🧩 What a share is: owning a slice of a business

🎯 In 30 seconds: A share is a piece of ownership in a company. If a company is split into 10 crore shares and you own 1,000 of them, you own one part in a lakh of that business. You make money in two ways: the share price goes up, or the company pays you part of its profits as a dividend. You can also lose money, all of it in the worst case. This chapter also sets up the numbers the rest of the course uses: rupees, lakh and crore.

Start with a dosa shop

Picture a busy dosa shop in Bengaluru owned by one person, Meenakshi. She owns 100% of it: the tawas, the lease, the batter recipe, the bank account and whatever profit is left at the end of the year.

Meenakshi wants to open a second outlet but does not have the money. So she splits the ownership of her business into 10 equal pieces and sells 4 of them to friends and relatives for ₹10 lakh each. She now has ₹40 lakh to open the new outlet, and she still owns 6 pieces.

Each of those pieces is a share. Anyone holding one owns part of the whole business, both outlets included. If the outlets do well, each share becomes worth more. If they fail, the shares can become worth nothing.

A listed company like a bank, a cement maker or a software firm works the same way, just with far more pieces. Large Indian companies have hundreds of crores of shares, and anyone with a demat and trading account can buy a few.

Ten slices keep the drawing readable. The idea is identical with 10 pieces or 500 crore pieces.

Lakh and crore: the numbers this course uses

Indian markets count in lakh and crore, not millions and billions, and the commas sit in different places. You will see these numbers in every chapter, on every exchange website and in every company result, so it is worth getting comfortable with them now.

The pattern for commas: the first comma comes after three digits from the right, and after that a comma every two digits. So one lakh twenty-five thousand is ₹1,25,000, and twelve crore thirty-four lakh is ₹12,34,00,000.

In practice, people shorten big numbers: ₹1,25,000 becomes "₹1.25 lakh", and ₹12,34,00,000 becomes "₹12.34 crore". Company sizes are almost always quoted in crore. A company "worth ₹50,000 crore" is worth half of ₹1 lakh crore, or ₹0.5 lakh crore. It is easy to slip by a factor of ten here, so slow down when you convert.

What owning a share gives you

• A claim on profits. When the company earns money, part of it belongs to you in proportion to your shares. The company can pay it out as a dividend or keep it to grow the business, which should make each share worth more over time.
• A vote. An ordinary equity share normally carries one vote per share at shareholder meetings, for things like appointing directors or approving big decisions. A few Indian companies have issued shares with differential voting rights (DVRs), which carry fewer votes, so check before you assume.
• Limited liability. If the company collapses, you can lose what you paid for the shares, but its lenders cannot come after your savings or your family's house. The most you can lose on a share you bought with your own money is 100% of what you paid.
• A place in line, at the back. If a company is wound up, banks, bondholders, employees and other creditors are paid before equity shareholders. Shareholders are last, which is why they often get nothing.

What a share does not give you: the right to walk into the head office and give instructions, a say in daily decisions, or any promise of a return.

Face value is not the price

Every Indian share has a face value (also called par value), a small fixed number printed in the company's books, such as ₹1, ₹2, ₹5 or ₹10. It is an accounting figure. It tells you almost nothing about what the share is worth today.

The market price is what buyers and sellers are paying on the exchange right now. Hypothetical Sharma Foods Ltd might have a face value of ₹10 and trade at ₹640. The ₹630 gap is not a mistake. It reflects years of profit and growth that the market is paying for.

Face value matters in one place a beginner will notice: dividends. Indian companies often announce dividends as a percentage of face value. "A dividend of 150%" sounds huge, but on a ₹10 face value it means ₹15 per share. On a market price of ₹640, that is a yield of about 2.3% (15 ÷ 640). Always convert the percentage into rupees per share, then compare it with the market price.

Promoters and public shareholders

In India you will hear the word promoter all the time. The promoters are the founders, families or parent companies that control the business, and the "promoter group" includes their relatives and related firms. Everyone else, from a college student with 5 shares to a large mutual fund, is a public shareholder.

Many large Indian companies are still controlled by their promoters, who often own half or more of the shares. That is different from many US companies, where no single owner holds a big stake. It has upsides (owners with their own money at risk) and downsides (minority shareholders can be outvoted, and the promoter may run the company partly for the family's benefit). You will learn to judge this in Qualitative analysis.

There is a floor on how much must sit with the public. Under the Securities Contracts (Regulation) Rules, a listed company generally has to keep at least 25% of its shares with public shareholders. Very large companies that list with a smaller public float are given a few years to reach that level, and SEBI reviewed these timelines in 2025. The point for you: a promoter cannot own 100% of a listed company and keep it listed.

The two ways you make money

1. The price goes up (capital gain). You buy a share at ₹500. A year later it trades at ₹600. If you sell, you made ₹100 per share, a 20% gain, before tax and charges.

2. The company pays dividends. Many established companies pay part of their profits to shareholders in cash, once or twice a year. If a ₹500 share pays ₹20 a year, that is a 4% dividend yield. Many fast-growing companies pay little or nothing and reinvest the money.

Your total return is both added together.

The same example can run backwards. If the share fell to ₹350, you would be down ₹3,000 on price, and ₹400 of dividends would not come close to covering it. Tax and trading charges also come out of whatever you make. They get their own chapters: What trading really costs and Taxes for traders and investors.

Price is not the same as value

A share price is simply the last price at which a buyer and a seller agreed to trade. It moves all through market hours because people keep changing their minds about what the business is worth.

A ₹5,000 share is not more expensive than a ₹50 share in any useful sense. What matters is the price compared with what the business earns, and how many shares exist. That is why people look at market capitalisation (market cap): share price multiplied by the number of shares.

Company B is four times larger, even though its share price is a hundredth of Company A's. You will learn the tools for comparing price and value in Valuation ratios.

Equity shares, preference shares and DVRs

Equity shares are what people usually mean by "shares". They carry votes and the full upside, and they are last in line if the company is wound up. Almost everything traded on NSE and BSE by individuals is an equity share.

Preference shares usually pay a fixed dividend and are paid before equity shares if the company is wound up, but they normally carry limited voting rights and no share in extra profit. They behave partly like a bond.

Shares with differential voting rights are equity shares with fewer votes, sometimes offered with a slightly higher dividend. They are rare in India. The company's annual report explains exactly what each class gets.

Where your shares actually live

Nobody hands you a paper certificate any more. When you buy shares of a listed company, they are credited in electronic form to your demat account, which is held with a depository participant (often your broker) and recorded at one of India's two depositories, NSDL or CDSL. Your broker's app shows them, but the official record sits with the depository.

That chain, from the tap on your phone to the shares appearing in your demat account, is the subject of How the Indian market works. Opening the accounts comes in Demat and trading accounts.

Where the risk comes from

Shares are riskier than a bank fixed deposit or a government bond because nothing is promised. A company's profits can shrink, its industry can change, it can borrow too much, its promoters can behave badly, or the whole market can fall at once.

A single company can go to zero. A broad basket of hundreds of companies has never gone to zero, though Indian indexes have fallen by half or more and taken years to recover (see Bull and bear markets). That difference is why diversification keeps coming up in this course.

Owning vs trading

An owner buys shares because they expect the business to be worth more in five or ten years, and mostly ignores daily price moves. A trader buys shares because they expect the price to move over days or weeks, and cares a lot about those moves.

Both buy the same thing, a share of a business. The difference is the time frame and the reason for the trade. Investing vs trading covers that choice and what SEBI's own studies found about how Indian traders actually do.

Try it

1. Pick five Indian companies whose products or services you use: a bank, a two-wheeler maker, a paint company, a phone network, a food brand.
2. Look each one up on the NSE or BSE website. Write down the share price, the face value and the market cap in crore.
3. On the same company page, find the latest shareholding pattern and note the promoter percentage.
4. In a notebook, write one sentence on what each company sells and one on how it makes a profit.
5. Convert each market cap into lakh crore as practice (for example, ₹3,40,000 crore = ₹3.4 lakh crore).

Do this for five companies before you place a single trade. It costs nothing and it builds the habit of thinking about businesses rather than tickers.

Sources

• SEBI: Review of the requirement of Minimum Public Offer and Minimum Public Shareholding (board memorandum, September 2025)
• SEBI: FAQs on Issue of Capital and Disclosure Requirements (May 2025)
• SEBI: Acts (SEBI Act 1992, Depositories Act 1996, Securities Contracts (Regulation) Act 1956)
• SEBI Investor website