How do you profit from investing in unlisted shares in India.

“Live like there is no tomorrow but invest as if there were 5 years left,” is a quote by Rakesh Jhunjhunwala. 

 We all know the Famous Rakesh Jhunjhunwala, often known as the Big Bull of India, an Indian billionaire, Chartered Accountant, stock trader, and investor. But what most of us might not know is his journey to become a billionaire. We have a very simple way to describe his journey in just 3 P’s: “ Purchase, Patience, Profit.” 

Rakesh Jhunjhunwala began investing in 1985 with a capital of Rs 5,000, with his first major profit in 1986. Jhunjhunwala started with $5,000 in capital in 1985, and his first significant profit came in the form of $5 lakh in 1986. Between 1986 and 1989, he earned almost ₹20–25 lakh profit. By 2022, his investment had grown to ₹11,000 crores. As of 2021, his most significant investment was in Titan Company, worth ₹7,294.8 crores.

The stocks that he invested in are as follows: 

1. The successful IPO that Nazara Technologies launched in 2021.

2. Star Health

3. Tata Motors 

He invested in twenty unlisted companies, from which he earned major profits from 2 of those companies. 

The curious part is how to earn profits from investing in Unlisted Shares. 

When you invest in unlisted shares, how you make money can change depending on the type of investment and how well the company does. 

• Profit when the company's value goes up: 

If the company becomes more valuable over time, the unlisted shares you own become worth more, and you can liquidate these unlisted shares for a profit.

• Get a share of the company's profits: 

Some companies, when they make a lot of money, like to share a part of those earnings with the people who own their unlisted shares. These earnings that they share are called 'dividends.' It's like getting a small portion of the company's profits. For instance, Otis Elevator India distributed dividends thrice from September 2022 to October 2023.

• Liquidate your unlisted shares back to the company:

Now and then, the company you've got unlisted shares of might want to buy back the unlisted shares it sold initially to you. They do this because they believe their unlisted shares are worth more than you paid. If you agree to liquidate your unlisted shares back to the company at this higher price, you'll make some extra money – that's your profit!

• Sell to another investor:

Sometimes, you might meet another person who's interested in investing in the unlisted shares you own. If they're willing to pay more for those unlisted shares than you originally paid, you can liquidate them and make some extra money.

For example, let's say you have unlisted shares in 'ABC Corporation,' and you meet a friend who thinks those unlisted shares are valuable. If your friend offers to invest in those unlisted shares from you at a higher price than what you spent to invest in them, you can say yes and pocket the profit.

There are also platforms like 'Precize' that specialize in repurchasing unlisted shares, making it easier to liquidate your unlisted shares.

• Profit from a merger or acquisition:

Imagine the company you invested in becoming so successful that another big company decides to invest in it. When this happens, you might receive a special reward. It could be cash or unlisted shares in the bigger company that's doing the investing. This special reward is like a profit for you. In the first half of 2020, Capgemini acquired Altran Technologies, the former owner of Aricent Technologies. This acquisition brought all the companies under the Altran group, including Aricent, into Capgemini. This was a highly profitable move for Aricent shareholders.

For instance, let's say you invested in 'TechStart Inc.' and 'BigGrowth Corp.' sees how great TechStart is doing. BigGrowth decides to invest in these unlisted shares of TechStart, and as a result, you receive some cash or unlisted shares in BigGrowth. This is how you make a profit when two companies merge or when one company acquires another.

• Make money when the company goes public: 

Even though you bought unlisted shares, the company might decide to become a publicly traded company through an IPO. Then, you can liquidate your shares on the stock market, potentially at a higher price. Listed companies that were unlisted before are:

1. Nazara Technologies

2. Dmart

3. Bombay Stock Exchange

• Profit when the company is liquidated:

If the company is dissolved, unlisted shareholders might get a share of the remaining assets after debts are settled.

A few other ways to earn profits by investing in unlisted shares were discussed in how to buy and sell unlisted shares.

 Unlisted Shares that have shown growth potential over the past period.

• Hero Fincorp

• HDFC Securities

*Disclaimer: This information is for private use only and does not constitute investment advice. Recipients must assess risks and seek advice from financial, legal, and tax professionals. Private market investments carry risks, and there are no returns or capital protection guarantees. We are not liable for investment decisions.

To learn more facts about the unlisted share market, stay tuned to Precize.