| Date post: | 26-May-2015 |
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CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
TYPES OF EQUITY SHARES
SHELLEY E.Trademark Department
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
INTRODUCTION
• A share is a document which is issued by a company, registered with the stock exchange, by which the holder of the share becomes one of the owners of the company.
• There are several different stock types and classifications, so it is important to understand what type your shares are and what their classifications are.
• Two of the biggest stock types are preferred stock shares and common stock shares/ Equity Shares.
• These type of shares you own will determine how you are paid, and the value of your stock if the company goes under, as well as the order debts are paid to shareholders.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
EQUITY SHARES
• Equity shares/common shares/ordinary shares. – These shares are the most commonly traded
shares, and they give you a vote in company matters.
– Equity shares can be purchased from the stock market or from the company when it announces public issue of its stock.
– They earn a dividend as long as the company is earning money, and this dividend directly corresponds to the profit made by the company.
– High profits mean high dividends for you. – Ordinary shares have no special rights or
restrictions. – Whilst they have the highest risk, they also have
the potential to bring the biggest financial gains.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
DEFINITION OF EQUITY SHARES
• Equity is the extra or surplus of profit left over to be distributed between investors, after all the liabilities are paid off.
• According to section 85 (2), of Companies Act, 1956, Equity share can be defined as the share, which is not preference shares. In other words equity shares are those shares, which do not have the following preferential rights:– (a) Preference of dividend over others.– (b) Preference for repayment of capital over
others at the time of winding up of the company.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
FEATURES OF EQUITY SHARES
• It is a financial instrument through which it bestows ownership rights to the investor in the company.
• The owner has a right on the profits and on the company’s assets in case of liquidation of the company.
• They have voting rights in the company.
• They are distributed the surplus of profits after the interest is settled, taxes paid and depreciation provided and preference shareholders are cleared.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONT.
• The financial standing, its progress and strategies for growth of the company determines the share prices.
• These equity shares can be bought at the stock exchange, through stock brokers, online brokers and sometimes in banks and
• Though the creditors and preferential shareholders invest cash, they have no say in the conduct of business while the equity shareholders have full powers to direct the company.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
TYPES OF EQUITY SHARES
• Blue Chip Shares: – These are the shares of companies which are
well established and reputed in all fields. – These shares normally pay dividends, and have
a track record of performance and earnings. – Blue chip companies also have no large
amounts of liabilities. Blue chip shares are usually the cream of the crop, and are sought after. These types of shares are generally considered stable and safe as an investment.
The Blue Chip companies include Microsoft, Coca- Cola, Reliance, ONGC, NTPC, SBI, ICICI, Tata Steels, Wipro, and a few others.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONT.
• Penny stocks:– These are another shares classification, and
these shares are low in price and high in risks.
– Penny shares are not traded on the regular stock markets and exchanges, and are instead traded on over the counter markets instead.
– Penny shares offer a significant opportunity for reward if you choose wisely, but there is a high risk level involved because many penny shares come from companies without an extensive history available.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONT.
• Income Shares: – These companies have a stable share value
and always pay high dividends. – Since they have high dividend payout ratio,
the profits of the company saved are less and so their growth opportunities are very less.
• Growth Shares: – These are shares of companies which are on
top in their industry like Wipro in Computers, Tatas in steel, Bajaj in automobiles etc.
– The shares here have less dividend payout and so their growth rate is high.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONT.
• Cyclical Shares: – Some company’s performance keeps
fluctuating like a business cycle meaning the share prices are affected with any variations in the economy.
– Sugar and fertiliser are two such industries.
• Defensive Shares: – The shares of these companies are
not affected by the economical changes.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONT.
• Speculative Shares: – The shares here are traded on speculations.
These shares are high risk in nature but also give very high returns in short terms.
– The scrips fall sharply suddenly so investors should always keep an eye on it always.
• Value shares:– are shares which investors believe have
been undervalued, and these shares are believed to be worth more than the current market value.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
LIMITATIONS AND RISK FACTORS
• The equity share holders have many limitations as far as income is concerned.
• Even when there are profits, they get their share at the last which means the amount of sharing gets reduced.
• The preferential shareholders and creditors are paid interest income even if the company is in loss but the equity shareholders get their share only if company makes huge profits.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONT..
• The rate of dividend on such shares is not pre-determined, but it depends on the profit earned by the company.
• These shares are also known as ‘Risk Capital’, because they get dividend on the balance of profit if any, left after payment of dividend on preference shares and also at the time of winding up of the company, they are paid from the balance asset left after payment of other liabilities and preference share capital.
• They have to claim dividend only, if the company in its A. G. M. declares the dividend.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CONCLUSION
• The shares cannot be put in one category as each has different characters and are overlapping each other. The investment in shares involve market risks. Hence a very careful analysis in choosing the right share is important.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
THANK YOU
