We all are familiar with the term: stock exchange and how a company receives investments from everyone to rise in the stock market. But only companies that fulfill the SEBI criteria can be registered as listed companies to be part of the global trading market.
A company that does not meet the SEBI criteria or opts to be unlisted is called an unlisted company or organization.
Differentiating a listed and unlisted company is primarily based on stock exchange registration. However, there are other factors too, which help in categorizing a company as listed or unlisted.
Difference between Listed and Unlisted Companies:
| 1. Regulation | The listed companies in India- are regulated by the Security and Exchange Board of India(SEBI). These companies need to follow strict laws & regulations. | Unlisted companies are not controlled by any governing body and follow less stringent laws than listed companies. |
| 2. Investment Advantage | Due to the regulation and monitoring from a governing body, there is less risk when it comes to Listed companies. | Unlisted companies- are not impacted by market sentiments and are thus less volatile than listed companies. |
| 3. Liquidity | Listed companies- are easily liquified due to the facile availability of stocks. | Unlisted companies have less liquidy because of the unavailability of the respective market. |
What is a Listed and Unlisted company? How do they differ?
A company is categorized as listed when its securities- are registered on a recognized stock exchange. Anyone can invest in these companies and trade the shares freely.
Usually, listed companies are owned by numerous shareholders. Some of the listed companies in India are- Reliance Industries, HDFC Bank, Nestle, etc. The listed companies in India are categorized- into private limited and public limited companies based on the Companies act of 2013.
What is an Unlisted company?
Unlisted companies are the exact opposite. They are not listed on the stock exchange and can only raise equity through private investments. The trade between the buyer and seller takes place on the over-the-counter market.
In comparison, unlisted companies have more risk factors but also have the benefit of not having an external regulating body which might lead to stagnancy in particular cases.
Also, read:
How to buy Unlisted Shares in India?
How to Sell Esop Shares?
Advantages of Investing in Unlisted Company:
- Unlisted companies are majorly startups or small companies- which tend to have high growth potential and lower base value.
- The price does not fluctuate as in the case of listed companies, and the shares remain undervalued for a significant time. It is ideal for beginners and small investors to invest in unlisted companies for profit maximization.
- When diversifying your portfolio, unlisted companies balance out the total volatility of the companies under your portfolio. This is because unlisted companies are less risky than listed companies.
- Benefit from tax reliefs like the Enterprise Investment Scheme(EIS) and Seed Enterprise Investment Scheme(SEIS).
Some of the Unlisted companies in India:
- boAt
- Tata Technologies
- National Stock Exchange of India (NSE)
- HDFC Securities Limited
- Reliance Retail Limited
- Chennai Super Kings Cricket
- B9 Beverages(Bira 91)
Advantages of Investing in a Listed Company:
- It is easy for listed companies to gain additional capital to support future expansion plans. This is because the stock exchange offers both an increase in credibility and shareholder count.
- Listed companies are held accountable by their shareholders due to the establishment of transparency and productivity.
- Once the company is listed, it increases accountability as they need to follow strict rules. It limits the risks involved for the investors and prevents inconsistencies.
Some of the Listed companies in India:
- Adani Gas Limited
- Bank Of India
- Coal India Limited
- Maruti Suzuki India Limited
- Pidilite Industries Limited
Conclusion:
Conclusively, the stock exchange is not the only factor that makes both types of companies different there are several additional factors. If you are starting your investing journey without expert assistance, it is better to examine the characteristics and the working of unlisted and listed companies before investing. Knowing the founder and promoter’s background before investing in unlisted companies can help in decision-making. However, unlisted companies always run the risk of financial fraud, and even listed companies are investing in unlisted companies.
Frequently Asked Questions(FAQS):
- Is Reliance Industries Limited(RIL) a listed or unlisted company?
Reliance Industries Limited(RIL) is listed on the National Stock Exchange of India(NSE)and the Bombay Stock Exchange of India Limited.
- Can I take a loan from an unlisted company?
Getting a loan against shares of an unlisted company can be difficult. While a few institutions provide ESOP financing, most do not provide loans against unlisted shares. We can help you with loan requirements against unlisted, delisted, and many other investments. Reach out to us at WWIPL
- How do unlisted companies make money?
Unlisted companies do not differ from Listed companies in terms of making money. Both types of companies receive investments that support expansion and growth plans.
- How to know the share price of an unlisted company?
Most online trading platforms provide data related to unlisted companies. This data includes the current market price, capitalization, and the EBITDA score of the company. At WWIPL you can navigate through the essential details like the annual report, market capitalization and demand, and supply, etc., of the company before buying the stock.