What is a Share?

The Simple Explanation

A share (also called a stock or equity) is a unit of ownership in a company. When a company divides itself into millions of small pieces and sells those pieces to the public, each piece is called a share.

If TCS has 370 crore shares outstanding and you buy 100 shares — you own 100/370,00,00,000th of TCS. You're a part-owner. You have a claim on their profits, their assets, and a vote in key decisions.

Why do companies sell shares? Because growing a business requires capital — money to hire, expand, build. Instead of taking a bank loan (which charges interest), a company can sell ownership stakes. Shareholders invest hoping the company grows — and so does their share's value.

Types of Shares

Feature	Equity Shares (Common Stock)	Preference Shares
Voting rights	Yes — right to vote in AGM	Usually none
Dividends	Share of profits, when declared	Fixed dividend, paid first
Upside	Capital gains if price rises	Limited — no extra gains beyond fixed dividend
Priority in liquidation	Last in line	Priority claim on assets

Equity shares are what most investors buy — buying HDFC Bank on Zerodha, for instance, is an equity share purchase. Preference shares are a hybrid instrument, part equity and part bond-like, but they're not commonly available to retail investors on the exchanges.

Rights of a Shareholder

Dividend income: If the company makes a profit and decides to share it, shareholders receive dividends proportional to their holdings. If TCS declares a ₹28/share dividend and you own 50 shares, that's ₹1,400 credited to your bank.
Capital appreciation: If the share price rises from ₹1,000 to ₹1,500, your investment grew by 50%. You realise this gain when you sell — this is the primary way most equity investors earn money.
Voting rights: You can vote on major decisions — mergers, board appointments, dividend policies. One equity share equals one vote, so large institutional investors holding crores of shares carry significant voting power.
Right to information: Listed companies must publish quarterly results, annual reports, management commentary, and material events — SEBI mandates this, giving you a right to know how your company is performing.
Rights issue / bonus shares: A company may offer existing shareholders the right to buy new shares at a discount (Rights Issue), or give free bonus shares in proportion to their holding (Bonus Issue).

Share price is set purely by supply and demand at any given moment. But what drives that supply and demand?

Company earnings: Profits beating expectations bring buyers rushing in, pushing prices up. A profit warning or loss sends sellers exiting, pushing prices down.
Industry outlook: An IT sector boom or new government contracts lift sector stocks broadly. A banking crisis or rising NPAs drag banking stocks down together.
Macroeconomics: An RBI rate cut means cheaper borrowing, helping companies grow and stocks rise. An inflation spike forcing RBI rate hikes raises growth concerns and pulls stocks down.
Investor sentiment: In a bull market, optimism and FOMO buying can push prices to overshoot reality. In fear-driven conditions, panic selling can push prices to undershoot reality.

Key Terms Every Shareholder Should Know

Term	What It Means
Face Value (Par Value)	The original value assigned to a share by the company — typically ₹1, ₹2, or ₹10. Completely different from market price; TCS's face value is ₹1 but it trades at ₹3,800+.
Market Price (CMP)	Current Market Price — what you actually pay or receive when you buy or sell, determined by the exchange every second during trading hours.
Market Capitalisation	Total value of a company = Market Price × Total Shares Outstanding. TCS at ₹3,800 × 370 crore shares works out to roughly ₹14 lakh crore market cap.
Dividend Yield	Annual dividend per share ÷ Current Share Price × 100. If a ₹500 stock pays ₹15/year dividend, the yield is 3% — useful for comparing income stocks.
P/E Ratio (Price-to-Earnings)	Market Price ÷ Earnings Per Share. A P/E of 25 means you're paying ₹25 for every ₹1 the company earns annually — a high P/E signals high growth expectations, a low P/E signals value or concern.
EPS (Earnings Per Share)	Net Profit ÷ Total Shares. If TCS earns ₹40,000 crore profit with 370 crore shares outstanding, EPS works out to ₹108/share — rising EPS signals a growing company.

Common Mistakes to Avoid

Confusing face value with market price: A stock's face value (₹1, ₹2, or ₹10) has no bearing on what you actually pay — always check the current market price before judging whether a stock is "cheap" or "expensive."
Assuming a low share price means a bargain: A ₹50 stock isn't automatically cheaper than a ₹3,000 stock in any meaningful sense — market capitalisation and fundamentals matter far more than the per-share price alone.
Ignoring where equity holders rank in a liquidation: Equity shareholders are paid last, after creditors and preference shareholders — this is exactly why diversification across many companies matters.
Chasing dividend yield without checking the underlying business: An unusually high dividend yield can sometimes signal a falling stock price (which mechanically raises yield) rather than a genuinely strong payout.

Key Takeaway: A share is a unit of ownership in a company. Owning shares gives you rights to dividends, capital gains, and voting in key decisions. Share price is driven by supply and demand, which in turn is driven by company performance, macro conditions, and investor sentiment. As a shareholder, you are part-owner of a real business — with rights, but also with the risk of being last in line if that business fails.

Frequently Asked Questions

Can a company take back my shares?

Only in special circumstances — like a delisting (the company goes private), a buyback offer (company repurchases shares from you at a premium), or if you've been found to have acquired shares illegally. In normal circumstances, shares you've bought are yours.

What happens to my shares if the company goes bankrupt?

In bankruptcy/liquidation, assets are distributed in order: secured creditors → unsecured creditors → preference shareholders → equity shareholders. Equity shareholders are last — and often get nothing. This is why diversification matters.

Is there a minimum number of shares I must buy?

For most stocks, you can buy just 1 share. But some are only available in "lots" through derivatives. In regular equity markets, buying a single share of any company is fine.

What is a stock split?

A company divides each existing share into multiple shares. For example, if Tata Motors does a 2:1 split, 100 shares at ₹600 each become 200 shares at ₹300 each — total value stays the same. Splits increase affordability and liquidity.

Do all shareholders get the same dividend per share?

Yes, within the same share class — dividend per share is fixed for all equity holders, so your total dividend simply scales with how many shares you own, whether that's 1 or 10,000.