In a current submit on X, Kamath shared how a wealth supervisor approached Zerodha to purchase shares in one in every of its unlisted firms, aspiring to promote them instantly at a 50% markup. He described the craze for shares of firms just like the Nationwide Inventory Trade (NSE), Metropolitan Inventory Trade (MSEI), and Chennai Tremendous Kings amongst retail buyers as “loopy.”
“Most buyers suppose they’ll make straightforward cash by selecting these pre-IPO firms, ready for the IPO, and making massive itemizing features. Nevertheless it’s not as straightforward because it sounds, and there are all kinds of dangers,” Kamath cautioned.
He pointed to HDB Monetary Providers as a current instance, noting that its IPO worth band was set almost 40% beneath the final traded worth on unlisted platforms, burning many early buyers.
Based on Kamath, one of many largest issues with the unlisted shares market is the dearth of worth discovery. In contrast to inventory exchanges, the place trades occur transparently and costs mirror market demand and fundamentals, unlisted shares are traded on unregulated platforms—with no oversight and sometimes extreme markups and commissions.
Additional, there’s no assure of liquidity. Some firms can take years to go public—NSE’s IPO, for instance, has been within the works for over a decade. Within the meantime, buyers are caught with illiquid shares and have little or no visibility into the corporate’s efficiency.“Unlisted firms additionally make fewer disclosures than listed firms,” Kamath famous. “You might be higher off investing in mutual funds than making an attempt to select unlisted firms.”To offer deeper context, Kamath linked to a weblog submit by Bhuvan, a monetary researcher at Zerodha, which breaks down how these platforms perform and why buyers ought to be cautious.
“They mixture the availability of unlisted shares like NSE, Chennai Tremendous Kings, Boat, Oyo Rooms, and many others., add a markup to the value, after which promote them,” Bhuvan wrote. “On high of the markups, there are commissions as effectively. In lots of circumstances, the markups plus commissions might be anyplace from 30–40% to 100–200%.”
Bhuvan famous that the post-COVID funding increase drew extra retail curiosity into these markets, fueled by a easy pitch: uncover the following massive firm earlier than it lists. However the actuality usually doesn’t match the promise.
The weblog additionally cited current losses, together with HDB Monetary Providers, the place shares as soon as traded above Rs 1,500 within the unlisted market however have been later priced at Rs 700–740 within the IPO band. Equally, in 2023, buyers in Reliance Retail misplaced as a lot as 60% after a discount in share capital.
In December 2024, Sebi issued a round warning that transactions on such unregulated platforms could also be unlawful:
“Sure digital platforms and/or web sites are facilitating transactions in unlisted securities of public restricted firms. Such actions are in violation of the Securities Contract (Regulation) Act, 1956, and SEBI Act, 1992,” the regulator stated.
Bhuvan ended his weblog with a blunt actuality test for retail buyers:
“Should you don’t have an edge, you’re simply persevering with the age-old custom of retail buyers donating cash to the markets—this time with out tax advantages.”
Kamath and Bhuvan’s message is evident: unlisted shares are high-risk, low-transparency, and sometimes overpriced. Retail buyers are higher served sticking to regulated funding choices like mutual funds, ETFs, or direct equities by means of inventory exchanges.
(Disclaimer: Suggestions, options, views, and opinions given by the specialists are their very own. These don’t symbolize the views of The Financial Occasions)
