Unpacking Unlisted Share: Navigating the World of Private Markets

"When a company goes public, it often makes headlines. But recently, more fast-growing businesses have turned to the unlisted share capital market to raise capital. In 2020, there were nearly 2.5 times more investments in the private or unlisted market than the public market—why?" 

 J.P. Morgan published the above statement in one of its recent articles titled 'Unpacked: Private and Unlisted Capital Markets." But before we unpack and disseminate information about the knits and knots of the unlisted share markets, predominantly in the Indian context, we would like to ignite intellectual curiosity amongst our unlisted share market aficionados with our inaugural article on "What are Private Markets?"  

Why do parents invest in their child's education? Why are they always on their toes to keep their child healthy? Why do they shell out humongous chunks of money on their children? Take a pause and think for a second. So, if I am not wrong, "out of love" might be those three words that would have popped up in your head at first. Well, I have a different take on this. I agree that they do it out of love, but is it just because of love? No, right? When parents invest so much of everything in their children, they want to equip these naive creatures with every possible thing that will help them create 'VALUE' for themselves in the future so that they can help this world.

Now, when you extrapolate this analogy to the private markets, you will not only have the answer to "What are Private Markets?" but also understand a few attributes of it. 

An unlisted share market is a 'not-so-mature'  private company space to play, and the private company is similar to a child. The investors are its parents who pour in their money, which helps the unlisted share company run its day-to-day operations, innovate its products, and work on its various other offerings. I mean, look at today's giant whales in the listed space like Nykaa, Latent View Analytics, and Happiest Minds; the magnitude of the spike that their unlisted share prices have shown in a year or even less is terrific! Why? The freedom of choice and the robust business models of these unlisted companies have made them pioneers of revitalizing and mind-boggling creations, which eventually help in restructuring themselves as the whale in an ocean. 

Thus, as an investor, it is your responsibility to dive deep into understanding the nuances of their business to spot the bigwigs in their nascent stage to reap benefits later. 

Remember, private markets are not riskier than public/ listed markets. As you need to be more careful with the younger ones, you need to be more hawk-eyed while analyzing this bunch of unlisted companies. 

•  What is the difference between Public and Private companies?

The regulation parameter distinguishes between the publicly and privately/ unlisted held (unlisted) companies. Let's take a straight drive into the fact that the market of listed companies is heavily regulated by stringent laws to achieve standardization, transparency, and securitization of the interests of investors, ultimately making them investor-friendly. On the other hand, the regulatory measures for the unlisted share companies are less stringent to a specific valuation so that these unlisted companies can have a space to play around with more freedom. 

Another thing that differentiates them is the formalization factor. The publicly listed companies have to produce annual reports and other related documents in every quarter, which is a good thing as it offers transparency. In contrast, this is not the case with unlisted companies in the private markets. The private markets have a mix of both, where unlisted companies thrive on inducing reliability, assurance, and transparency by providing various reports. 

Then, others can be labeled as foul players as they rob people of the transparency aspect, which makes investing in them a lot harder because there isn’t enough information to arrive at a conclusion in favor or against these curtain-wrapped entities. 

Anyways, promising companies in any sphere have nothing to hide! 

Lastly, speaking of the shortcomings of the retail investors, there have been many. Still, the most profound one is high entry fees. They make the transaction in bulk, which kills off the ease of trade or the liquidity factor, as none of the market makers are willing to make pocket-friendly transactions from a retail investor's point of view. Well, this hasn’t been an issue for HNIs & UHNIs, as they have been dominant players in this space. 

• What's in there for retail investors? 

Retail investors can perceive this opportunity as a proposition to start value investing. Many investors will argue that buying unlisted shares of good unlisted companies when they are underpriced is where the heart of value investing lies, but it is not limited to this. Unlisted companies that are growing at a steady pace have shown unbelievable adherence to the governing principles. They are working diligently towards diversifying their portfolio of offerings, doing justice to every penny they have bagged through several rounds of funding and are also the ones who deserve to be respected.  

As these are the mammoths in the making, now more than ever is a better chance to be part of their growth story!  

• What does Precize have to offer?  

We here at precize.in understanding that this space of private markets in India has not been explored much, and even if it has been, the kind of experiences the investors have had speaks volumes about how uncanny it has been for them. Therefore, we are here to provide the community of investors with a transparent and technologically vibrant platform for trading in private shares. Furthermore, we operate to democratize the unlisted share markets by amplifying its awareness. By securitizing our client's interests to instill trust and confidence in the unlisted share markets, we offer a universal entry price irrespective of the strata and build ourselves as a platform that respects the privacy of its users.

Precize is trying to create an exclusive community of active investors passionate about the future of unlisted share markets in India. If you'd like to join and invest on a friendly budget early, you should apply for access and get in early!