What Is Face Value?
Face value, also called nominal value or par value, is the value assigned to a share in a company’s share capital when the share is issued.
- It is a nominal value assigned to each share.
- It is recorded in the company’s share-capital structure.
- Common examples include ₹1, ₹2, ₹5 and ₹10 per share.
- It is not necessarily the price at which investors buy or sell the share.
- A share may trade at a market price much higher or lower than its face value.
Face Value vs Market Price
Both figures relate to the same share, but they describe very different things.
- Nominal value assigned to a share
- Recorded in the company’s share-capital structure
- Generally changes through corporate actions such as stock splits or other applicable share-capital changes
- Used in certain corporate calculations, including dividends declared as a percentage of face value
- Price at which a share trades in the market
- Changes with demand, supply, expectations, company performance and broader market conditions
- Can be above or below face value
- Is the price investors generally pay when buying shares in the market, excluding applicable charges
Example: Face Value ₹10 and Market Price ₹250. The share trades at ₹250 in the market, while its face value remains ₹10. This difference alone does not indicate whether the share is undervalued or overvalued.
Why Does Face Value Matter?
Face value shows up in a few specific places in company records and corporate actions.
Share Capital
Face value forms part of the nominal share-capital structure of a company.
Dividend Calculations
When a dividend is declared as a percentage of face value, the percentage is applied to face value, not automatically to the current market price.
Stock Splits
A stock split reduces the face value per share and proportionately increases the number of shares held, subject to the terms of the corporate action.
Bonus Issues
A bonus issue increases the number of shares held by eligible shareholders. It does not automatically mean the face value of each share changes.
Face Value and Dividend Calculation
If a company declares a dividend of 50% of face value and the face value is ₹10, the dividend is ₹5 per eligible share before applicable taxes or other considerations.
- A 50% dividend does not automatically mean a 50% return on the market price.
- Dividend declarations and payments depend on the company’s applicable processes and conditions.
- Dividends are not guaranteed every year.
Dividend Per Share = Face Value × Dividend Percentage ÷ 100
Hypothetical example: Face value ₹10, declared dividend 50% of face value.
Face Value vs Book Value vs Issue Price
Three related terms that are often confused.
| Face Value | Book Value Per Share | Issue Price |
|---|---|---|
| Nominal value assigned to a share. Part of the company’s share-capital structure. | An accounting measure based on net assets or shareholders’ equity attributable to ordinary shareholders, divided by the relevant number of shares. May differ substantially from both face value and market price. | Price at which shares are offered or issued to investors in a particular issuance. May equal face value or include a premium, depending on the issue terms. |
Hypothetical example: Face value ₹10, issue price ₹150, market price after listing ₹220. These figures can differ because each represents a different concept. They will not always follow this pattern.
Face Value and Stock Splits
A simplified illustration of a hypothetical 1:2 split, where each existing share becomes two shares.
- The number of shares doubles in this example.
- The face value per share becomes half.
- The total nominal share value remains ₹1,000.
- The market price generally adjusts around the split, all else equal, but actual trading prices can change due to market conditions.
Common Face Value Mistakes
- 1
Treating face value as the market price. Market price is set by trading, not by the nominal value.
- 2
Assuming a ₹1 face-value share is cheaper than a ₹10 one. Face value says nothing about how a share is priced.
- 3
Assuming lower face value means a better investment. Face value does not indicate quality or performance.
- 4
Confusing face value with book value. Book value is an accounting measure based on equity; face value is nominal.
- 5
Assuming a bonus issue always changes face value. It increases the number of shares; face value does not necessarily change.
- 6
Assuming a dividend percentage applies to market price. It is typically applied to face value when declared that way.
Face Value & Dividend Calculator
Dividend Per Share = Face Value × Dividend Percentage ÷ 100. Total Dividend = Dividend Per Share × Number of Eligible Shares.
This calculation assumes the dividend is declared as a percentage of face value and that all entered shares are eligible. It is an educational estimate, not confirmation of an actual dividend entitlement.
Myths vs Facts
Frequently Asked Questions
Face value, also called nominal or par value, is the value assigned to a share in a company’s share capital when it is issued. Common examples are ₹1, ₹2, ₹5 and ₹10. It is not necessarily the price at which the share trades.
Face value is a fixed nominal figure recorded in the company’s share-capital structure. Market price is the price at which the share trades, and it moves with demand, supply, expectations and market conditions. It can be above or below face value.
When a dividend is declared as a percentage of face value, the percentage is applied to face value. For example, 50% of a ₹10 face value gives ₹5 per eligible share, before applicable taxes. It is not automatically a percentage of the market price, and dividends are not guaranteed.
A stock split reduces the face value per share and increases the number of shares proportionately, subject to the terms of the corporate action. A bonus issue increases the number of shares held by eligible shareholders and does not necessarily change face value.
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Explore Market EducationThis content is for educational and informational purposes only and should not be considered investment, trading or financial advice. Face value alone does not determine a share’s investment quality, market price or future performance. Corporate actions and dividends are subject to applicable company decisions, terms and regulations.
