The upcoming initial public offering (IPO) of the National Stock Exchange of India Ltd (NSE) is expected to significantly impact the country’s primary market while disrupting the rapidly growing trade in unlisted shares. As the operator of the world’s busiest derivatives market, NSE has been estimated to represent around half of the trading volume within India’s shadow market for unlisted shares, according to data from trading platform UnlistedZone.
The NSE’s move to list publicly is anticipated to reduce activity in the private trading space, presenting a challenge for the numerous platforms and specialist brokers that have flourished by facilitating transactions in unlisted shares. Over the past two years, as India’s IPO market saw record fundraising, the unlisted market became an attractive venue for affluent investors and funds to place bets on companies preparing to go public. This surge in interest gave rise to an ecosystem focused on connecting buyers and sellers and handling regulatory approvals, documentation, and share transfers.
NSE’s unique position as a dominant, profitable market operator with disclosures resembling those of listed companies made it a central player in this space. The existence of its smaller listed competitor, BSE Ltd, provided investors with a benchmark for valuation. Moreover, years of delay in NSE’s own listing created an extended trading window that helped transition the segment from niche to mainstream. Before the IPO, NSE had a shareholder count of more than 231,000—substantially higher than many listed firms—a notable increase from fewer than 80 shareholders in 2016.
According to Sandipan Roy, chief investment officer at Motilal Oswal Private Wealth, NSE’s quasi-listed status fostered an entire industry around unlisted share trades. However, with NSE going public, platforms that depend on its scale and liquidity may face difficulties in maintaining interest. Without a similar issuer providing the size, familiarity, and liquidity NSE offered, these platforms will need to shift focus to smaller firms, which typically present challenges such as lower financial transparency and limited liquidity.
Despite these hurdles, some sector specialists foresee sustained selective demand for unlisted shares, especially in emerging industries like space technology, aerospace, defense, and data centers. Rajan Shah, founder of 3A Capital Services—which operates a platform for unlisted share trading—identified companies such as Sterlite Electric Ltd, Indofil Industries Ltd, Krasny Defence Technologies Ltd, Berar Finance Ltd, Kineco Ltd, Indian Potash Ltd, and Garuda Aerospace Ltd as drawing market interest.
Investing in unlisted shares has yielded mixed outcomes. Some investors in prominent companies, including HDB Financial Services Ltd and Tata Capital Ltd, incurred losses, and shareholders of NSE acquired in the past year may also face valuation declines ahead of the IPO. Yet, as Umesh Paliwal, co-founder of UnlistedZone, noted, the unlisted market has occasionally delivered substantial returns, with timing and valuation remaining critical factors for success.