Optimizing Parental Equity Investments in Non-Traded Companies: A Comprehensive Guide
Parents often hold equity shares in companies for various reasons, including long-term wealth accumulation, family interests, or even lack of immediate liquidity. This guide provides a step-by-step approach for optimizing the value of these equity shares, specifically focusing on companies like Sterlite Industries India Limited, Ador Samia Limited, Essar Gujarat Limited, and Gujarat Telephone Cables Limited. While these shares might not appreciate rapidly, there are strategic moves that can be made to ensure a better exit or cash out.
Liquidation and Market Appreciation: Understanding the Current Scenario
When it comes to equity shares of less liquid companies, appreciation can take a longer time than in more active markets. Shareholders like your parents might not see immediate gains. However, there are two primary methods they can consider to cash out: exiting better at a rally and selling through a brokerage firm.
1. Timing the Market for a Better Exit
A rally is a period of market recovery or growth in the stock market. During a rally, the market value of assets may rise, providing an opportunity for better exit on a smaller investment. However, this strategy requires careful market analysis and timing. Parents should stay informed about market trends and company-specific news that may impact stock value.
2. Selling Through a Brokerage Firm
For a more straightforward and less risky approach, parents can opt to sell their shares through a brokerage firm. This method involves a few steps:
Open a Demat Account with a Full-Service Broking Firm: A Demat (Dematerialized) account is an essential requirement for holding and trading securities in electronic form. A full-service broking firm will offer additional services and advice, enhancing the overall experience.
Submit Physical Stock Forms: If the shares still trade actively in the exchange, these physical forms must be submitted to the broking firm. The firm will then transfer the shares to a Depository Participant (DP), effectively converting them into electronic form.
Transact and Sell: Once the shares are mapped to the Demat account, they can be sold through the broker's platform. The proceeds will then be transferred to the parent's account.
Conclusion
While equity shares in non-traded companies like Sterlite Industries India Limited, Ador Samia Limited, Essar Gujarat Limited, and Gujarat Telephone Cables Limited may not appreciate rapidly, there are still strategic moves that can be made to maximize their value. Whether through a brokerage firm or timing the market at a rally, parents should consult with financial experts to devise a plan that suits their financial goals and timeline.