Imagine your friend runs a small tea stall. It does well, and she wants to open four more. She needs ₹10 lakh and does not want a bank loan. So she offers you a deal: give her ₹1 lakh, and you own 10% of the business — forever.
That is a share. You did not lend money. You bought a piece of the business.
A share (also called a stock or equity) is one unit of ownership in a company. If a company has 1 crore shares and you own 100 of them, you own 100 ÷ 1,00,00,000 of that company. A tiny slice — but a real one.
What ownership actually gets you
Owning a share gives you three things, and it is worth being clear about what they are and are not.
1. A claim on the profits. If the company decides to distribute profit to owners, you get your share of it. That payment is called a . The key word is decides — a company is not obliged to pay you anything. Many strong companies pay no dividend at all and put the money back into growth instead.
2. A vote. One share usually equals one vote on big decisions — appointing directors, approving a merger, and so on. With 100 shares out of a crore, your vote does not change outcomes. It is still a real right, and large shareholders use it seriously.
3. A claim on what is left over. If the company shuts down and sells everything, shareholders are paid after lenders, employees and the tax department. Often that leaves nothing. Shareholders take the most risk, which is exactly why they get the upside.
Why a company sells shares in the first place
A growing company needs money. It has two ways to get it.
It can borrow — from a bank, or by issuing bonds. Borrowed money must be repaid with interest, on a fixed date, whether business is good or bad. Miss a payment and lenders can push the company into insolvency.
Or it can sell ownership — issue shares. That money never has to be repaid. There is no interest. If the business has a terrible year, nothing is owed to shareholders.
The cost is control and future profit. The founder who owned 100% now owns 60%, and 40% of every future rupee of profit belongs to someone else.
Two ways to raise ₹10 crore
Option A — Loan at 10%: ₹1 crore of interest every year, good year or bad. The founder still owns 100%.
Option B — Sell 20% of the company: ₹0 interest, ever. But if the company earns ₹50 crore of profit in 2035, ₹10 crore of that belongs to the new shareholders.
Neither is "better". A steady, predictable business often prefers debt. A fast-growing, uncertain one prefers equity.
Where the share price comes from
The price of a share is not set by the company, and it is not a measure of how good the company is. It is simply the price at which a buyer and a seller last agreed to trade.
If more people want to buy than sell, the price rises until enough sellers are tempted. If more want to sell, it falls until enough buyers appear. That is the whole mechanism. What people are willing to pay depends on what they believe the company will earn in the future — and people disagree about that constantly, which is why prices move every second.
Face value, and why it confuses everyone
Every share has a — usually ₹1, ₹2, ₹5 or ₹10. It is an accounting number printed in the company's records from when the shares were first created.
Face value has almost nothing to do with market price. A share with a face value of ₹10 can trade at ₹4,000 or at ₹6. The only places face value genuinely matters are dividend announcements (often declared as a percentage of face value) and stock splits. Both are covered later in the Corporate Actions module.
How you actually make or lose money
Two ways, and only two.
Capital gain (or loss). You buy at ₹500, the price goes to ₹700, you sell. You made ₹200 per share. If it goes to ₹300 and you sell, you lost ₹200 per share. Until you sell, the gain or loss is only on paper.
Dividends. Cash the company sends you while you hold the share. Usually modest — a 1% to 3% yearly yield is typical for Indian large companies — but it arrives without you selling anything.
Key takeaways
- A share is a real, permanent piece of ownership in a company.
- It gives you a claim on profits, a vote, and a claim on leftovers — but no guarantee of any return.
- Companies issue shares to raise money they never have to repay, at the cost of giving away future profit.
- The share price is just the last price a buyer and a seller agreed on — not a measure of quality.
- Face value is an accounting number and is not related to market price.
Check your understanding
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