Our goal with The Daily Brief is to simplify the biggest stories in the Indian markets and help you understand what they mean. We won’t just tell you what happened, but why and how too. We do this show in both formats: video and audio. This piece curates the stories that we talk about.

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In today’s edition of The Daily Brief:

SEBI's warning to investors against unlisted shares
India doesn’t want Chinese solar cells
US and China are fighting again

SEBI's warning to investors against unlisted shares

What do Oyo Hotels, Chennai Super Kings, the National Stock Exchange, and Bira91 have in common?

At first glance, not much—hospitality, cricket, stock markets, and beer seem like a mixed bag. But here’s the twist: they’re all public companies whose shares are hot commodities in the unlisted securities market.

Now, what exactly are unlisted shares, you wonder? To understand this, let’s dive into the basics of business ownership.

When companies need funds, they raise them by issuing shares, which represent ownership in the business. Investors who buy these shares become shareholders.

Companies looking to raise large sums of capital often consider going public through an Initial Public Offering—an IPO. This lets them tap into a broader pool of investors but also means stricter regulatory oversight and reporting requirements—not every company’s cup of tea.

An alternate route is to remain private, but that comes with its own limitation: for example, as per the Companies Act, a private company can’t have more than 200 shareholders.

But there’s a middle ground. Some companies convert to public limited status. This allows them to raise funds from a wider base of investors without immediately listing on a stock exchange. Once these shares are issued, early shareholders—like employees, venture capitalists, or other investors—can sell their holdings privately to interested parties.

Of course, this is only allowed if the company’s articles of association permit it. In some cases, board approval may also be required.

And that’s where the unlisted securities market comes into play, offering investors a chance to transact in shares of promising companies before they hit the stock exchange.

Interest in this market has surged recently. The stock market boom and the buzz around startup IPOs have drawn attention, but here’s what’s really driven the uptick: the rise of electronic platforms enabling such transactions. These platforms have made it easier for buyers and sellers to connect, leading to a significant increase in activity in the unlisted space.

But here’s the catch:

Earlier this week, on Monday, SEBI issued a press release warning that these platforms violate the Securities Contract Regulation Act of 1956. Why? Because according to SEBI, only recognized stock exchanges can facilitate fundraising and trading for listed or “to-be-listed” entities. SEBI has cautioned investors against dealing or sharing any sensitive personal details with these platforms.

Here’s why:

Look, India boasts one of the best investor redressal mechanisms in the world, thanks largely to SEBI's robust regulatory framework. However, transactions on these platforms happen outside SEBI’s purview, which means that you’ll have no legal recourse if something goes wrong. These platforms act as matchmakers, taking orders from buyers and sellers and handling the transaction themselves. But, there’s a lack of transparency in how prices are determined.

For instance, these platforms don’t operate like the secondary markets, where you see an automated system displaying real-time bids and offers from buyers and sellers. Instead, prices on these platforms are largely driven by demand and supply dynamics. To make things more complex, these prices often include a markup added by the platform itself. Why? Because that markup is typically the platform’s primary source of revenue, helping it sustain its operations. Without it, these platforms wouldn’t have a viable business model.

The process of completing a transaction on these platforms is quite different from traditional stock exchanges. Here’s how it works: sellers first transfer their securities to the platform provider’s account. The platform then works to match the seller with an interested buyer. Once a match is found, the securities are credited to the buyer’s account, and the funds from the buyer are transferred to the seller. While the intermediary role played by the platform ensures the transaction is completed, it also means the platform temporarily holds the securities and funds, which introduces an additional layer of risk and reliance on the platform's integrity.

Another significant concern with transacting in unlisted securities is price volatility. A striking example is Reliance Retail. In 2023, its unlisted share price experienced a dramatic crash, dropping overnight from ₹2,500–₹2,700 levels to ₹1,362. This sudden plunge occurred after Reliance, during a board meeting, decided to cancel all public shares and compensate shareholders at a fixed rate of ₹1,362 per share. The decision blindsided many retail investors, who were understandably outraged by the steep markdown in value. However, given the unregulated nature of such platforms, there was little they could do to seek recourse, leaving them to bear the brunt of the decision.

And this isn’t an isolated incident. In 2022, the logistic company - Delhivery’s unlisted share price dropped nearly 35%—from ₹750 to ₹487—after the company set its IPO price band between ₹462 and ₹487. So, while the idea of getting in early on unlisted securities can be tempting, tread carefully. The unlisted market is lucrative but unregulated, and risks abound.

The future of these platforms remains uncertain. Will they continue to operate as they have been, or will SEBI eventually take action to shut them down or regulate their activities? Only time will tell. For now, SEBI has limited itself to issuing a cautionary advisory, warning investors against engaging in investment or trading activities through unregistered web applications or electronic platforms. This means that while these platforms may still be active, investors are operating in a grey zone, without the safety nets and oversight that SEBI’s regulations provide for recognized stock exchanges. The risks, therefore, are entirely on the investors who choose to transact on these platforms. So, tread cautiously.

India doesn’t want Chinese solar cells

A while ago, India decided to use only Indian-made solar modules. Now, the government has taken it a step further. It has been decided that both solar modules and solar cells must be made in India.

To achieve this, the government has issued an order to include solar cells in the Approved List of Models and Manufacturers (ALMM) starting June 1, 2026. This move aims to boost domestic manufacturing.

Before we dive into the details, let’s quickly explain how solar manufacturing works. The process starts with polysilicon, which is melted down and shaped into blocks called ingots. When these ingots are sliced, the pieces are called silicon wafers. After further cleaning, these wafers turn into solar cells. Finally, you get a solar module when you combine several solar cells.

When all the solar modules are combined, they form a solar panel, which is what actually converts sunlight into electricity.

Now, can you guess which country leads this entire process—not just one part, but the whole thing? It’s China.

China controls about 80% of the entire solar manufacturing process.

The problem with relying on just a few suppliers from one country is that it’s risky. What if the Chinese government decides to restrict exports of solar PV inputs? It’s not hard to imagine that happening.

Like the US, India has long wanted to reduce this dependency. So, in 2021, India introduced a Production Linked Incentive (PLI) scheme. With a budget of about ₹24,000 crore, the goal was to boost local production of solar modules and cut down on imports.

But the government didn’t stop there. They introduced the Approved List of Models and Manufacturers (ALMM). This is an official list that manufacturers must join if they want to supply to government solar projects. The idea was to reduce imports while ensuring good quality in Indian solar manufacturing. To further discourage imports, the government imposed a 25% tax on solar cell imports and a 40% tax on solar module imports, targeting cheap imports from China and other parts of Asia.

When the ALMM was introduced, its impact was mixed. On the one hand, imports of solar modules—especially for government projects—did drop since these projects required ALMM-listed products. This forced developers to source modules from Indian manufacturers, creating a steady market for local companies.

On the production side, some of India’s largest players, like Adani, quickly ramped up their manufacturing capacities. Adani, for example, announced plans to set up a vertically integrated solar manufacturing complex.

Smaller companies also stepped up, working hard to get listed on the ALMM and tap into the growing demand for Indian-made solar modules.

But it wasn’t all smooth sailing.

Domestic production couldn’t keep up with the surging demand for solar modules, especially with India’s ambitious renewable energy goals. Solar developers started voicing concerns about higher costs and the limited availability of ALMM-approved products, which caused delays in project completion. Developers were also frustrated that the ALMM only applied to Indian projects. Exports to other countries didn’t have to follow the same rules, making Chinese imports far more competitive in the global market.

Then came the big decision—the suspension of the ALMM in 2023-24. Why?

Simply put, the government realized that domestic manufacturing hadn’t reached the scale needed. The ALMM was making solar projects more expensive, and India wasn’t installing solar power fast enough to meet its renewable energy targets. So, the government paused the ALMM for a year, allowing developers to import cheaper modules from countries like China. This helped projects move faster and ensured targets weren’t missed—though it increased reliance on imports.

During this suspension, imports shot up. But as of April 1, 2024, the ALMM mandate was back.

The government reintroduced it because several things had changed:

Domestic production capacity had improved.
Costs of Indian-made solar modules began to drop as production scaled up.
The focus on energy security was renewed, with a push to reduce dependence on Chinese imports and build a stronger, more reliable supply chain.

Now, there’s an even bigger change. Starting June 1, 2026, solar cells—the core components of solar modules—will also be included in the ALMM. This means not only must solar modules be made in India by approved manufacturers, but the solar cells used in those modules must also come from ALMM-listed companies.

The big question remains: Can Indian companies like Tata Power and Adani bridge the gap and meet this demand?

US and China are fighting again

The next story about China revolves around the ongoing semiconductor or chip war, which we discussed in the episode dated December 4th.

The U.S. and China have been locked in a tech war since around 2018, and things have only escalated. Both countries are now engaged in a game of tit-for-tat. Most recently, China launched an antitrust investigation into Nvidia, raising concerns about monopolistic practices. To put it bluntly, that’s like the Taliban preaching non-violence.

China, after all, dominates several industries—solar power, electric vehicles, lithium-ion batteries, and more. But let’s break down what led to this move by China.

The saga began in 2019 when the Trump administration targeted Huawei, one of China’s biggest tech giants. Huawei wasn’t just making smartphones—it was leading the global race to build 5G networks. The U.S. accused Huawei of being a national security risk, claiming its equipment could be used for spying. In response, the U.S. blacklisted Huawei, requiring American companies to get special approval to sell technology to it. The U.S. even pressured allies like the UK and Australia to ban Huawei equipment.

This move crippled Huawei.

The company relied heavily on American semiconductors and software like Google’s Android to power its phones and telecom equipment. But Huawei tried to get around these restrictions by sourcing chips from other suppliers outside the U.S.

The Trump administration wasn’t satisfied. It tightened the rules, banning even foreign suppliers from selling chips to Huawei if those chips were made using American technology. This was a strategic blow. Huawei’s smartphone sales nosedived globally, forcing the company to pivot to new industries just to survive.

When Biden took office in 2022, he didn’t ease the pressure. Instead, he doubled down. The Biden administration announced sweeping restrictions to block China’s access to advanced semiconductors and the tools needed to make them. These chips are critical for technologies like artificial intelligence and advanced military systems. The aim was clear: slow down China’s progress in high-tech sectors and protect U.S. dominance.

China wasn’t going to take this lying down. In July 2023, it retaliated by restricting exports of gallium and germanium, two rare minerals essential for making advanced semiconductors. These might not be household names, but China controls about 80% of the world’s gallium supply and 60% of germanium production.

Without these materials, making high-end chips becomes incredibly difficult. This was China’s way of saying, “If you’re going to cut us off from technology, we’ll cut off your access to raw materials.”

But the back-and-forth didn’t end there. By October 2023, the Biden administration hit back harder, expanding restrictions on AI chips and chip-making equipment. The new rules banned the sale of even more advanced chips to China and tightened controls on the tools needed to manufacture them.

China wasn’t about to back down. In November 2023, it targeted another critical material: graphite. It imposed new restrictions on high-purity graphite, a key component in electric vehicle (EV) batteries. This was a direct blow to U.S. EV ambitions, as 95% of synthetic graphite production and nearly all graphite refining happens in China. Without access to this material, EV production in the U.S. faces serious challenges.

The tit-for-tat escalated even further in 2024

In September, China upped the stakes by banning antimony exports to the U.S. Antimony, a crucial material for making semiconductors and military-grade explosives, became another tool in China’s trade arsenal. This wasn’t just a symbolic move—China produces nearly 63% of the antimony used by the U.S., and prices doubled within three months of the restrictions. With no domestic production, the U.S. was left scrambling to find alternative sources.

In response, the Biden administration struck back with even stricter semiconductor export controls. The U.S. added more Chinese companies to its Entity List, further restricted AI chips, and tightened rules on tools critical for advanced manufacturing. These new measures targeted 140 Chinese firms and expanded the foreign direct product rule. This meant that even foreign-made equipment containing U.S. components couldn’t be shipped to Chinese companies on the list without special approval. The goal was clear: to make it nearly impossible for China to develop cutting-edge chips capable of powering military AI or other advanced technologies.

China didn’t hold back either. Its Ministry of Commerce announced its toughest export controls yet, focusing on dual-use technologies—materials that can be used for both civilian and military purposes. This included outright bans on gallium, germanium, and antimony exports to the U.S. The message was loud and clear: China was ready to use its control over critical minerals as a weapon.

And as we mentioned earlier, China’s regulators recently opened an antitrust investigation into Nvidia, accusing it of anti-competitive practices. Nvidia, which dominates 90% of the global AI chip market, has been a key player in this tech war. The timing of the investigation—just days after the U.S. expanded its chip export restrictions—was no coincidence.

This is no longer just a trade war. It’s a full-scale battle for control over the future of technology.

- This edition of the newsletter was written by Venu and Krishna

Tidbits

Air India ordered 100 more Airbus planes, increasing its total fleet order to 570 aircraft. This expansion supports its ambitious transformation plan, solidifying its competitiveness in India’s booming aviation market.
Vodafone Idea raised ₹1,980 crore to address its ₹2.16 lakh crore debt burden but faces pressing payments and competitive pressures. Long-term survival depends on further funding and effective debt management.
Passenger vehicle sales fell 14% YoY in November, with urban markets slowing and high inventory levels persisting. Rising entry-level car prices and competition from used cars add to post-festive season challenges.

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The Daily Brief by Zerodha

Before you invest in unlisted shares, read…