Even before the IPOs hit the market, there is a lot of buzz being created in the grey market i.e. the market of unlisted securities. In respect of Shyam Metalics and Energy IPO that is scheduled for June 14 and today was opened for bidding by anchor investors, the shares in the grey market traded at a premium of Rs. 140-Rs.145 per share as on Thursday i.e. a nearly 50% premium over the issue price of Rs. 306.
Similar has been the case for Reliance Retail unlisted shares which on June 9 as per a leading dailies report was changing hands at an over 40% premium in comparison to its price one month back. So, if you are even elated and can visualise the profits you can make by investing in unlisted securities, here are given some 6 key ways via which you can invest in unlisted securities:
Not to forget, the valuation of Paytm shares has also gained substantially in the grey market as the payments entity inches closer to its public offer.
Now here are given 6 ways of buying unlisted shares:
1. Pre-IPO funds:
Pre-IPO funds provide an opportunity to invest in the company even before it goes public. These funds are structured similar to AIFs or Alternative Investment Funds.
Suitable for: Super wealthy/Large investors
Minimum investment ticket size: In eight figures or Rs. 1 crore
First AMC to come up with dedicated Pre-IPO funds: IIFL AMC
Return from Pre-IPO funds: As per IIFL AMC which manages an asset pool of over Rs. 10,000 crore in pre-IPO funds, the returns from the instrument have been in the range of 10-15%. For the listed portfolio, the IRR or internal rate of return comes to be between 16-30 percent.
2. Portfolio Management Services (PMS) or Alternative Investment Funds (AIFs):
This is another route that can be taken by HNI, NRI and foreign investors for buying unlisted securities as investment into these schemes or funds involve a huge sum of money. Financial entities managing these schemes buy into unlisted shares and capitalize on the lower pre-IPO valuation for generating higher return as and when the listing happens and valuations surge.
3. Buying unlisted shares directly via intermediaries such as brokers, wealth management firms or specialized start-ups:
You can open a demat account with these intermediaries such as brokers or for that matter startups for buying unlisted shares. Minimum investment size for investment into unlisted securities via this route is Rs. 50,000 for every company and while the payment has to be made on an upfront basis, the delivery is done on the basis of T+3 days i.e after 3 days of buying the securities, so there is counter-party risk involved in the process that investors need to take a note of.
4. Buying unlisted shares from employees:
Some large scale organizations offer ESOPs or employee stock option plans to their employees via which they get equity ownership in the company. These ESOPs then allow employees to buy shares of the company at a pre-specified rate and after a pre-defined period. Now if employees wish to redeem or sell off their unlisted shares holding then you can purchase unlisted equity from them. For the same also, you would need to approach brokerage firms as they are acquainted with which unlisted shares are on offer.
5. Via Private Placement
There is a procedure referred as Private Placement via which promoters of the company offer/ place their stake in the company for sale. The unlisted securities are kept with wealth managers and bank and so investors intending to invest in unlisted securities can do so via private placements. Also, via this route you can even own a larger stake in the company as these promoters promoting the company generally have a high ownership in them.
6. Buying unlisted shares from crowdfunding platforms:
Several crowdfunding platforms are available that allows individuals to invest in the equity shares of unlisted companies. Now as you are investing in the business via crowdfunding route, you are indirectly supporting the business venture and in a case if it fails to sustain, you shall be at loss, so investors need to keep note of this investment risk in mind.