Investments in unlisted shares like Initial Public Offerings (IPOs) will grow rapidly in the next five years due to increased transparency compared to other new-age businesses, said India Wealth Report 2019 by Karvy Private Wealth.
The report states that individual wealth in unlisted equity increased by 10.29% to Rs.10.54 trillion in FY19 from Rs.9.56 trillion in FY18. Further, it expects individual investments in this space to reach Rs.36 trillion by FY24 at a CAGR of 28.27%.
It sees unlisted shares, direct equity and MF to be the largest contributor to an individual's financial wealth. The report expects individual financial wealth to almost double to Rs.528 trillion by FY24 from Rs.262 trillion in FY19.
However, in FY19 due to the increased volatility in the capital markets, investments in direct equity, MFs and IPOs witnessed lower growth rates when compared to FY18, the report said.
“In the past few years, we have seen considerable growth in the OTC market for the trading of unlisted shares. We saw a huge spurt in public issues in 2016 & 2017 with successful listings of RBL Bank, Avenue Supermarts, Ujjivan Finance, Apex Frozen foods and many more," said the report.
According to the report, unlisted shares have become popular among investors after mutual funds and AIFs have started offering schemes like IPO focussed funds. “There is a large amount of wealth locked into small and medium enterprises in India and many of these businesses will eventually grow big as the economy grows and create substantial wealth eventually for the promoters and investors,” it said.
However, it states that there are some concerns in this segment like the risk of the listing getting delayed due to market sentiment. The report suggests a venture exchange as a solution to this problem as small and medium enterprises, startups and private companies can come to the platform to trade in their shares with accredited investors.