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June 14, 2026
The Dispatch

Definition

Securities Premium

Securities premium is the amount a company receives above the face value when it issues shares, recorded in a dedicated reserve.

If a ₹10 face-value share is issued at ₹100, the ₹90 excess is the securities premium and goes into the securities premium account. Under the Companies Act this reserve can only be used for specified purposes such as issuing bonus shares, writing off preliminary expenses or buying back shares.

IPOs at a large premium build a substantial securities premium reserve, which strengthens the company's net worth without being distributable as dividends. It is distinct from retained earnings.

Related terms

  • Face Value vs PremiumFace value is the nominal value of a share stated in the company's capital, while the premium is the amount charged above it in an issue.
  • Bonus IssueA bonus issue is the free allotment of additional shares to existing shareholders, funded out of reserves, in proportion to their holdings.
  • Net WorthNet worth is what you own (assets) minus what you owe (liabilities) — a single snapshot of your financial health.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.