1. With IPO allotments scarce, retail investors are chasing unlisted shares for early access to big names.
2. Many IPOs debut below unlisted highs, locking in early losses for pre-IPO buyers.
3. Opaque, unregulated markets with steep mark-ups and poor disclosure make unlisted shares a dangerous bet.
Once seen as the battleground for high-net-worth individuals, the unlisted shares market is fast becoming the newest playground for retail investors. As enthusiasm for initial public offerings (IPOs) among this segment cools, partly due to intense competition for allotments, many are shifting their attention to the even riskier world of unlisted shares. The lure lies in the hope of buying into companies at what are perceived to be lower valuations, well before they take the step into the primary market.
In reality, the story is less rosy. A growing number of companies are pricing their IPOs below the levels seen in the unlisted market, leaving retail investors nursing losses even before the shares begin trading publicly. This has been the case with several prominent listings. From HDB Financial Services’ high-profile IPO in June and NSDL’s offer in July to Tata Technologies’ listing in late 2023, multiple companies have entered the market at prices well below the peaks their shares commanded off-market.
For those investing through the IPO itself, gains were uncertain. For those holding unlisted shares, the outcome was more predictable, they already knew the IPO price would be lower than what they had paid. A recent example is NSDL, which priced its IPO at ₹800 per share, well below the unlisted high of around ₹1,250. HDB Financial also priced its IPO at ₹740 a share after its unlisted stock had traded at nearly double that level, around ₹1,525.
“Unlisted shares were once the preserve of high net worth individuals (HNIs) and ultra-HNIs, largely due to high minimum investments and limited access,” analysts at Incred Money noted. “That picture has changed significantly. Digital platforms have made investing in unlisted shares almost as straightforward as buying listed ones, and retail participation has grown sharply. Many investors are attracted by the lower entry costs, the chance to bypass the IPO lottery system, and the opportunity to gain early exposure to well-known names such as OYO and NSE.”
At present, the biggest magnet for retail money in the unlisted space is shares of the National Stock Exchange. The exchange’s IPO has been anticipated for almost a decade, repeatedly delayed by regulatory hurdles. Recent positive signals have renewed hopes of a listing next year, pushing demand for its unlisted shares above ₹2,000. Yet uncertainty remains, not only over whether the IPO will proceed, but also over the eventual pricing. This leaves retail investors of unlisted shares in a potentially difficult position if the listing price falls short of expectations.
“The popularity is clear as NSE’s shareholder base has now crossed 150,000, which shows the growing appetite among retail investors,” Incred Money added. Other names drawing strong retail interest include the IPL franchise Chennai Super Kings and Tata Capital.
With a strong pipeline of companies expected to tap the market, unlisted shares have become the latest trend on Dalal Street. The appeal is easy to see as IPO oversubscriptions often limit retail allocations, but buying shares pre-IPO sidesteps that problem. The risk, however, is equally clear, if the eventual IPO price comes in lower than the unlisted purchase price, those early investors may face losses before the shares even reach the secondary market.
Zerodha co-founder Nithin Kamath also raised concerns about the growing frenzy among retail investors around unlisted shares, warning that the risks are far greater than many realize.
“Unlike stock exchanges, there's no price discovery for unlisted shares. The markups and commissions are ridiculous. These platforms are also unregulated, so there's nobody to protect you. Companies can go a long time without an IPO like NSE, which means you can get stuck without liquidity. Unlisted companies also make fewer disclosures than listed companies. You are better off investing in mutual funds than trying to pick unlisted companies,” Kamath wrote in a post on social media platform, X.
Unlisted shares operate very differently from listed ones. They do not trade on regulated exchanges, and there is no centralised marketplace or transparent pricing mechanism. Instead, they are sold through unregulated platforms, where sellers can set any price they wish. This contrasts with listed markets, where prices reflect fundamentals, sentiment, and supply-demand dynamics.
“These platforms often source shares in companies like NSE, Chennai Super Kings, Boat, or OYO Rooms, add a mark-up, and charge a commission. Combined, these costs can range anywhere from 30–40% to even 100–200% above the base price,” wrote Bhuvanesh R, a financial analyst at Zerodha.
Although such platforms have existed for years, they remained niche until after the pandemic, when retail participation in markets surged. Yet the challenges are considerable. Picking quality listed stocks is difficult enough, even with regulations, disclosures, and research coverage. In the unlisted space, limited transparency, minimal disclosures, and scarce analysis make the task far harder.
Price movements in this market are often detached from business performance, and can swing sharply on speculation. In December 2024, Sebi clarified that online platforms trading in unlisted shares are in breach of existing securities laws, adding further risk for retail buyers.
“The prices of unlisted shares can rise and fall by triple-digit percentages without any fundamental trigger. A mere rumour can send them soaring, drawing in unsuspecting retail investors. It’s the classic pump-and-dump, only in the unlisted market,” Bhuvanesh added.
For retail investors, the unlisted shares market offers both the allure of early entry and the hazard of opaque pricing and limited safeguards. The potential rewards are undeniable, but so too are the risks, particularly when speculation overtakes caution.
As the unlisted space grows in accessibility and popularity, the onus lies on investors to look beyond the promise of quick gains and assess whether the fundamentals, the pricing, and the time horizon truly justify stepping in before a company makes its public debut.