Direct Equity
There were many public issues where we have seen successful listings of RBL Bank, Avenue Supermarts, Ujjivan Finance and many more. Most of these shares were actively traded in the unlisted space where investors saw significant gains when the stock got listed.
Purchasing unlisted equity through secondary market is relatively easier way for retail investors to get exposure to a privately held company. This has emerged as a new investment option for the investor.
Benefits
- Novel Investment option aiding in diversification of overall portfolio.
- Entry to new age businesses at an early stage providing scope of immense growth.
- Availability in smaller ticket sizes allows portfolio creation of unlisted securities.
- Limited correlation with listed market space leads to stable prices in short term.
- Exposure to vast unlisted small and medium enterprises.
Key Risks
- Price/Valuation Discovery of shares’ in unlisted space can be difficult; unlike listed space.
- Stock Liquidity is mainly dependent on demand and supply. If there is a poor demand for any unlisted stock, then it may lengthen investment cycle in case of non-listing of the scrip.
- Transaction and Trading price are outside the purview of Regulatory Authority.
- One-year Lock-in aer stock listing; exposes investor to volatility post listing.
- Early-stage companies could pose higher risk for a business model failure.
