What Happens to Unlisted Shares After an IPO? A Complete Guide for 2025 Investors

Investing in unlisted shares has become increasingly popular, especially among high-net-worth individuals, family offices, and savvy retail investors. With the buzz around high-profile companies like NSE and Reliance Retail potentially going public, one question is being asked more than ever, What happens to unlisted shares after an IPO?

This guide breaks down what you need to know in 2025, including how unlisted shares transition into listed ones, the lock-in period rules, tax implications, and how to plan your exit strategy after the listing.

Understanding Unlisted Shares and the IPO Transition

Unlisted shares are equity shares of a company that are not yet listed on stock exchanges like NSE or BSE. These shares are often traded in the grey market or acquired through private placements before a company launches its Initial Public Offering (IPO).

Once the company goes public, your unlisted shares undergo a process of conversion and reclassification, making them eligible for trading on the stock exchange. But it's not as simple as selling them on day one.

Let’s take a closer look at the journey your unlisted shares go through after an IPO.

What Happens to Unlisted Shares After an IPO?

When the company you’ve invested in launches its IPO, your unlisted shares get converted into listed shares, but with a few important caveats:

1. Shares Are Credited Under a Lock-In Period

Your shares will be credited in your demat account as listed shares, but you may not be able to sell them immediately. This is because SEBI mandates a lock-in period for certain categories of pre-IPO shareholders.

2. Price Discovery Begins in the Open Market

The listed price of the company is determined through investor demand and supply once the shares are listed on the exchange. This price may be higher or lower than your purchase price in the unlisted market.

3. Post Lock-In, Shares Become Fully Tradable

After the lock-in period ends, your shares are like any other publicly listed stock. You can sell them on the stock exchange via your demat account through your broker.

Lock-In Period: Why You Might Not Be Able to Sell Immediately

Lock-in periods are a regulatory requirement to prevent sudden mass selling of shares after an IPO. Depending on your investor category, SEBI mandates different timelines:

Investor Category Typical Lock-In Period Promoters 18 months (reduced from 3 years in some cases) Pre-IPO Investors (HNIs, AIFs) 6 months Employees (ESOP holders) 6 months Retail IPO Allottees No lock-in

Why Some Unlisted Shareholders Can’t Sell Immediately After an IPO

If you bought shares before the IPO, either through intermediaries or private deals, you likely fall under the “pre-IPO investor” category. This means you’ll need to wait for six months post listing before selling your shares.

How to Sell Your Unlisted Shares After the IPO

Once the lock-in period ends, here's how you can sell your shares:

Step 1: Monitor the Listing Price

Track the company’s share price after listing. Use tools like NSE/BSE websites, financial news platforms, or your brokerage account to keep an eye on the stock’s performance.

Step 2: Check Demat Status

Ensure your shares are visible as listed equity shares in your demat account. If not, contact your broker or the intermediary who facilitated your initial purchase.

Step 3: Place a Sell Order

Use your trading account to sell the shares once the lock-in expires. Depending on the market conditions, you can place a market or limit order.

Tip: Avoid rushing to sell on the first day post lock-in unless valuations are strongly in your favor.

What Are the Tax Implications for Unlisted Shares After They Get Listed?

Taxation on unlisted shares differs based on when and how long you held them before the IPO.

1. Before Listing (Unlisted Status)

If sold before the IPO or during the lock-in period via an off-market transaction:

Short-Term Capital Gains (STCG): Taxed as per your income slab if held for less than 24 months.
Long-Term Capital Gains (LTCG): Taxed at 20% with indexation if held for more than 24 months.

2. After Listing (Post IPO)

Once the shares are listed and the lock-in is over:

Listed LTCG (if held for more than 12 months): 12.5% tax on gains above ₹1 lakh (no indexation).
Listed STCG (if sold within 12 months): Taxed at 20%.

Important: The holding period resets from the IPO listing date for LTCG/STCG classification of listed shares. However, past unlisted holding periods may be factored in depending on case law and CBDT clarifications. Always consult a tax expert.

Can You Avoid Lock-In for Unlisted Shares After IPO?

In most cases, no, especially if you're not part of the IPO allotment process. SEBI has clearly laid down lock-in norms to ensure market stability.

However, exceptions may apply for:

Small shareholders with limited holdings
Certain ESOP holders, based on company policy
Shares acquired under specific legal circumstances like inheritance

But for the majority of pre-IPO investors, a 6-month lock-in is standard.

Real-Life Example: NSE Unlisted Shares

Let’s say you purchased NSE unlisted shares in 2023 at ₹3,500 per share. If NSE files for IPO in 2025 at a price of ₹5,000 and lists at ₹6,000, here’s what happens:

Your shares will be converted to listed form in your demat account.
You’ll be subject to a 6-month lock-in from the listing date.
After that, you can sell your shares at market price.
If you sell at ₹6,000, you’ll earn a gain of ₹2,500 per share, subject to applicable capital gains tax.

Final Thoughts

If you're holding unlisted shares after IPO, understanding the lock-in period, taxation norms, and liquidity process is key. While the excitement of listing gains is real, strategic planning and patience are crucial to maximizing returns.

The pre-IPO space continues to attract attention in 2025, but it’s vital to stay informed, work with trusted intermediaries, and always factor in the post-IPO realities.

Unlisted shares can be rewarding, if you know what to expect after the curtain lifts.

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