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

Mr. Iyer holds 1,000 shares of a listed company in his demat account. The company announces a 1:5 stock split, reducing face value from Rs 10 to Rs 2. Which statement correctly describes the outcome after the split is processed?

He will hold 5,000 shares of face value Rs 2 each. A split from Rs 10 to Rs 2 multiplies the number of shares by five, while the total face value of the holding stays at Rs 10,000 and the ISIN generally changes.

  1. AHe holds 200 shares of face value Rs 10 each
  2. BHe holds 5,000 shares of face value Rs 2 each, and the value of his total holding at face value is unchangedCorrect
  3. CHe holds 5,000 shares of face value Rs 10 each
  4. DHe holds 1,000 shares of face value Rs 2 each

Explanation

Face value falls from Rs 10 to Rs 2, so each share becomes 5 shares. 1,000 x 5 = 5,000 shares. Face value of holding stays 1,000 x 10 = 5,000 x 2 = Rs 10,000. The old ISIN is typically replaced by a new ISIN for the new face value.

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