A) The benefits of investing in NSE unlisted shares
NSE stands for “National Stock Exchange’. It was incorporated in 1992 and recognized as a stock exchange in 1993. Being a leading stock exchange in India, there are multiple benefits of investing in NSE unlisted shares-
1. Exponential Growth
In the last three years, NSE revenue has soared exponentially. The revenue increased to Rs. 9500 crore in FY22 from Rs. 3896 crore in FY20 and EBITDA increased to Rs. 7069 crore from Rs. 2655 crore for the same period. EPS rose almost three times to Rs. 104.95 in FY22 as against Rs. 38 in FY20.
2. Higher Liquidity and Trading Volume
NSE has higher liquidity than BSE. Which means buying and selling the shares through NSE is easier than BSE and there are better opportunities to convert stocks into money. The volume traded on the NSE is way more than on the BSE, which implies many buyers and sellers are available for stocks. while the BSE has less trading volume. This attracts more investors to trade through the NSE, resulting in more business for the company compared to its competitors.
At the moment, the NSE has a market share of 90% of the cash market volume and 100% of the FnO market volume.
3. Advance Technology
NSE offers advanced technology. The NSE is the most modern and technology driven exchange which enables a shorter settlement cycle and book entry settlement. Using an electronic trading system, the NSE provides a transparent securities market. This makes the NSE stand out among all the exchanges in India which ultimately makes it the most preferred exchange,which again results in more business for the company compared to its competitors.
NSE is also selling its technology for the capital market in other asian countries.
B) The risks associated with investing in NSE Unlisted Shares
There are many risks involved in the purchase of NSE unlisted shares.
1. The primary and most important risk is liquidity. When you need to sell your shares, you may have difficulty finding purchasers. If a company’s fundamental performance is poor in the unlisted market, the price of its shares will fall, and finding a buyer will become difficult. If the company is functioning well, then liquidity may not be an issue. In fact, in the last 3 years, the share price of NSE has gone up from Rs. 1000 to Rs. 3500 per share. A true multibagger has returned in the last 3 years.
2. The second concern is the absence of a regulatory framework. Currently, SEBI has no regulations regarding the unlisted market. Therefore, you may end up purchasing unlisted shares at a greater price than what they will receive in the IPO. This will lead to losses on the investment. So, always buy from a trusted seller in the market.
3. There is a six-month lock-in period after the listing. So, you can’t tell what will happen to the price of a share after it has been listed for 6 months.
C) The potential returns of investing in NSE Unlisted?
NSE stands for “National Stock Exchange’. It is the biggest stock exchange in the country and the 12th in the world. A quality unlisted stock for long term investment. It has already given a 3x return to investors in the last 3 years. And more will come in the next 10 years for long term investors.
The NSE is also one of those stocks which has the potential to give an exceptional return on investment. Looking at the figures of the last three years, NSE revenue is soaring exponentially. The revenue increased to Rs. 9500 crore in FY22 from Rs. 3896 crore in FY20 and EBITDA increased to Rs. 7069 crore from Rs. 2655 crore for the same period. EPS rose almost three times to Rs. 104.95 in FY22 as against Rs. 38 in FY20.
In terms of volume, the NSE is the largest stock market exchange in India. Incorporated in 1992 by big insurance companies, financial institutions, and banks, NSE is the leading stock exchange in the country.
D) What to look for when investing in NSE Unlisted Shares?
There are various points which you need to be mindful of while investing in NSE unlisted shares. The first point which we need to look for is the financial performance and current status of the company in the market. And while looking at the financial statistics of NSE, the company is performing well. Established 117 years later The company holds the position of being the biggest stock exchange in the country. The company is far ahead of its nearest peer in terms of revenue and PAT.
You should also know about applicable taxes on NSE unlisted shares. Similar to listed shares, Long-term and short-term capital gains are applicable. Before investing in NSE unlisted shares, one should be vigilant about the risks involved in unlisted shares of NSE. One of the prevalent risks is liquidity. Sometimes, it might be difficult to liquidate the shares. But if the company is performing well, there is no issue with liquidity. Apart from this, dilution in valuation and the absence of a regulatory framework are some of the major risks. For a better return, investors should plan for long term investment.
The tax implications of investing in NSE Unlisted Shares
The tax implications for NSE unlisted shares are Long-term and short-term capital gains. Long-term and short-term capital gains are different on listed and unlisted securities. For unlisted shares, short-term capital gains are taxable as per the normal tax slab for investors.
For listed shares, if the holding period is less than one year, then the short-term capital gain is taxed at the rate of 15%. If the holding period is more than a year, long-term capital gain is taxable at the rate of 10% without indexation benefit for profit over Rs 1 lakh.
For unlisted shares, if your holding period is more than two years, long-term capital gain is applied at the rate of 20% after indexation, and if the holding period is less than 2 years, the STCG will be applicable at the rate depending upon your individual tax slab.