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

A company has 10 crore shares of Rs 10 each. It announces a stock split into shares of Rs 2 each. Ms. Rao holds 300 shares before the split. Which statement is correct after the corporate action is processed by the depository?

Ms. Rao will hold 1,500 shares of Rs 2 each. Splitting Rs 10 shares into Rs 2 shares gives five new shares per old share, and because the face value changes, the depository activates a new ISIN for the shares.

  1. AShe holds 1,500 shares of Rs 2 each, with a new ISIN allotted for the new face valueCorrect
  2. BShe holds 300 shares of Rs 2 each, and her investment value reduces
  3. CShe holds 1,500 shares of Rs 10 each under the same ISIN
  4. DShe holds 60 shares of Rs 2 each

Explanation

Split ratio is 10/2 = 5 new shares for each old share, so 300 x 5 = 1,500 shares. Face value change leads to a new ISIN, and the old ISIN is closed after the corporate action. Total share capital value is unchanged; only the number of shares increases.

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