Demat is short for "dematerialised" — an account that holds your shares in electronic form instead of physical paper certificates. It is opened with a Depository Participant (your broker) under CDSL or NSDL. Holding shares in demat makes transfer instant, secure and compliant with SEBI rules.
Why it matters to you
You cannot buy or hold unlisted shares without a demat account — paper certificates are no longer transferable for most companies. When you purchase unlisted shares, the seller credits them to your demat via an off-market transfer, and you can confirm receipt by checking your holdings statement. The same account later receives any IPO allotment, bonus or split.
Example: A buyer's unlisted shares appeared in their demat holdings two working days after payment, matched by ISIN. Related: how to transfer unlisted shares between demat accounts.