Net worth of a company meaning in simple words, with example
Net worth: the shareholders' share of a company: what it owns minus everything it owes, which equals its share capital plus reserves.
The story
two people, one chai stall
A bank manager is visiting about a bigger loan. Before the meeting, Sameer corners Riya.
SameerHe'll ask our net worth. Do I say ₹270 crore? That's our market cap.
RiyaNo. Market cap is what the stock market thinks we're worth. Net worth comes from our own books.
SameerThen what?
RiyaStart with everything we own: ₹145 crore. Take off the ₹20 crore bank loan and ₹15 crore of bills. ₹110 crore is left for the shareholders. That's our net worth.
SameerIs there another way to get there?
RiyaAdd up what owners put in and left in. Share capital is ₹50 crore. Reserves are ₹60 crore: ₹45 crore of IPO premium plus ₹15 crore of profits we kept. Same ₹110 crore.
SameerWhy does the bank care?
RiyaIt's our cushion. If things go wrong, lenders are paid before shareholders, so a bigger net worth makes them feel safer.
SameerSo, ₹110 crore. Not ₹270.
RiyaNot unless you want a very short meeting.
The grown-up version
same idea, exact words
Section 2(57) defines net worth as the paid-up share capital plus all reserves created out of profits, the securities premium account and the debit or credit balance of the profit and loss account, less accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet. Reserves created out of revaluation of assets, write-back of depreciation and amalgamation are excluded. In an Ind AS balance sheet it is close to 'Total equity', but the legal figure can differ. Net worth thresholds decide whether rules such as CSR (₹500 crore or more) apply.
Formula
Net worth = Paid-up share capital + Reserves (as defined) − Accumulated losses and unwritten-off expenditure
Which rule asks for itSection 2(57), Companies Act, 2013 (as amended by the Companies (Amendment) Act, 2017).
Spot it in the wild
a real annual report, a real page
- Share capital of ₹102 crore plus reserves of ₹10,563 crore in 2025-26.
- Add them up: net worth of ₹10,665 crore, up from ₹3,399 crore ten years earlier.
Don't mix it up
the usual confusions
Net worth ≠ market cap
Net worth is the accounts' value of the shareholders' stake: ₹110 crore. Market cap is what the stock market pays for it: ₹270 crore.
Net worth ≠ total assets
Total assets (₹145 crore) include things bought with borrowed money. Net worth is only the part that belongs to shareholders.
Net worth ≠ personal net worth
A person's net worth is everything they own minus their debts. A company's works the same way, but the law fixes what can count.
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Hindi mein
नेट वर्थ (कुल मालियत)
नेट वर्थ कंपनी में शेयरधारकों का हिस्सा है: कंपनी के पास जो है उसमें से सारा उधार घटाकर, यानी शेयर कैपिटल और रिज़र्व का जोड़।
Sources
- Companies Act, 2013, India Code