By MOFSL
2025-06-23T11:40:00.000Z
4 mins read
Issued Share vs. Subscribed Share Capital: What's the Difference?
motilal-oswal:tags/stock-market,motilal-oswal:tags/share-market,motilal-oswal:tags/equity-market,motilal-oswal:tags/share-market-india
2025-06-23T11:40:00.000Z

Issued vs. Subscribed Share Capital

Introduction

As a regular investor, you may have encountered terms like issued and subscribed share capital while examining companies' financials or IPOs. These concepts form the basis of company funding, and distinguishing between issued and subscribed share capital will enhance your investment decisions. Let's explore these terms, understand how they operate in India's growing marketplace, and establish their relevance.

Understanding Issued Share Capital

Imagine you are starting a company. You will decide on the total shares your company can issue, e.g., one million. This is referred to as your authorised capital, which is prescribed by your company's charter. You allocate 500,000 of these shares to investors. This is your issued share capital, the portion of authorised shares you are preparing to sell. Issued capital is the total known value of shares the company intends to take to market, at the shares' nominal (par) value.

In the Indian context, when companies such as Reliance Industries or Infosys need to raise money, they do so by issuing shares under an IPO (initial public offering) or follow-on offering. For example, if a company issues 100,000 shares at ₹10 each, the issued capital is ₹1,000,000. At this point, the shares are "out in the world" and usually available to investors like you on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), or they may be issued privately to institutional or other investors.

Understanding Subscribed Share Capital

Now, suppose you and others are interested in purchasing the 100,000 shares. If only 80,000 shares are taken up, this is your subscribed share capital; this is the part of the issued share capital that investors have expressed an interest in taking up. The "subscribed capital" depends on actual investor uptake, as it reflects the shares investors have committed to purchase, regardless of whether they have been fully paid for or at least partially.

In a fast-developing IPO market like India, subscribed capital is a key indicator of investor confidence. Take the Zomato IPO in 2021, if there were 100 million shares (issued capital) on offer, and subscribers applied for 120 million shares (oversubscribed), the subscribed share capital would still be limited to the issued amount, and the allotment would take place according to SEBI allotment rules. If the subscribed capital is less than the issued capital, say 80 million. The company will then raise less than planned, potentially impacting its growth strategy.

Key Differences Between Issued and Subscribed Share Capital

But what is the difference between the Issued and subscribed share capital? Think of issued capital as the overall offering by a company, like a vast buffet spread. In this analogy, subscribed share capital is the amount you and other investors picked up from that buffet.

Here's the difference:

1. Scope: Issued share capital is all the shares a company has issued, and subscribed share capital is the amount investors commit to purchasing.

2. Value: Issued share capital is based on all the issued shares, whether those shares were sold or not, and subscribed share capital is only the subscribed shares the investor agreed to purchase.

3. Impact: Issued share capital communicates the maximum offer value to the market; subscribed share capital communicates the amount of funds committed, thus influencing a company's cash flow.

The distinction between issued and subscribed share capital is relevant in India, particularly for IPOs. If an IPO has a huge oversubscription, like the Public Offering of Paytm, it signals a strong level of trust from investors. On the contrary, if an IPO is undersubscribed, it may raise potential red flags about a company's future performance.

Why It Matters to You

Understanding these words will help you evaluate companies as an investor. More subscribed capital versus issued capital means high demand for stocks, which may increase the price of shares after listing. On the other hand, less subscribed capital indicates weak interest, such as the lack of interest in some small IPOs on the NSE SME platform.

The regulatory framework in India, governed by SEBI, ensures that companies disclose (or at least structure their reporting) so that there is transparency on the issued and subscribed share capital.

The Road Ahead

Are you ready to invest? Look for companies with a strong subscription level in their offerings, especially in booming sectors like technology and green energy in 2025. Check reliable platforms to look at issued capital and subscription data. You can consider using ETFs like the ICICI Prudential Nifty 50 ETF for safer fund diversification with companies with high issued and subscribed capital.

Conclusion

By knowing the difference between issued and subscribed share capital, you are in a good position to navigate India's stock market effectively. Issued capital indicates the company's fundraising ambition, and subscribed capital indicates actual confidence in investors. With this information, you can identify opportunities, evaluate risks, and assess your investment decisions and align your investment activity to India's growth story.

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