When beginners enter the stock market, one common doubt is:
👉 “What is the difference between a Private Limited Company and a Public Limited Company?”
👉 “Can a Private Limited Company get listed so that we can invest in it?”
Understanding this is important because only certain types of companies are allowed to be listed and traded in the stock market. In this blog, we will clearly explain the key differences and how a company becomes eligible for listing, in simple terms.
1. What Is a Private Limited Company? (Pvt Ltd)
A Private Limited Company is a privately owned business registered under the Companies Act. It is owned by a small group of shareholders—usually family, partners, or a small group of investors.
✔ Key Features:
- Shareholders: Minimum 2, maximum 200
- Shares are NOT open to the public
- Cannot freely trade or transfer shares
- No requirement to publish financial reports publicly
- Best suited for small & medium businesses
✔ Examples:
Infosys (before listing), OYO, Byju’s, Swiggy (before going public)
✔ Why companies start as Pvt Ltd:
- Easy to form
- More control
- Less regulations
- No pressure from public investors
2. What Is a Public Limited Company? (Ltd)
A Public Limited Company is a business whose shares are open to the public. Anyone can buy or sell these shares on the stock market.
✔ Key Features:
- Minimum 7 shareholders, no upper limit
- Shares can be openly traded
- Company must publish financial reports
- Strict regulation by SEBI & Stock Exchanges
- Can raise huge funds from the public
✔ Examples:
Reliance Industries, TCS, HDFC Bank
Public Limited Companies are the ones you see listed on NSE & BSE.
3. Key Differences Between Private Limited vs Public Limited
Feature | Private Limited Company (Pvt Ltd) | Public Limited Company (Ltd) |
Ownership | Small group | Open to public |
Shareholders | 2–200 | 7–Unlimited |
Share transfer | Restricted | Freely tradeable |
Financial Transparency | Limited | Full disclosure required |
Listing on Stock Market | ❌ Not allowed | ✔ Allowed |
Regulations | Less strict | More strict |
4. Can a Private Limited Company List in the Stock Market?
❌ No. A Private Limited Company cannot directly list its shares on the stock market.
But here’s the important part:
✔ A Private Limited Company CAN become a Public Limited Company.
And after converting, it can apply for listing on NSE/BSE.
5. How Does a Company Convert from Pvt Ltd to Public Ltd?
Here is the simple process:
Step 1️⃣: Board approval
Shareholders must agree to convert from Pvt Ltd → Public Ltd.
Step 2️⃣: Name Change
The company name changes from “XYZ Pvt Ltd” → “XYZ Ltd”.
Step 3️⃣: Increase shareholders
Must have at least 7 shareholders.
Step 4️⃣: Remove restrictions
Private company restrictions on share transfer must be removed.
Step 5️⃣: Apply for approval from:
- Ministry of Corporate Affairs (MCA)
- Registrar of Companies (ROC)
Step 6️⃣: Apply for SEBI approval
The company must meet SEBI listing requirements.
Step 7️⃣: IPO
The company issues shares to the public through an Initial Public Offering (IPO).
Step 8️⃣: Listing on Stock Exchange
After approval, shares are listed on NSE/BSE, and now investors can trade.
6. Why Do Companies Become Public?
- To raise large capital
- To expand business fast
- To increase brand value
- To allow early investors to exit
- To get better valuation
Going public is a major milestone for a growing company.
7. Can You Invest in Private Limited Companies?
For normal retail investors:
❌ No. You cannot invest in a Private Limited Company on the stock market.
But:
✔ You can invest if:
- You are part of a private equity round
- You get ESOPs as an employee
- You invest through angel networks
- You buy shares in the unlisted market (high risk)
But these require:
- High capital
- High risk appetite
- Understanding of startup investing
For beginners, it’s safer to invest in public listed companies.
8.Conclusion
Understanding the difference between Private Limited and Public Limited companies helps traders and investors know:
- Which companies are listable
- How IPOs work
- Why companies choose to go public
- When retail investors get access to shares
A Pvt Ltd company cannot be listed directly, but it can convert itself into a Public Limited Company and then issue an IPO.
Only Public Limited Companies are available for trading on NSE/BSE.
