Face Value

Face value (also called par value) is the original value of a share as stated in the company's memorandum of association and printed on the share certificate. In India, common face values are Rs 1 (Reliance Industries, TCS), Rs 2 (Infosys, Wipro), Rs 5 (HDFC Bank, ITC), and Rs 10 (SBI, Coal India). Face value has no direct relationship to the market price of the stock.

Face value serves several accounting and regulatory purposes. Dividend declarations in India are often expressed as a percentage of face value — "200% dividend" on a Rs 10 face value stock means Rs 20 per share, but the same "200% dividend" on a Rs 1 face value stock means only Rs 2 per share. This can mislead investors who look at dividend percentages without checking the face value.

Stock splits and Bonus Issue directly affect face value. When Reliance Industries did a 1:1 bonus in 2017, the number of shares doubled but the face value remained Rs 10. When a company does a stock split (say 1:5), a share with Rs 10 face value becomes five shares of Rs 2 face value. The market capitalisation remains unchanged; only the per-share metrics adjust.

In the Indian primary market, shares are issued at or above face value. Issuing below face value is prohibited under the Companies Act, 2013 (Section 53). The amount received above face value is called the "share premium" and is recorded separately in the balance sheet. For example, if a company issues shares with Rs 10 face value at Rs 500, the Rs 490 difference is share premium.

For investors, face value is mostly a technical detail — CMP, EPS, P/E ratio, and Book Value are far more relevant for investment decisions. However, face value becomes important in specific situations: evaluating Dividend Yield when dividends are quoted as percentages, understanding stock split announcements, analysing Bonus Issue proposals, and in corporate restructuring scenarios where the face value may be altered through share consolidation or reduction.