Reserves and surplus

Everything in shareholders' equity other than the face value of the shares. Retained earnings, securities premium, revaluation reserves, general reserve and the components of other comprehensive income all live here.

A company with ₹1,470 crore of total equity and ₹100 crore of share capital carries ₹1,370 crore of reserves.

The label misleads people who read it as money set aside. Reserves are not a pot of cash; they are a claim, and the cash they once represented has usually been spent on plant, inventory or acquisitions. A company can have ₹1,370 crore of reserves and ₹6 crore in the bank.

The breakdown is what matters. Retained earnings are profits the business generated and kept. Securities premium is money outside investors put in. The two say opposite things about how the equity base was built.

A reserve is a claim, not a cash box.

Other comprehensive income sits here too, and for most manufacturers it is small enough to pass over. For a bank or an insurer with a large investment book it is not. Gains and losses on securities measured at fair value through other comprehensive income accumulate in a separate reserve and can swing by more than a year's profit when interest rates move, which is exactly what happened to institutions holding long-dated government bonds through a tightening cycle. The reserve is disclosed with its own movement schedule, and reading it is the difference between knowing what a financial company earned and knowing what happened to its shareholders' money.