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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

A company announces a stock split reducing face value from Rs 10 to Rs 2. Mr. Rao holds 300 shares on the record date. What happens in the depository system?

Mr. Rao will hold 1,500 shares, since each Rs 10 share becomes five Rs 2 shares. Because the face value changes, the depository normally assigns a new ISIN and the DP's holdings are shifted from the old ISIN to the new one.

  1. AHe gets 1,500 shares and the old ISIN is typically replaced by a new ISIN for the new face valueCorrect
  2. BHe continues with 300 shares of face value Rs 2
  3. CHe gets 1,200 additional shares under the old ISIN with no change
  4. DHe gets 60 shares of face value Rs 50

Explanation

Split ratio is 10/2 = 5 shares for each one held, so 300 x 5 = 1,500 shares. Since face value changes, a new ISIN is generally allotted and holdings are moved to it. Option 3 treats the ratio as 1:4 additional, which gives 1,500 total but wrongly keeps the old ISIN; the key point is that the new ISIN applies.

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