Thinking Of Investing In Unlisted Shares Like NSE Or Chennai Super Kings? Here’s Zerodha’s Nithin Kamath’s Big Warning

Zerodha Founder and CEO Nithin Kamath has issued a strong warning to retail investors rushing to buy unlisted shares of popular companies like NSE, Chennai Super Kings, and Reliance Retail.

Kamath explained that while unlisted shares are being sold as the next big way to make money, the reality is far riskier than many realise.

What Nithin Kamath Said?

“A wealth manager approached us recently to buy one of our unlisted companies so that he could sell it at a 50% markup immediately. The popularity of some of these unlisted companies, like NSE, MSEI, Chennai Super Kings, among retail investors, etc., is crazy,” he said.

According to Kamath, many investors think they can simply buy pre-IPO shares, wait for the IPO, and pocket huge listing gains. But this is often not how things play out.

“Most investors think they can make easy money by picking these pre-IPO companies, waiting for the IPO, and making big listing gains. But it’s not as easy as it sounds, and there are all sorts of risks.”

HDB Financial Services IPO

One recent example is HDB Financial Services. The shares had traded above Rs 1,500 in the unlisted market. But when the IPO price band was announced, it was set at Rs 700-740, about 40% lower. Investors who bought at inflated prices suffered steep losses when the IPO was announced.

Kamath pointed out that, unlike stock exchanges, there is no proper price discovery for unlisted shares. Platforms that sell them often add huge markups and commissions, sometimes between 30% and 200%, making it almost impossible to know the fair value.

"Unlike stock exchanges, there’s no price discovery for unlisted shares. The markups and commissions are ridiculous. These platforms are also unregulated, so there’s nobody to protect you.”

Another risk is liquidity. Even if a company plans to list, it could take years. For instance, NSE has been discussing an IPO for over a decade but has still not listed. This means investors can get stuck with their shares and no way to sell them.

“Companies can go a long time without an IPO like NSE, which means you can get stuck without liquidity. Unlisted companies also make fewer disclosures than listed companies.”

Also Read: Vodafone Idea Share Price: Why VI Shares Surged 15% In 5 Days?

Tax headaches

Besides the risk of losses, owning unlisted shares also creates tax headaches. Investors have to manually track dividends and calculate fair value when they sell. Kamath advised that most investors are better off sticking to regulated options like mutual funds rather than trying to pick unlisted companies in an unregulated market.

“You are better off investing in mutual funds than trying to pick unlisted companies. We recently wrote a post about the risks.”

In December 2024, SEBI also clarified that platforms selling unlisted shares could be violating securities laws, further highlighting the regulatory risks involved.