Should You Invest in Partly Paid Shares: Key Benefits & Considerations

Investing in shares doesn't always require paying the full amount upfront. Partly paid shares allow investors to acquire equity in a company by paying in instalments, with future calls for the balance. These shares are common in capital-raising strategies and present a flexible investment entry point. But before jumping in, it's important to understand how they work and the risks involved.

Partly paid shares are equity shares for which investors have only paid a portion of the total face or issue value at the time of allotment. The remaining amount is collected in one or more calls by the company in the future.

Example: If a share is issued at ₹100, an investor might initially pay ₹25 and be required to pay the remaining ₹75 in future instalments, called “calls”.

Partly paid shares are equity instruments where investors initially pay only a portion of the total share price, with the remaining amount called up by the company over time. The issuing company specifies the total issue price, the amount payable at the time of application, and the schedule for subsequent payments, also known as "calls."

These shares remain partly paid until all instalments have been completed. Once the investor fulfils all payment obligations, the shares convert into fully paid shares and carry the same rights as regular equity shares. Importantly, investors are contractually liable to pay all future call amounts within the stipulated deadlines. Failure to do so may result in penalties or even forfeiture of the partly paid shares.

Lower entry cost

Investors can gain exposure to the equity market without having to commit large amounts of capital upfront. Partly paid shares can offer a lower capital outlay, which may appeal to investors looking for phased investment exposure.

Phased investment

The staggered payment structure allows investors to plan their finances more effectively. It offers the flexibility to spread investments over time instead of a lump-sum outlay.

Capital appreciation potential

Despite being only partially paid for, these shares are traded on stock exchanges. If the share price appreciates in the market, investors can benefit from capital gains even before completing all payment calls.

Obligation to pay future calls

Investors must track and fulfil future payment obligations. Missing a call can lead to interest penalties and, in extreme cases, forfeiture of shares by the company.

Price volatility

Due to lower liquidity and speculative trading behaviour, partly paid shares can be more volatile compared to fully paid counterparts. This may result in sharp price movements and increased investment risk.

Dividend rights

Dividend entitlements may be limited or conditional for partly paid shares. Full participation in dividends is typically granted only after the shares become fully paid.

Partly paid shares are listed separately on stock exchanges and can be identified by a suffix such as “PP” (e.g., ABC Ltd-PP). Investors can purchase them through their brokerage accounts, similar to other listed securities. However, it is essential to remain updated about the company's call schedules, as non-payment can have financial and legal consequences. Prospective investors should evaluate their ability to meet future payment obligations before entering such investments.

Partly paid shares are commonly issued by companies during rights issues or public offerings, especially when they aim to raise funds in stages to match project or expansion needs.

Partly paid shares provide a convenient entry point into equity markets with phased capital commitments. However, investors must be financially prepared to meet future call obligations and accept the risk of share forfeiture. With clear understanding and risk awareness, partly paid shares can serve specific capital-raising and investment scenarios.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.