NSE IPO threatens India's unlisted share

The upcoming initial public offering of the National Stock Exchange of India threatens to trigger a sharp drop in activity in the country's unlisted share market. According to an estimate from trading platform UnlistedZone, the operator of the world's busiest derivatives market accounted for roughly half of the trading volume in this shadow market.

As India set consecutive records for IPO proceeds over the last two years, the unlisted market became a venue for wealthy individuals and funds to bet on companies in the listing pipeline. This booming interest fostered an ecosystem of online platforms and specialist brokers connecting buyers and sellers. The NSE had been a linchpin of this growth due to its scale, profitability, dominant position, and disclosures that mirrored listed companies.

Sandipan Roy, chief investment officer at Motilal Oswal Private Wealth, described the situation. "NSE was quasi-listed," he said. "It spawned an entire industry."

The exchange had 231,378 shareholders ahead of its IPO, more than several listed companies. This compares with fewer than 80 shareholders it had in 2016, according to its draft prospectus from December of that year. Until last year, NSE made monthly disclosures on share transfers. Its final such release in March 2025 showed nearly 15 billion rupees, or about $170 million, of shares changing hands during that month.

Platforms face a challenge

Staying relevant without NSE may prove difficult for the platforms that have mushroomed over the years. No current issuers offer the combination of size, familiarity, and liquidity that NSE provided. These intermediaries may now have to persuade investors to trade shares of smaller companies, which typically have less financial disclosure and thinner liquidity.

Rajan Shah, Founder of 3A Capital Services, which operates a platform for dealing in unlisted shares, pointed to potential new areas of interest. We expect interest in the unlisted market to remain selective as companies emerge across sectors such as space technology, aerospace, defense, data centers and other new-age industries, he said.

Shah listed several companies attracting market interest, which are presented in the table below.

Investment risks and returns

Investing in unlisted shares has not always proved profitable. Investors in some high-profile names, including HDB Financial Services Ltd. And Tata Capital Ltd., suffered losses. Those who bought NSE shares over the past year may also enter the IPO sitting on losses.

However, there have been success stories. Umesh Paliwal, co-founder of UnlistedZone, noted the potential for significant gains. There have also been instances of outsize returns in the unlisted market, Paliwal said. Ultimately, entry timing and valuations are critical. The presence of smaller listed rival BSE Ltd. Had given investors a valuation benchmark for NSE, while years of delays in its listing meant an unusually long trading window in the unlisted space.

That extended window helped turn a once-niche corner of India's financial system into a mainstream investment avenue. It gave rise to intermediaries that assisted investors with the regulatory approvals, documentation, and transfers needed to buy shares outside of public exchanges.