Investors looking to grow their wealth and expand their portfolio often turn to equity share capital. With returns generated close to 14-15% CAGR (compound annual growth rate) in the last 15 years, investing in equity capital markets is more profitable than other asset classes.
Investing in equities involves buying shares of publicly traded companies, which are traded on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). To learn more about equity share capital, read on to discover the definition of equity share, the types of equity share capital, and much more in this blog.
High-volatility stock portfolios for investors with a high risk appetite Try smallcase
Equity share capital refers to the amount of money a company raises by issuing equity shares to investors. This capital forms a critical part of the company’s financial foundation. Equity share capital encompasses all funds contributed by shareholders in exchange for ownership shares.
Additionally, companies can raise funds by issuing equity shares in two ways: privately or, if listed on the stock exchange, through an Initial Public Offering (IPO). After investing through an IPO, investors can benefit from their investment by receiving dividends, attaining voting rights, and enjoying potential appreciation in value as the company grows.
Equities, also known as stocks, represent ownership in a company. Equity refers to classes of shares that are equities, own a portion of the company and are entitled to a share of its profits/losses. Equities are traded on stock exchanges, and their value fluctuates based on the company’s performance, market conditions, and investor sentiment. Investing in equities carries both the potential for capital appreciation and the risk of loss, making it a dynamic and essential component of financial markets.
Equity shares are known as a unit of ownership in a company. If you own equity shares, you are an equity shareholder. You are entitled to a portion of the company’s profits through dividends and are liable for any losses. Your stake in the company is proportional to the number of shares you hold. Equity shares can be bought, sold, and traded on stock exchanges. As a shareholder, you can receive dividends and vote on various company matters.
Consider a company, XYZ Ltd., which issues 1,000,000 shares at Rs. 10 each. The total equity share capital would be:
Equity Share Capital = Number of Shares×Price per Share
Equity Share Capital = 1,000,000×10 = Rs. 10,000,000
This example of equity illustrates how companies raise substantial funds through equity share capital.
smallcase provides an effective way for investors to participate in equity markets by encouraging portfolio investing. So, now you only invest in ideas you believe in with smallcase.
Start your investment journey today by investing in equity-based smallcases!
House of Tata smallcase by Windmill Capital
IT Tracker smallcase by Windmill Capital
Get 500+ Readymade Stock Baskets Created & managed by SEBI-registered experts Try smallcase
There are several different categories of share capital that investors can choose from. Let’s have a look at some of these types of share capital:
Companies issue equity share capital for several reasons:
A company may issue equity shares to attract long-term investors who are willing to take on more risk for potentially higher returns.
Equity share capital, also known as ordinary share capital, represents the ownership interest of the shareholders in a company. The features of equity share capital include:
Equity share capital is a popular form of raising business capital and has many advantages. Below, we have mentioned some of them:
Equity share capital is an important source of funding for companies, but it also comes with its risks. Two common risks associated are:
Equity share capital is a vital component of a company’s financial strategy, offering a means to raise funds and improve liquidity without incurring debt. However, it comes with its own set of challenges, such as potential dilution of control and market volatility. Understanding the equity share capital meaning, its types, and its implications can help investors and companies make informed decisions. While equity share capital comes with its own risks, various solutions are available to mitigate these risks, and one such solution is offered by smallcase.
Yes. Equity share capital, or share capital, refers to the funds a company raises by issuing shares. This money, provided by owners and investors, is used to develop or expand the company’s operations.
2. How is equity share capital calculated?Equity share capital is calculated by multiplying the number of issued shares by the face value of each share. It represents the total value of shareholders’ equity in a company. The formula for calculating equity share capital is:
Equity Share Capital = Number of Shares×Price per Share
Equity capital is also known as residual capital.
4. Why is equity share capital called risk capital?Equity share capital is risk capital because your returns correlate directly to the company’s performance. For example, if the company performs well for the quarter and books profit, it will lead to an increase in the valuation of the company. And if that happens, it will be reflected in your investment. On the contrary, if the company loses money, which will eventually lead to depreciation in the valuation of a company, the value of your investment will also decrease
5. What is total equity?Total equity and long-term debt are a company’s primary sources of long-term capital. It is calculated by subtracting total liabilities from total assets, giving a rough estimate of the company’s break-up value.
smallcase offers you a quick view to the different finance related concepts to help you on your investment journey to achieve the financial freedom you have always dreamt of –
smallcase Technologies Private Limited
#51, 3rd Floor, Le Parc Richmonde,
Richmond Road, Shanthala Nagar,
Richmond Town, Bangalore - 560025
Dislaimer: This platform is intended for informational purposes only and is not intended to provide investment advice. The stock prices displayed are delayed and may not reflect the most current market conditions. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. You can also consider consulting a financial advisor before making any investment decisions. Smallcase Technologies Private Limited shall not be responsible for any losses that may occur as a result of using this platform.
The views expressed in this article are those of the author and do not necessarily reflect the views of Smallcase Technologies Private Limited (STPL) or any of its associates. The information provided in this article is for educational and informational purposes only. Investors are responsible for their investment decisions and are responsible to validate all the information used to make the investment decision. Investors should understand that his/her investment decision is based on personal investment needs and risk tolerance, and performance information available on here is one amongst many other things that should be considered while making an investment decision. Past performance does not guarantee future returns.
Investments in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The examples and/or scurities quoted (if any) are for illustration only and are not recommendatory.
The content and data available on the website, including but not limited to index value, return numbers and rationale are for information and illustration purposes only. Charts and performance numbers do not include the impact of transaction fee and other related costs. Past performance does not guarantee future returns and performances of the portfolios are subject to market risk. Data used for calculation of live returns and other information is provided by exchange approved third party vendors and has neither been audited nor validated by the Company. Detailed return calculation methodology is available here. Detailed volatility calculation methodology is available here.
The user agrees to assume complete and full responsibility for the outcomes of all of his/her investment decisions that he/she makes, including any direct, indirect, incidental, consequential, special, punitive or any other losses/damages if any that may be incurred by him/her. Smallcase Technologies shall not be responsible or liable for any direct, indirect, incidental, consequential, special, punitive or any other losses/damages arising out of the recipient's investments. For disclosures related to Smallcase Technologies Pvt Ltd, please visit this page .
