Types of Shares in India: Equity, Preference & DVR Shares Explained
The main types of shares in India are equity shares, preference shares, and DVR shares.
For most retail investors, equity shares are the most important type. When you buy listed stocks on NSE or BSE, you are usually buying equity shares.
Preference shares and DVR shares also exist, but they are not the usual starting point for a beginner. This chapter explains all three in simple language, with the focus on what you actually need to know before investing.
What is an Equity Share? (Meaning & Features)
An equity share represents ownership in a company.
When you buy equity shares, you become a shareholder. That means you own a small part of the business.
Example:
If you buy 10 equity shares of a listed company, you do not run the company. But you become one of its owners in a small way.
If the company grows, the share price may rise. If the company pays dividends, you may receive part of its profits. If the company performs badly, the share price may fall.
This is why equity shares have both upside and risk.
Equity shares are the most common shares traded by retail investors in India. When people say, “I bought a stock,” they usually mean they bought equity shares.
Here are the main features:
| Feature | What it means |
| Ownership | You own a small part of the company |
| Voting rights | You may vote on important company decisions |
| Dividend | You may receive profit share if the company declares it |
| Price movement | Share price can rise or fall |
| Risk level | Higher than preference shares |
| Liquidity | Usually better for actively traded listed companies |
A dividend is part of a company’s profit paid to shareholders.
For a deeper explanation, read What is Dividend in Stock Market?
Equity shareholders also carry the highest risk if the company fails.
If a company closes and its assets are sold, lenders and preference shareholders usually get paid before equity shareholders. Equity shareholders get what is left, if anything.
That is why equity shares are called risk capital.
You get the possibility of higher wealth creation, but you also take higher risk.
Key Rights of Equity Shareholders
Equity shareholders get certain rights because they are owners of the company.
For a beginner, these are the most important rights to understand:
| Right | What it means |
| Voting rights | You can vote on some company decisions |
| Dividend rights | You may receive dividends if declared |
| Bonus shares | You may receive extra shares if the company issues them |
| Rights issue participation | You may get a chance to buy more shares before outsiders |
| Residual claim | You get what is left after others are paid if the company shuts down |
In ordinary equity shares, the usual idea is simple: one share gives one vote.
So if someone owns more shares, they usually have more voting power.
Example:
A shareholder with 10,000 shares has more voting power than someone with 10 shares.
But for most small investors, voting is not the main reason to buy equity shares.
Most people buy equity shares for long-term price growth, dividends, or portfolio building.
I have seen beginners think, “If I am a shareholder, I can control the company.”
Not really.
If you own 5 shares of a large company, you are an owner, but your control is tiny. Your real benefit comes from participating in the company’s financial growth, not running the business.
Types of Equity Shares
There are a few terms you may see around equity shares.
Do not try to memorise them on day one. Just understand the basic meaning.
| Type or term | Simple meaning |
| Ordinary equity shares | Regular shares with normal ownership and voting rights |
| Bonus shares | Extra shares given to existing shareholders |
| Rights shares | Shares offered first to existing shareholders |
| Sweat equity | Shares given to employees or directors for contribution |
| DVR equity shares | Equity shares with different voting rights |
A bonus share does not make you richer automatically.
Example:
Before bonus:
10 shares at ₹1,000 each = ₹10,000
After 1:1 bonus:
20 shares at around ₹500 each = ₹10,000
You have more shares, but the price usually adjusts. Your total value does not double just because the number of shares doubled.
This is a common beginner confusion.
For most retail investors, the main focus should remain ordinary equity shares.
That is what you usually buy when you invest in listed stocks.
What Are Preference Shares?
Preference shares are shares that get preference over equity shares for dividends and repayment if the company is wound up.
They are called preference shares because they stand ahead of equity shares in some payments.
A preference shareholder is still a shareholder, but the role is different from an equity shareholder.
Preference shares usually have:
- Preference in dividend payment
- Priority over equity shareholders during liquidation
- Limited or no voting rights in normal situations
- Lower upside compared with equity shares
Liquidation means the company is closed and its assets are sold to pay dues.
Example:
Suppose a company has both equity shareholders and preference shareholders.
If the company declares dividends, preference shareholders may get their dividend before equity shareholders receive anything.
If the company shuts down, preference shareholders usually get priority over equity shareholders, after lenders and other dues.
Preference shares can feel closer to fixed-income products because they may have a fixed dividend rate. But they are not the same as bank FDs.
They are still linked to the company’s financial health.
For most retail investors, preference shares are less common in regular stock market investing.
You will hear about them more in company funding, special situations, or institutional investment deals.
Types of Preference Shares
Preference shares can have different structures.
For a first-time investor, a simple table is enough.
| Type of preference share | Simple meaning |
| Cumulative | Unpaid dividends can be carried forward |
| Non-cumulative | Skipped dividends do not carry forward |
| Convertible | Can convert into equity shares later |
| Non-convertible | Cannot convert into equity shares |
| Redeemable | Company can repay or redeem them later |
| Participating | May get extra profit share after fixed dividend |
| Non-participating | Usually limited to fixed dividend |
The important takeaway:
Preference shares may give priority in dividends, but they usually do not give the same ownership upside as equity shares.
For beginners, treat preference shares as background knowledge unless you are specifically evaluating one.
What Are DVR Shares? (Differential Voting Rights)
DVR shares are shares with different voting rights compared with ordinary equity shares.
DVR stands for Differential Voting Rights.
These shares usually offer lower voting rights. In some cases, they may offer a slightly higher dividend to compensate for lower voting power.
Example:
A normal equity share may give one vote per share.
A DVR share may give fewer votes, such as one vote for multiple shares. In return, it may offer a higher dividend.
The most well-known Indian example was Tata Motors DVR.
Tata Motors DVR shares had lower voting rights and a higher dividend compared with ordinary shares. But this should now be treated as a historical example. Tata Motors cancelled its A Ordinary Shares, commonly known as DVR shares, under a scheme of arrangement in 2024, and holders received ordinary shares as consideration.
So do not read old examples and assume Tata Motors DVR still works the same way today.
DVR shares are rare in India.
Most retail investors will not deal with them regularly. But understanding DVR shares helps you know one thing:
Not every share gives the same voting power.
For beginners, DVR shares are useful to understand, but they are not the main focus.
Equity vs Preference vs DVR: Comparison Table
Here is the cleanest comparison.
| Factor | Equity Shares | Preference Shares | DVR Shares |
| Ownership | Yes | Yes, with preference features | Yes, as a form of equity |
| Voting rights | Usually full voting rights | Usually limited or no voting rights | Different or lower voting rights |
| Dividend | Variable, not guaranteed | Usually preferential or fixed | May be higher than ordinary equity |
| Risk | Higher | Lower than equity in payment priority, but still risky | Similar business risk as equity |
| Liquidity | Usually higher for listed shares | Usually lower for retail investors | Rare in India |
| Beginner relevance | Most relevant | Background knowledge | Rare, but useful to understand |
If you are opening an investing app and buying listed stocks, you are most likely buying equity shares.
That is the main point.
Preference shares and DVR shares exist, but they are not the usual starting point for a first-time investor.
Here is a simpler view:
| Your goal | Share type you will most commonly see |
| Buy listed stocks | Equity shares |
| Understand dividend priority | Preference shares |
| Understand different voting rights | DVR shares |
Do not overcomplicate your first investment journey.
Start by understanding equity shares properly. Then learn preference and DVR shares as advanced concepts.
Which Type of Shares Do Most Investors Buy?
Most retail investors in India buy equity shares.
When people say:
- “I bought Reliance shares”
- “I invested in TCS”
- “I sold HDFC Bank stock”
- “I bought 5 shares of a company”
They are usually talking about equity shares.
Preference shares are more common in company financing or special situations. DVR shares are rare and not something most beginners will actively buy.
So if you are a first-time investor, your focus should be clear:
Learn equity shares first.
That means understanding:
- What the company does
- How it earns money
- Whether profits are growing
- How much debt it has
- Whether the valuation is reasonable
- Whether the stock fits your risk level
Do not buy a share only because the price looks low.
A ₹20 equity share is not automatically cheaper than a ₹2,000 equity share. Business quality, profit, debt, valuation, and future prospects matter more than price alone. You can read chapter on fundamental analysis to understand the businesss quality.
I have seen beginners say:
“This stock is only ₹30, so it can easily become ₹300.”
That is not investing. That is guessing.
A stock can be at ₹30 because the business is weak. Another stock can be at ₹2,000 because the company is strong and profitable.
Your job is to understand the business behind the share.
For regular stock investing, equity shares are the main type you need. Preference shares and DVR shares are useful to know, but they should not distract you on day one.