depends on liquidity needs, information comfort, and planning horizon.
Equity Is Fit For Investors who:
- Want to deal with regulated and exchange environments.
- Require regular routine reports.
- Track markets on a frequent basis
- Need flexibility in their holding period.
Unlisted Shares are fit for Investors Who:
- Are at ease if they need to hold their investment for the long-term
- Prioritize the underlying business over the price on a daily basis.
- Have a good knowledge of the private market.
- Want to gain exposure outside of the listed markets.
Processes and Compliance Structure
In comparing equity with unlisted shares, having clarity regarding market processes is important.
In equity-related participations, there is:
- Exchange-related compliance systems
- Settlement in standard timelines
- Report in uniform formats
In unlisted shares participations, there is:
- Transfer rules driven by individual company law
- Shareholder registers and their approvals
- Documentation and verification in a structured way
Evaluating Equity vs Unlisted Shares: Why it is important
When assessing equity vs unlisted shares, it is important to consider the following factors:
- The holding period for the investments
- The liquidity requirements
- The comfort level with restricted publicly available information
- The interest level in doing active vs passive tracking
Last Thoughts: Equity Vs Unlisted Shares
When discussing equity vs unlisted shares, the focus is not on which option is better, but on which structure aligns best with individual planning preferences. Equity provides greater visibility and adaptability.
On the other hand, unlisted shares align with the business in the long run and provide early-entry access to the investors in the industry. The most educated decision is one that starts with understanding and progresses with refinement.
Frequently Asked Question’s
Q1-What is the difference between equity and unlisted shares?
The primary difference between equity and unlisted shares is their listing status. Equity shares are available on officially recognized stock exchanges and are subject to continuous disclosure obligations. Whereas unlisted shares pertain to entities not listed on the exchanges and engage in trading via private, intra-company arrangements that operate outside of the company’s daily market activity.
Q2-Why does liquidity differ in equity vs unlisted shares?
The liquidity difference between listed and unlisted shares is because of their character and trading on stock exchanges. Unlisted shares are not traded on stock exchanges and are dependent solely on private negotiations between buyer and seller. This is the reason for limited liquidity and longer holding periods for unlisted shares.
Q3-Why does information availability differ between equity and unlisted shares?
Yes, in equity, information is more easily available than in unlisted shares. The listed firms are subject to mandatory disclosures and reporting calendars. On other hand, unlisted firms share very little information with the public, which is available through direct mail, company registers, or organized systems.
Q4-Why do some portfolios include both equity and unlisted shares in India?
Equity and unlisted shares can be in the same portfolio. Equity is considered for market flexibility and visibility, while unlisted shares are considered for a longer-term strategic alignment with the business. This will depend on the individual’s planning goals, liquidity, and time frame.
Q5-Where can the readers access structured insights on unlisted shares?
Readers can access structured insights on unlisted shares at Delisted Stocks, which offers organized information about companies, transparent documentation, and updated process-driven information.
This platform informs users about private market structures that are not impacted by daily market changes.
Q6-How can investors explore unlisted share markets?
Investors wishing to explore unlisted share domains may consider partner options with our ‘Become our partner’ page. These offerings are tailored for market non-participating professionals seeking long-term partnerships, process transparency, and analytical assistance.
Disclaimer
This article is for informational purposes only and should not be considered investment advice. Prices and data of unlisted shares are based on publicly available sources and may vary. Investors are advised to conduct independent research or consult financial professionals before making investment decisions.
