3 rules every investor must know before buying unlisted shares: Here’s how to avoid ‘costly’ mistakes

Be it Tata Capital or NSE, the IPO-bound unlisted shares have been buzzing. The recent swing in the price of these unlisted shares of IPO-bound companies have sparked quite a bit of interest and intrigue about the unlisted share market. The simplified rules have also added to the ease of transaction in these shares. However, the sharp plunge in the unlisted share price of NSDL and HDB Financial share price before their listing and the notional loss for investors have raised investor caution as well as the need for concern. This is particularly revelant because the IPO pipeline is significantly strong as we head towards the end of 2025 with close to Rs 40,000 crore fund-raising pipeline.

How to invest in unlisted shares?

Therefore, the big question is how should one approach investments in the unlisted shares? Here are three ‘must-know’ factors that investors can’t afford to ignore.

Don’t forget the basic rules of investment

The first and most important aspect of investing in unlisted shares is the same as any other investment. Most experts and stakeholders in the unlisted share space reiterate that, just like investing in shares or any other asset class, investors should have a clear investment objective when putting in their money in the unlisted share market. It is important that one takes an informed decision and ensures that the said investment aligns with the overall investment objective.

Don’t fall prey to FOMO

As the popular investment advice goes, one must not let either fear or greed influence their investment decisions. The reality of investing in unlisted shares is no different. As Manan Doshi from UnlistedArena.com dealing in unlisted shares, pointed out, “Avoid the fear of missing out on an upcoming IPO and rush to buy the shares. Instead, focus on buying the shares at attractive valuations.”

He was referring to the recent buzz in unlisted shares of upcoming IPOs. Typically, demand for these shares spikes around the time when the IPO timeline is announced. However, depending on the issue price, sometimes these shares see a sharp drop in the price. Industry experts advise that just like any other investment, assessing the value on the basis of long-term valuation is a better metric as compared to short-term buzz.

Don’t ignore the fundamentals

The key point then is how should one value the unlisted shares, or how should they decide that a particular level is fair value? This becomes particularly difficult for unlisted shares, as these do not have a whole lot of analysis either. A company’s fundamentals and the intrinsic value of the business should be the key parameters for assigning value, as per key market players.

As per Doshi, “But whenever you look at an investment, you should go for a longer-term view. Because you cannot easily sell the unlisted shares after listing. There is a six-month locking.”

He highlighted that the relatively less liquid market condition should also make investors very careful about the unlisted shares that they choose to invest in.

Therefore, investors must be careful about not chasing just the IPO buzz. While investing in unlisted shares, fundamentals are crucial, as is the case in most other investment opportunities. The bottom line is that the rules of the investment are fairly the same, and investors must focus on value over buzz.