As we all know, nowadays Unlisted equities are gaining more popularity among retail investors and the competition between new-age companies/startups is reaching the pinnacle’s threshold for being listed on the stock market.

The majority of unlisted shares and stocks are related to new start-ups/small-scale businesses. Eventually, small-scale businesses have a smaller basis with a large scope and hence expand more quickly than well-established businesses.

Investing in new start-ups at an early stage will benefit the investor more because it will result in greater profits and ownership holdings. Early investment in a start-up not only promises huge profits but also makes sure that the investor provides guidance and decisions to the business. Every stage a startup goes through represents different opportunities and risks for investors.

Unlisted equity includes shares and stocks which are available over the counter and not listed on the stock exchanges. With emerging start-ups and new-age companies, investment in pre-IPO/ESOP shares of companies has become more relevant amongst investors.

Investment in unlisted shares/stocks comes with its own share of risks and rewards. To diversify the portfolio every investor must be aware of the risks and returns associated with every type of investment before choosing to invest. This will help to achieve their financial investment's realistic goals.

The risk associated with investment in Unlisted Shares

Investors always looking to diversify their portfolios, At Rurash Financials we want to make sure, that our investors are fully informed before investing in unlisted equities,

Here are some of the risks associated with investing in Unlisted shares:

  1. Loss of capital investment is the biggest potential list when it comes to investing in the equity of unlisted companies.
  2. Since these companies are not listed on any exchange, there is no fair market price that you can track daily, instead a fair value must be arrived at.
  3. Investments in unlisted companies attract higher rates of taxation policies
  4. Pricing of the companies basically depends upon the buyer’s or seller’s needs.

Factors to consider before investing in Unlisted Shares

Examine the company's business

  1. Discover the management's long-term objectives for the business.
  2. Research the company's income sources, revenue mix, and cash flow risk

Go Through what is the company’s value proposition

  1. Evaluate the firm's advantage over competitors in the sector.
  2. Check out what is the Unique Selling Proposition of the company's products and offerings

Look at the company's valuation

  1. Research the buying/selling price of the company's unlisted shares in the grey market
  2. Examine and compare valuation is higher or lower than its peers

Check out the future potential of the company

  1. See the business's expansion strategies and funding sources.
  2. Analyze and Research future prospects and growth plans of the company and execution strategy

Advantages of Investing in Unlisted Shares

Businesses in the pre-IPO stage often have an established revenue model and can raise more money from the market by going public. As such bets include risk, they should only be undertaken by aggressive investors. Investing in a firm that is set to make its IPO (initial public offering) may allow an investor to share in a company's growth.

The value of unlisted firm stock on the grey market is typically less erratic than on the primary market. Additionally, buying stocks on the grey market is no longer just a luxury enjoyed by big institutions or investors. The gray market is now open to private investors.

  1. Profitable-return potential investments: Shares are frequently overpriced or undervalued for a longer duration of time as they are not very liquid. As a result, an investor may make a sizable return if they can purchase shares when they are cheap.
  2. Risk diversification: Since unlisted equity shares are a separate asset class, they provide some risk diversification for investors who have significant holdings in listed stock markets and mutual funds.
  3. Investments in businesses with high growth potential: Unlisted businesses are frequently smaller in size and have not yet grown to the point where they could consider becoming public in order to raise funds. Because of the small base effect, investments made when a company is still tiny and during its growth phase before becoming public typically produce high returns.
  1. Less Volatile Price Range: Unlike listed equity shares, unlisted equity shares' values are frequently less volatile, so investors don't need to worry about daily price fluctuations.

Conclusion

Buying/selling of stocks is a common way for people to increase their income. Unpopular as it may be, buying pre-IPO shares from startups or firms may actually help you make a lot of money. A substantial profit could be made by purchasing shares in a company while it is still in its early stages of development.

Rurash Financials offers a unique investment opportunity, providing a secure environment for unlisted equity investments while ensuring peace of mind. When you choose Rurash Financials, you gain access to a range of exclusive benefits that set you apart from the competition.

To know more, reach us today or write to unlisted@rurashhfin.com

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