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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 per share. A client holds 100 shares in demat form on the record date. What happens in the client's account?

The client's 100 shares of Rs 10 are replaced by 500 shares of Rs 2 face value, normally under a new ISIN. The depository does this automatically for demat holders on the basis of the record date, and no client application or cash adjustment is needed.

  1. AThe 100 shares are replaced with 500 shares of Rs 2 face value under a new ISIN, as allowed by the depository processCorrect
  2. BThe client receives 400 additional shares of Rs 10 face value under the same ISIN
  3. CThe client must submit a request to the DP to receive the split shares
  4. DThe client receives 100 shares of Rs 2 face value with cash for the difference

Explanation

Split ratio is 10/2 = 5, so 100 shares become 500 shares. Because the face value changes, the issuer obtains a new ISIN and the depository debits old ISIN and credits new ISIN automatically, with no client request. Cash compensation is not part of a split.

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