What is Face Value of a Share? Why Rs.1 and Rs.10 Face Value Matters
Face value is the original nominal value assigned to a share when a company is first incorporated. It is a fixed number, usually Rs.1, Rs.2, or Rs.10, printed on the share certificate. It has almost no relation to the actual market price of the share.
Think of it like the denomination printed on a currency note. A Rs.100 note is always Rs.100 in denomination, regardless of what you can buy with it today versus ten years ago. Similarly, a share with a face value of Rs.10 will always have a face value of Rs.10, even if its market price is Rs.3,000 or Rs.5. The market price changes every day. The face value does not.
Why does face value exist?
Face value exists for legal and accounting purposes. When a company is incorporated, it decides its authorised share capital and divides it into shares of a fixed denomination. If a company has an authorised capital of Rs.10 crore and a face value of Rs.10 per share, it can issue up to 1 crore shares.
Face value also determines the par value at which shares are first issued. When a company does a stock split, it is the face value that gets split. For example, Reliance Industries split its shares from Rs.10 face value to Rs.5 face value in 2017. Every shareholder who held 1 share now held 2 shares, each with a face value of Rs.5.
How is face value different from market price?
| Feature | Face Value | Market Price |
|---|---|---|
| Set by | Company at incorporation | Buyers and sellers on the exchange |
| Changes? | Only during stock splits | Every second during trading hours |
| Typical value | Rs.1, Rs.2, Rs.5, or Rs.10 | Can be anything from Rs.1 to Rs.1 lakh+ |
| Use | Accounting, dividends, splits | Valuation, buying and selling |
| Example | TCS face value = Rs.1 | TCS market price = Rs.3,900+ |
Where does face value matter for investors?
Dividends are often declared as a percentage of face value. If a company with a Rs.10 face value declares a 200% dividend, you get Rs.20 per share. The same 200% dividend from a company with Rs.1 face value gives you only Rs.2 per share. Understanding face value helps you interpret dividend announcements correctly.
Face value also matters during bonus issues and stock splits. A 1:1 bonus on a Rs.10 face value stock doubles your shares. A stock split from Rs.10 to Rs.5 also doubles your shares but halves the face value. In both cases, your total investment value stays the same immediately after the event.
Where can I check the face value of a stock?
Face value is displayed on NSE and BSE websites under each company's profile. It is also shown on broker platforms when you look up a stock's details. You can check stock details including face value at stockk.trade/products/equity.
Investments in securities market are subject to market risks. This article is for educational purposes only.
Frequently Asked Questions
A stock has a face value of Rs.1 but trades at Rs.5,000. Is that normal?
Completely normal. Many large companies in India have a face value of Rs.1 or Rs.2 after multiple stock splits over the years. TCS has a face value of Rs.1 but trades at thousands of rupees. The gap between face value and market price simply reflects how much value the business has created since incorporation.
If two companies have different face values, how do I compare their dividends?
Compare the dividend per share in rupees, not the percentage. A company paying Rs.15 per share is giving you more than one paying Rs.10 per share, regardless of their face values. Alternatively, use dividend yield, which is dividend per share divided by market price, expressed as a percentage. That gives you a like-for-like comparison.
Does face value affect the price of a stock during an IPO?
Not directly. The IPO price is determined by the company and its investment bankers based on demand, financials, and market conditions. A company with a Rs.10 face value can price its IPO at Rs.500 if investors are willing to pay that much. The premium over face value is called the share premium, and it reflects the perceived value of the business beyond its nominal capital.
What happens to face value when a company does a reverse stock split?
In a reverse stock split, the face value increases and the number of shares decreases proportionally. If a company with Rs.1 face value does a 1:10 reverse split, the face value becomes Rs.10 and your 1,000 shares become 100. The total value stays the same. Reverse splits are less common in India but are used by companies that want to increase their per-share price.
Can a company change its face value whenever it wants?
A company can change its face value through a stock split or reverse split, but this requires board approval and, in some cases, shareholder approval. It must also be communicated to the stock exchange and SEBI. Companies cannot change face value arbitrarily. It is a formal corporate action with regulatory and procedural requirements.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
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