What is a Partly Paid (PP) share?
A Partly Paid (PP) share is a share that has only been partly paid for as compared to the full issue price. The remaining amount is paid in instalments as per 'calls' made by the company.
The initial amount paid is referred to as the Application Money. The balance amount, the Call Money, is paid in instalments over 12 months as and when the company requires it. Non-payment of the call money leads to the forfeiture of shares. When the amount is fully settled, the shares are converted to fully paid.
For example, Reliance Industries issues 42.26 crores of partly paid shares at an issue price of Rs. 1,257 per share.
- The application amount (1st tranche) is set @ 25% of the issue price; Rs. 314. 25
- The 2nd tranche (call amount) is set @ 25% of the issue price; Rs. 314. 25
- The final tranche (call amount) is set @ 50% of the issue price; Rs. 628.5
- On payment of both calls, the shares are converted to fully paid shares of Reliance Industries