Glossary

Share Premium

Share premium is the amount a company collects over a share's face value when issuing new shares, such as in an IPO, recorded separately in its reserves.

What It Means

Share premium is the amount a company collects over and above a share's face value when it issues new shares, such as in an IPO or rights issue. It's recorded separately in the company's reserves, distinct from its face-value share capital.

Example

If a company with a ₹10 face value issues fresh shares to investors at ₹150 each, ₹10 goes into share capital and the remaining ₹140 per share is booked as share premium.

  • Free Reserves: share premium collected in cash is one of the sources that qualifies here
  • Face Value: the baseline share premium is calculated against
Share Premium Meaning & Example | TraderStack