Zerodha's Nithin Kamath warns retail investors on unlisted shares: Better off with mutual funds

Retail interest in unlisted shares—like NSE, MSEI, and Chennai Super Kings—is soaring. But Nithin Kamath, co-founder of Zerodha, has issued a warning: “It’s not as easy as it sounds.”

In a post on X, Kamath stated that a wealth manager had recently approached Zerodha to purchase one of its unlisted firms, only to resell it at a 50% markup. This, he said, reflects how the promise of pre-IPO riches is luring retail investors.

“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,” 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.

— Nithin Kamath (@Nithin0dha) June 27, 2025

No price discovery, no protection

Unlisted shares are sold on opaque platforms without transparent price discovery.

“The markups and commissions are ridiculous,” Kamath warned.

Since these platforms are unregulated, investors have no legal protection if things go wrong.

He cited the example of HDB Financial Services, which set its IPO price band 40% below the last traded price on unlisted markets, leaving many investors sitting on notional losses even before the IPO.

No guarantee of IPO or exit

Some unlisted firms may delay their IPOs for years, or never list at all.

Kamath noted the case of the Stock Exchange (NSE), which still hasn’t been listed despite years of speculation.

“You can get stuck without liquidity,” he said.

Unlisted companies also make fewer financial and business disclosures compared to listed ones, making it hard for investors to evaluate risks properly.

“Investing in unlisted shares is like walking a minefield”

In a blog post titled The Risks of Investing in Unlisted Shares, Bhuvanesh T V from Zerodha’s Rainmatter team explains why these investments can be dangerous for retail investors.

“Investing in unlisted shares is like walking a minefield blindfolded,” he wrote.

He explains that there is no standard pricing mechanism for these shares, and the same company can be offered at wildly different valuations across platforms. Commissions are often embedded in inflated prices, making it hard to know the real worth of what you’re buying.

Bhuvanesh also points out that liquidity is one of the biggest concerns. Even if an IPO eventually happens, investors might be subject to a lock-in or face a listing price lower than what they paid.

'Mutual funds better bet'

Kamath ended his thread with a piece of advice:

“You are better off investing in mutual funds than trying to pick unlisted companies.”

Mutual funds offer diversified exposure, are well-regulated, and come with robust disclosure norms, making them far safer for retail investors.