Unlisted shares represent ownership in companies not traded on public stock exchanges, making their valuation a critical step for investors. Whether you own shares from a startup, a pre-IPO company, or as part of an Employee Stock Ownership Plan (ESOP), knowing how to check the value of your unlisted shares is essential for informed decision-making.
In this detailed guide, you’ll learn what unlisted shares are, the factors that drive their valuation, the leading valuation methods, and practical steps to estimate their worth.
What Are Unlisted Shares?
Unlisted shares refer to equity shares of companies that have not listed themselves on major stock exchanges like the NSE or BSE. Investors may acquire these shares from:
- Startups and private companies
- Pre-IPO offers
- Employee stock ownership plans (ESOPs)
- Private placements and preferential allotments
Since these shares are not traded on open markets, their prices are not visible like listed stocks—making the valuation process unique.
Why Should You Check the Value of Unlisted Shares?
Determining the right value of your unlisted shares matters for several reasons:
- Selling or transferring ownership: Buyers and sellers need a fair estimate to negotiate a price.
- Tax computation: Accurate valuation is crucial for capital gains taxation.
- Personal investment tracking: Helps in portfolio management and strategic planning.
- Compliance and regulatory reporting: Some transactions require certified valuation per legal norms.
Key Factors Influencing Unlisted Share Valuation
Valuing unlisted shares involves analyzing variables that differ from listed stocks. Below is a table summarizing the major factors that play a role:
| Factor | Description |
|---|---|
| Financial Performance | Revenue, net profit, cash flows, and overall balance sheet strength |
| Industry Trends | Growth dynamics, regulation, and competitive environment |
| Recent Transactions | Price disclosed for recent deals involving the company’s shares |
| Future Growth Prospects | Projected earnings, market expansion plans, and innovation potential |
| Investor Demand | Interest from existing investors, VCs, or new buyers |
| Corporate Developments | Mergers, acquisitions, leadership changes, and significant operational decisions |
These parameters together help paint a holistic picture of how much your unlisted shares may be worth.
Common Methods for Valuing Unlisted Shares
Professional valuation combines art and science. Here are the standard approaches:
1. Net Asset Value (NAV) Method
NAV focuses on the company’s assets and liabilities. The value per share is calculated by subtracting total liabilities from total assets, then dividing by the number of shares.
Formula:
NAV per share=Total Assets−Total LiabilitiesNumber of SharesNAV per share=Number of SharesTotal Assets−Total Liabilities
This method is straightforward and ideal for investment or holding companies with significant tangible assets.
2. Earnings-Based Valuation (P/E Multiple)
Here, valuation is based on profit-generating potential. If you know the company’s earnings per share (EPS) and the typical Price-to-Earnings (P/E) ratio for its sector, use:
Formula:
Value per share=EPS×Industry P/E RatioValue per share=EPS×Industry P/E Ratio
This model works best when the company has consistent profits and sector benchmarks are available.
3. Discounted Cash Flow (DCF) Method
DCF projects future cash flows and discounts them to present values—ideal for high-growth companies or startups. The main steps:
- Estimate future cash flows for several years
- Choose a discount rate (usually weighted average cost of capital)
- Calculate the present value of all future cash flows
Formula:
DCF Value=∑t=1nCFt(1+r)tDCF Value=t=1∑n(1+r)tCFt
Where CFtCFt is cash flow in year tt and rr is the discount rate.
4. Comparable Company Analysis (CCA)
CCA compares the target company’s financials and performance ratios with similar listed peers or recent transactions. This approach is useful when industry data is readily available.
| Method | Best Used For | Key Inputs |
|---|---|---|
| Net Asset Value (NAV) | Asset-rich companies | Assets, Liabilities, Shares |
| Earnings (P/E) | Stable profit companies | EPS, Industry P/E Ratio |
| DCF | Growth-oriented startups | Cash Flows, Discount Rate |
| CCA | Sector-aligned companies | Peer Ratios, Transaction Info |
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Using Financial Statements to Estimate Share Value
To begin, gather the company’s key financial documents:
- Balance Sheet: Shows assets and liabilities—crucial for NAV calculation
- Profit & Loss Statement: Reveals revenue, expenses, and net profit—essential for earnings-based valuation
- Cash Flow Statement: Important when using DCF approach
Step-by-Step Example: Calculating NAV
Suppose the company’s latest figures are:
- Total Assets: ₹100 crore
- Total Liabilities: ₹30 crore
- Number of Shares: 10 lakh
NAV per share=₹100 crore−₹30 crore10 lakh=₹70,00,00,00010,00,000=₹700NAV per share=10 lakh₹100 crore−₹30 crore=10,00,000₹70,00,00,000=₹700
Calculating Value with P/E Multiple
Assume:
- EPS = ₹12
- Peer Group P/E Ratio = 18
Value per share=12×18=₹216Value per share=12×18=₹216
Compare with listed peers—if their average P/E is much higher or lower, adjust accordingly.
Why Use Registered Valuers and Merchant Bankers?
When stakes are significant—such as in ESOP buyback, share transfer, or pre-IPO sales—the law often requires valuation by SEBI-registered entities. These professionals:
- Apply industry-standard methods
- Issue official reports for compliance
- Ensure fairness for all stakeholders
| Situation | Valuation Required | Who Conducts Valuation |
|---|---|---|
| ESOP taxation | Yes | Merchant Banker/Valuer |
| Pre-IPO private sale | Yes | Merchant Banker/Valuer |
| Buyback or company mergers | Yes | Registered Valuer |
| Small individual transfer | Sometimes (tax-driven) | Can self-calculate |
For high-value transactions or when tax authorities request proof, a formal report is indispensable.
Checking Marketplaces & Platforms for Unlisted Share Prices
In India, several digital platforms and dealers specialize in unlisted shares. These sites often provide:
- Indicative prices: Based on recent buy and sell transactions
- Market demand: Shows the number of interested buyers/sellers
- Transaction history: Displays price ranges from previous deals
| Platform Name | Features Offered |
|---|---|
| UnlistedZone | Indicative prices, deal facilitation |
| SharesBazaar | Order book, live quotes, transaction help |
| EquityList | Price discovery, market data |
Note: Prices shown on these platforms are not official and may change quickly. Use these figures as guidance, not gospel.
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Tax Implications and Documentation
When you sell unlisted shares, capital gains tax applies. Key considerations:
- Holding period: Shares held for more than 24 months are considered long-term assets
- Tax rates: Long-term capital gains taxed at 20% (with indexation benefits); short-term gains taxed as per your income slab
- Valuation records: For tax purposes, documented evidence of value (like a valuer report or platform price) is highly recommended
| Type of Gain | Holding Period | Tax Rate | Indexation Benefit |
|---|---|---|---|
| Short Term | Up to 24 months | Slab-wise | No |
| Long Term | More than 24 months | 20% | Yes |
Practical Tips for Indian Investors
- Always keep copies of financial statements.
- Consult a SEBI-registered merchant banker or valuer for large transactions, ESOP monetization, or pre-IPO sales.
- Monitor online platforms regularly for indicative prices and market trends.
- Keep detailed documentation (purchase records, valuer reports, platform screenshots) to avoid tax or compliance issues later.
- Be patient—liquidity in unlisted markets can be low and deals may take time.
Key Takeaways and Final Advice
Valuing unlisted shares involves careful analysis of financials, use of proven methods, and consultation with professionals for big transactions. Regularly checking current market estimates and maintaining proper documentation is critical for smart investing and staying compliant. Remember:
- Unlisted shares carry higher risk and require due diligence
- Never rush to sell without evaluating your options
- Consult experts for large transactions and taxation matters
- Track recent deals and use digital platforms to gauge value
By following these steps and tips, you can confidently check the value of your unlisted shares and make informed investment decisions.
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I am an IT professional with more than 17 years of experience in the industry. Over the past five years, I have developed a strong interest in the stock market, investing in both direct stocks and mutual funds. My background in IT has helped me analyze and understand market trends with a logical approach. Now, I want to share my knowledge and firsthand experiences to help others on their investment journey. Read more about us >>