Bengaluru-based startup Minance is looking to bring online trading in unlisted stocks by offering a similar experience for traders to buy a phone a book from an e-commerce company.
The bootstrapped startup is beta testing the platform and hopes to launch in the coming days. The platform lists available stocks that are available and can be bought just in a few steps.
"We have 21 stocks currently available. Users with a Demat account can purchase these shares by simply adding them onto the cart, the minimum threshold for purchase is of Rs 50, 000," said chief executive officer Anurag Bhatia.
The Demat account allows an investor to invest in securities such as stocks and bonds and these are held in a digital form. A Demat account is necessary to invest in the stock market.
Unlisted stocks are largely traded by brokers over the phone in an unregulated market. Created in 2016, Minance is trying to leverage technology to make the process digital.
Currently, he receives orders from customers over the phone and then contacts brokers who can access unlisted stocks and the entire process is done manually.
Now, the startup has automated the entire process. Customers place an order online and they automatically go to the brokers. This is followed by an online reverse auction and the one offering the cheapest price gets to sell. Shares are generally credited to the customer's Demat account within seven days.
While the front end of the process may look like an e-commerce transaction, trading in unlisted stocks is not easy.
The unlisted trading market depends on the availability of stocks of startups such as Paytm, Swiggy, Oyo, Nykaa, and even traditional companies that are not listed in the markets such as Carrier, HDB Financial Services, National Stock Exchange and HDFC Securities, among others.
Liquidity is always a challenge, as many startups have strict rules on buying and selling their shares. Selling these shares is not always easy, as people hold on to these hoping to exit through a blockbuster IPO.
These shares are generally sold by staff who are given employee stock options. When they leave the company, many prefer to sell their shares in the secondary market.
"As for stocks not available at that moment, we enter into a forward contract with the trader who waits for the allocation of shares," Bhatia said. This happens to companies like Oyo and Swiggy, which only allow their shares to be exchanged during an external funding round.
Minance records around Rs 10 lakh worth of trades every day, but Bhatia expects a jump in volume once activated with the full stack digital process.
Around Rs 4 crore worth of trading daily in the unlisted space. Many other platforms like Unlistedzone are involved in this business. Traders mostly rely on offline brokers to procure these shares.
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