Face Value Split and Demerger Details

A face value split occurs when a company reduces the nominal or par value of its shares, often to enhance liquidity and make stocks more affordable for retail investors. This process typically involves a split, such as a 2-for-1 or 5-for-1, where shareholders receive additional shares proportional to their existing holdings.

Conversely, demergers entail a company separating a portion of its business into a new, independent entity. This allows the original company to concentrate on its core operations and potentially unlock shareholder value. In a demerger, existing shareholders usually receive shares in the new company proportional to their original holdings.

Both corporate actions can influence a stock’s price, trading volume, and dividend distributions. Therefore, investors should carefully assess the reasons and potential benefits of such moves before making investment decisions.

Additionally, interest income from bonds and fixed deposits is determined by the face value of the investment rather than its market price, so understanding how face value affects returns on fixed-income assets is crucial.

In summary, face value splits and demergers are key factors for investors navigating the Indian equity and debt markets.