In India, the term "shares", almost always implies equity shares. This is because the other type of shares are mostly not known to investors and are hardly in vogue these days.
1) Equity shares
These are the shares that are traded on the stock exchange and are also called ordinary shares. Bulk of the shares that are traded on the stock exchanges, comprise equity shares.
The owners of these equity shares are entitled to dividends, voting rights and all other benefits that share holders have. Equity shares are issued at different face values.
2) Shares with Differential Voting Rights
The Tata Motors shares with Differential Voting Rights is traded along with equity shares. More popularly known as DVR, these come with voting rights, that may not be the same as equity share holders. In fact, they could be just 10 per cent of the voting rights of normal equity shareholders. However, investors tend to get compensated by higher dividends. Shares with Differential Voting Rights, tend to trade at a lower value as compared to ordinary shares.
For example, the equity shares of Tata Motors is traded at a premium to the DVRs of the company. The equity shares are traded at Rs 407, while the DVRs are traded at Rs 298. Jain Irrigation is another company that has issued DVR in India.
3) Preference Shares
The third category of shares that are issued in India, is the preferential shares. These shares give shareholders the rights to dividends ahead of the equity shareholders. Because of its preference in terms of dividend they have been named as preference shares. In the case of preference shares a fixed dividend is declared every year. On the other, for a equity shareholder, the dividend would be declared based on the profits of the company.
The other important difference is that preference shareholders, do not have voting rights, but, equity shareholder has voting rights.
Under preference shares there maybe various categories, including cumulative preferred, which entitles the holder to receive any dividend that is skipped. There is also a category called participating preferred, which could give dividends, plus extra earnings, based on other parameters, like profits of the company etc.
In India, the DVR category has yet to catch-up, though the preference shares have been around for sometime now. Tata Motors has made the DVR very popular and it is also heavily traded.