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NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions

A company has 10 crore shares of face value ₹10 each, trading at ₹250. It announces a stock split reducing face value to ₹2 per share. Which statement is correct after the split, assuming no other change?

Shares rise to 50 crore and the theoretical price falls to ₹50. The face value drops from ₹10 to ₹2, a factor of five, so shares multiply by five and price divides by five, leaving market capitalisation and paid-up capital unchanged.

  1. ANumber of shares becomes 50 crore and the theoretical price becomes ₹50Correct
  2. BNumber of shares becomes 50 crore and the theoretical price remains ₹250
  3. CNumber of shares remains 10 crore and the face value of paid-up capital falls
  4. DNumber of shares becomes 20 crore and the theoretical price becomes ₹125

Explanation

Split factor = 10/2 = 5. Shares become 10 x 5 = 50 crore, and price becomes 250 / 5 = ₹50. Paid-up capital stays the same at ₹100 crore, so market capitalisation is unchanged.

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