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

A company splits its equity shares from face value Rs 10 to Rs 2 each. An investor holds 500 shares in demat form on the record date. What happens in the investor's demat account after the split?

The holding becomes 2,500 shares of Rs 2 each, since each Rs 10 share splits into five. The depository usually credits these under a new ISIN automatically through the corporate action process, without the investor applying to the DP.

  1. AHolding stays 500 shares with face value Rs 2
  2. BHolding becomes 100 shares of Rs 10
  3. CHolding becomes 2,500 shares of Rs 2, with a new ISIN usually allottedCorrect
  4. DHolding becomes 2,500 shares only after the investor applies to the DP

Explanation

Split ratio is 10/2 = 5, so 500 x 5 = 2,500 shares. A sub-division typically results in a new ISIN, and the depository credits the new shares after the record date automatically, with no investor application.

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