Securities Premium
The reserve holding the amount received on share issues in excess of face value.
Formula
Securities Premium = (Issue Price - Face Value) x Number of Shares Issued
Unit
₹ crore
In depth
Securities premium captures the difference between what investors actually paid and the nominal face value, and for most listed companies it dwarfs share capital itself. Its use is restricted by the Companies Act: it can fund a bonus issue, write off share issue expenses, or support a buyback, but it cannot be paid out as an ordinary dividend. This is why a company with vast reserves may still be unable to increase its dividend. Reading total reserves as distributable capacity, without checking how much sits in securities premium, overstates what shareholders can actually receive.
Worked example
3 crore shares issued at ₹300 with a face value of ₹2. Securities premium = (300 - 2) x 3 crore = ₹894 crore, against just ₹6 crore added to share capital. None of that ₹894 crore is available for an ordinary dividend.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Securities Premium” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.