Face Value
Face value (also called par value) is the nominal value of a share as stated in the company's memorandum of association, typically Rs 1, Rs 2, Rs 5, or Rs 10 per share in India. It is the base value used for calculating dividend per share and is distinct from the market price.
Face value is the value assigned to a share at the time of a company's incorporation, representing the minimum subscription price at its founding. In India, companies historically issued shares with a face value of Rs 10, but stock splits and subdivisions have made Rs 1 and Rs 2 face values increasingly common. The face value is printed on the share certificate (or recorded in the demat system) and is not subject to market fluctuations — it remains constant unless the company undertakes a stock split or consolidation.
Face value has a few specific accounting and financial uses. Dividends are often declared as a percentage of face value — if a company declares a 300% dividend on a Rs 2 face value share, it means Rs 6 per share is being paid as dividend. When a company lists through an IPO, if its issue price exceeds the face value, the difference is recorded as 'Securities Premium' in its balance sheet. The paid-up capital of a company is calculated as face value multiplied by the number of shares issued, forming a component of shareholders' equity.
For retail investors, face value is commonly misunderstood. It has essentially no bearing on what a share is worth in the market. A share with a face value of Rs 1 and a market price of Rs 3,500 (like some large-cap IT stocks in India) is not overpriced just because its market price is 3,500 times its face value — that premium reflects the company's earnings power, growth prospects, and market demand. Similarly, a share with a Rs 10 face value trading at Rs 12 is not necessarily 'cheap' just because the market price is close to face value.
A related concept is the stock split, where a company reduces its face value (say from Rs 10 to Rs 1) and proportionally increases the number of shares, keeping the total market value unchanged. Companies undertake splits to improve affordability and liquidity of their shares. Infosys, Wipro, and many other Indian tech companies conducted multiple stock splits as their share prices rose significantly, making the shares more accessible to retail investors.