General Share question

  1. Whether the share company HAVE ACCESS TO use our invested money for the development of the company ( say WIPRO ) or THE INVESTED MONEY will be only in the account of CDSL.?

  2. Actually, what is the direct benefit to the company when the stock price of that company increases?

  3. Take a case study ( GOI Decided to sell a major share of AIR INDIA to Private clients ). Note AIR INDIA SHARES ARE NOT FLOATED IN NSE/BSE.
    what is the difference between selling a company’s major share which is listed on the Stock exchange (say for example BHUSHAN STEELS ) AND
    selling a company’s share which is not is not listed on the Stock exchange( SAY FOR EX. AIR INDIA )

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(1) the amount we invested in share of a company is our property which remain in share itself .CDSL or NSDL only hold securities in custody and no money .money is either in bank or as margin(if applicable) with broker.
(2) increase in market price of a stock may not have direct benefit to any company but it helps in many other ways like rights @ good premium , merger ,take over etc .(3) listed share selling means change of promoters mandatory ,open offer to all shareholders and if market finds it good ,the share price will increase /in a private company it is between 2 or more big entities .

merger ,take over means if any competitive offer .

  1. Suppose you start a company and want 100 crore rs for the same. You made IPO to general public with 10 lakh shares at 1000 rs per share. People pay you 1000 rs for each share and bought the shares from you. Now they are share owners of the company. If some HNI buys 1 lakh shares paying 10 crore rs then she will own 10% of you company.
    This is primary market and such money is directly used in company.
    Now you managed your company very well and within 10 years your business grows 10 fold. That means initial 100 crores become 1000 crore. So each share owners share value also increase 10 fold. Now not all those initial investors have kept the shares with them for 10 years, then they must have sold their shares at increased rate. And gained profit. That money goes in their pocket and not to company.

Now suppose tomorrow you buy 100 shares of reliance at 940. That 94000 rs wont go to Mukesbhai or reliance. It will not go to cdsl as well. It will go in the pocket of the person that has sold those shares to you. This is secondary market.

Is this clear to you now?


our money goes to the one who has sold us those shares.

company’s fund raising capacity improves, when stock price goes up.

just exchange of ownership of such shares, which can results change in management and business style.