Lock-in Period Explained in Unlisted Shares
You bought unlisted shares of a company. The company announces its IPO. You are excited — this is the moment you have been waiting for. But here is something many first-time unlisted share investors do not know until it is too late: you may not be able to sell your shares immediately after the IPO.
This restriction is called the lock-in period — and understanding it is essential before you invest in any unlisted share.
What is a Lock-in Period?
A lock-in period is a mandatory holding period imposed by SEBI regulations during which pre-IPO shareholders cannot sell their shares — even after the company has listed on the stock exchange.
In simple terms: once the company lists, your shares become listed shares sitting in your Demat account — but you are legally restricted from selling them for a defined period. You can see the price moving on NSE or BSE every day, but you cannot click sell.
Why Does SEBI Impose Lock-in? Lock-in periods exist to protect public investors. If pre-IPO shareholders could sell the moment a company lists, they could dump large volumes of shares on the market immediately — crashing the price for retail IPO investors. Lock-in ensures a more orderly transition from private to public ownership. |
Lock-in Period for Retail Pre-IPO Investors
As a retail investor who bought unlisted shares before the IPO, here is the lock-in rule that applies to you:
IPO Type | Lock-in Period for Pre-IPO Retail Shareholders |
Mainboard IPO (NSE/BSE Main Board) | 6 months from the date of allotment in the IPO |
SME IPO (NSE Emerge / BSE SME) | 1 year from the date of allotment in the IPO |
The lock-in period begins from the date of IPO allotment — not from the date you originally bought the unlisted shares, and not from the date the company lists. It starts when IPO shares are officially allotted to investors.
Mainboard vs SME IPO A Mainboard IPO is when a company lists on the main boards of NSE or BSE — typically larger companies with higher valuation. An SME IPO is when a smaller company lists on NSE Emerge or BSE SME platforms. The SME lock-in is stricter (1 year vs 6 months) because SME stocks are less liquid and SEBI wants to prevent excessive early selling pressure. |
A Practical Example — NSE Unlisted Shares
Suppose NSE (National Stock Exchange) finally announces its IPO. You hold NSE unlisted shares that you purchased 2 years ago.
Here is the timeline of what happens:
Today | You hold NSE unlisted shares Purchased in the unlisted market. Sitting in your Demat account. |
Day 0 | NSE IPO opens for subscription Public applies for IPO shares. Your existing unlisted shares are separate from this. |
Day 6 | IPO allotment date Shares are allotted to IPO applicants. THIS is when your lock-in period officially begins. |
Day 7 | NSE lists on NSE/BSE Your unlisted shares are now technically listed shares in your Demat. But you CANNOT sell yet. |
Day 187 | Lock-in ends (6 months from allotment) You can now sell your shares freely in the open market. For an SME IPO, this would be Day 371. |
Can You Sell During the Lock-in Period?
No. During the lock-in period, your shares are marked as locked in the depository system (CDSL or NSDL). Any attempt to transfer or sell them will be rejected by the system automatically. There are no exceptions for retail pre-IPO investors.
Plan Your Liquidity Accordingly If you are buying unlisted shares of a company that is close to filing its IPO, factor in the lock-in period in your liquidity planning. Even if the company lists tomorrow, your earliest exit could be 6 months (mainboard) or 1 year (SME) after that. Do not invest money you may need within that window. |
What Happens to Your Shares During Lock-in?
Your shares are fully yours — they show up in your Demat account under your holdings. You can see the live price. If the company pays a dividend during the lock-in period, you receive it. If there is a bonus issue or stock split, it applies to you. You simply cannot sell or transfer the shares until the lock-in expires.
Does the Lock-in Apply to All Pre-IPO Shareholders Equally?
No. SEBI has different lock-in rules for different categories of shareholders. As a retail pre-IPO buyer, the 6-month (mainboard) or 1-year (SME) rule applies to you. Promoters face stricter and longer lock-ins. Anchor investors and QIBs have their own separate rules.
This chapter focuses only on the retail pre-IPO investor — which is you.
Key Takeaways
Lock-in period prevents you from selling pre-IPO shares for a defined period after the IPO, even once listed.
For Mainboard IPOs — lock-in is 6 months from the IPO allotment date.
For SME IPOs — lock-in is 1 year from the IPO allotment date.
Lock-in starts from the allotment date — not from when you bought the shares or when the company listed.
During lock-in, shares are visible in your Demat but the system blocks any sale or transfer.
You still receive dividends, bonus shares, and stock splits during the lock-in period.
Plan your investment horizon to include the lock-in period — your actual exit may be 6 to 18 months after IPO announcement.