How to Buy Pre-IPO Shares: A Beginner’s Roadmap

More retail investors across India are looking into how to buy unlisted shares offered before companies go public and are listed on stock exchanges. It is completely legal to buy unlisted shares as long as you comply with KYC guidelines and the shares are transferred to your account in demat form.

However, the process is very different from buying shares on stock exchanges such as the BSE or NSE.

Researching will be an essential step, and this guide outlines the steps involved in the purchase of shares starting from the time you finish your research to the time the shares are credited into your demat account.

Table of Contents

• What Are Pre-IPO Shares?
• How The Unlisted Market Functions
• Buying Process Overview
• Documents Required
• Understanding Price Mechanism
• Companies Most Investors Track
• Pros and Cons
• Genuine Transaction Verification
• Tax Obligation
• Buying Checklist
• Summary
• Frequently Asked Questions (FAQs)

What Are Pre-IPO Shares?

Pre-IPO shares or unlisted shares are shares of companies that have not been listed on any of the recognized stock exchanges. As the shares are not publicly listed, they cannot be traded in public order books; instead, the buyer and seller will come to an agreement on a price and will execute a transfer of the shares through their respective demat accounts.

Companies usually remain unlisted to continue to raise private funding or to wait for optimal conditions to undertake an Initial Public Offering (IPO).

Some of the frequently tracked companies are NSE Unlisted Shares and OYO Unlisted Shares, and there are many other unlisted companies you may wish to explore.

How The Unlisted Market Works

Since there is no centralized order book, buyers and sellers interact through intermediaries who negotiate the price and execute the transfer. Off-market transfers are always an execution of a direct transfer between two demat accounts.

The transfers are done using Delivery Instruction Slips (DIS) or an online request, the same way that transfers are done for any publicly listed shares.

Step-by-Step Buying Process

• Investigate the firm along with the industry, and any DRHP/UDRHP submitted to SEBI.
• Pick a reputable marketplace with documented transparency.
• Confirm share availability along with lot size and pricing.
• KYC Details
• Banks require proof of KYC for their clients.
• Share Payment
• Paid through documented banking channels.
• Share Transfer
• Initiated by the seller via a DIS or electronic transfer.
• Demat Credit
• Confirm your demat account with a credit for the share transfer.
• Research → Confirm → KYC → Payment → Transfer → Demat Credit
• Documents Required: PAN, Aadhaar, active demat account, bank account, KYC documents.

How Prices Are Determined

Pricing of unlisted shares is a function of supply and demand, share financial performance, private valuations, sector view, IPO, and more.

Buyers and sellers estimate share value. Unlisted share prices can vary across platforms. Hence, best practice is to explore multiple sources.

Companies Investors Track

Popular searches for unlisted shares include MSEI Unlisted Share, Polymatech Unlisted Share, Zepto Unlisted Shares, NCDEX Unlisted Share, and Onix Renewables Unlisted Share.

Note: The names of these unlisted shares are shared for educational purposes, and no recommendations are given.

Benefits of Early Investment

The potential upside of purchasing shares in companies that have not traded publicly includes getting in on investments early to create a more diverse portfolio and the ability to earn the possible financial rewards that come with the purchase of shares in a privately held company. Those privately held companies still carry market and liquidity risk.

Key Points To Remember

• It is legal when done using proper KYC and demat transfer procedures.
• There is no central marketplace.
• Verify each step before and after a transfer.

Confirm Valid Transaction

Verify transfer information from the seller, check your DP’s portal for demat credit, keep KYC and payment documents, request a contract note, and retain payment documents.

Tax Impact

Selling shares that are unlisted will be subject to a capital gains tax and will have different holding period requirements than shares.

Checklist Before Buying

• Company research conducted.
• PAN, Aadhaar, demat established.
• Platform checked for transparency.
• Required details and lot size confirmed.
• KYC established.
• Payment evidence secured.
• Demat post-transfer credit checked.

Comparison: Listed vs Unlisted vs Pre-IPO Shares

Feature	Listed Shares	Unlisted / Pre-IPO Shares
Traded on Exchange	Yes	No
Price Discovery	Real-time through stock exchanges	Negotiated between buyer and seller (off-market)
Liquidity	High	Lower
Disclosure Norms	Continuous regulatory disclosures	Limited disclosures
Transfer Mechanism	Exchange settlement through stock exchanges	Off-market transfer via DIS or Demat

Conclusion

There are no exchange safety nets when buying pre-IPO shares, so exploring the private company ecosystem in India requires research, verification, and documentation. The diligence of other financial decisions is required for this practice.

Before making any decision, learn about the unlisted market with more resources on DelistedStocks.in.

​FAQs

Disclaimer:

This article is for information and educational purposes only. It is not investment advice, a recommendation, or a solicitation to buy or sell any security. Please do your own research and consult a financial advisor before making any investments.