NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
A company with 10 crore shares of face value ₹10 each, trading at ₹1,200, announces a stock split of 1 share into 10 shares of face value ₹1 each. Assuming no other factors, what is the approximate post-split price and the number of shares outstanding?
After the split the price is about ₹120 and shares outstanding are 100 crore. Splitting each share into ten multiplies the count by ten and divides the price by ten, leaving market capitalisation unchanged.
- A₹120 and 10 crore shares
- B₹120 and 100 crore sharesCorrect
- C₹1,200 and 100 crore shares
- D₹12,000 and 1 crore shares
Explanation
A 1:10 split multiplies the share count by 10, giving 100 crore shares. Price falls proportionately to 1,200 / 10 = ₹120, leaving market capitalisation unchanged at ₹12,000 crore. Keeping the price at ₹1,200 would wrongly raise market capitalisation tenfold.
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