Important Keywords: Face Value of Shares, Face Value meaning, Face Value of Share, Nominal Value, Par Value, Difference between Face Value and Market Price, Face Value Formula, How Face Value is calculated, Share Market Basics, Equity Shares, Market Capitalization.
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Table of Contents
Overview / Face Value of Shares
When people start investing in the stock market, they often notice that a share has two different values—Face Value and Market Price. This can be confusing because a share may have a Face Value of ₹10, while its Market Price is ₹1,100 or even higher. So, many beginners wonder, "Why does the same share have two different values?" and "Which value is actually important?"
The answer is that both values are correct, but they serve different purposes. While the Market Price is the price at which a share is bought and sold in the stock market, the Face Value is the original value decided by the company when the share is first issued.
In this blog, we'll explain what face value of shares is, how it differs from market value, and why every investor should understand this important concept.
Quick Summary
- Face Value is fixed.
- Market Price changes daily.
- Dividend is generally calculated on Face Value (unless otherwise specified by the company).
- Investors buy and sell at Market Price.
- Face Value does not determine whether a stock is expensive or cheap.
What is Face Value?
When you buy a share, you pay the Market Price. But when you look at the company's details, you may also see another value called the Face Value. This often confuses beginners because they wonder, "Why does the same share have two different values?"
The answer is simple—both values are correct, but they have different purposes.
Face Value (also called Nominal Value or Par Value) is the original value assigned to a share or bond by the company when it is first issued. This value is decided by the company and usually remains the same unless it is changed through a corporate action, such as a stock split or share consolidation.
Market Price, on the other hand, is the price at which the share is bought and sold in the stock market. It changes every day based on factors like demand and supply, the company's performance, and overall market conditions.
For example: A company may issue a share with a Face Value of ₹10. Over time, if the company performs well, the share's Market Price may rise to ₹500, ₹1,000, or even more. Even then, the Face Value will still remain ₹10.
In simple words, Face Value is the company's original value of a share, while Market Price is the price investors pay to buy or sell it. Face Value is mainly used for purposes such as calculating dividends, stock splits, and maintaining the company's financial records, whereas the Market Price determines your investment value.
What is Market Value of a Share?
Market Value (Market Price) is the price at which a share is currently bought and sold in the stock market. It is the actual price you pay when buying a share or receive when selling it. Unlike face value, the market value keeps changing every day because it depends on how many people want to buy or sell the share, how well the company is performing, and what investors expect from the company in the future.
In simple terms, Market value is the price that people are willing to pay for a company's share at a particular time.
Difference Between Face Value and Market Value (Market Price)
Let's understand the difference between Face Value and Market Value with a few simple examples.
Example 1: When the Share Price Increases
Suppose a company issues a share with a Face Value of ₹10.
After a few years, the company performs well, so more people want to buy its shares. As a result, the Market Price increases to ₹800.
Now the share has:
- Face Value: ₹10
- Market Price: ₹800
What does this mean?
Even though investors are buying the share for ₹800, its Face Value is still ₹10 because the company has not changed it.
Example 2: When the Share Price Decreases
Suppose another company also issues a share with a Face Value of ₹10.
After some time, the company does not perform well, so fewer people want to buy its shares. As a result, the Market Price falls to ₹6.
Now the share has:
- Face Value: ₹10
- Market Price: ₹6
What does this mean?
The Market Price can be higher or lower than the Face Value, but the Face Value remains ₹10 unless the company officially changes it.
Example 3: How Face Value is Used
Suppose you own 100 shares of a company.
- Face Value of each share: ₹10
- Market Price of each share: ₹500
The company announces a 20% dividend.
The dividend is calculated on the Face Value, not on the Market Price.
So, you will receive:
- Dividend per share: ₹2 (20% of ₹10)
- Total dividend: ₹200 (100 × ₹2)
What does this mean?
Even though the share is worth ₹500 in the market, the dividend is calculated using the Face Value of ₹10.
Why is Face Value Important?
If you buy or sell shares in the stock market, you may think that only the Market Price matters. So, you might wonder, "Why should I care about the Face Value?"
The answer is simple. Although Face Value does not affect the price at which you buy or sell a share, it is still important because the company uses it as the base value for many important decisions.
For example: If a company announces a dividend, it is usually calculated on the Face Value of the share. Similarly, if the company decides to split its shares or issue bonus shares, the Face Value plays an important role. It is also used to determine the company's share capital and maintain its financial records.
In simple words, the Market Price is important for investors because it determines your profit or loss, whereas the Face Value is important for the company because it is used for many financial and corporate decisions.
Formula of Face Value.
The Face Value of a share can be calculated by dividing the company's Paid-up equity share capital by the total number of issued equity shares.
Formula:
Face Value per share = Paid-up Equity share capital ÷ Total Number of issued Equity shares.
Example:
Suppose a company has:
- Paid-up Equity Share Capital: ₹50,00,000
- Total issued Equity Shares: 5,00,000
Face Value = ₹50,00,000 ÷ 5,00,000 = ₹10 per share
This means the face value of each share is ₹10
Common Questions People Actually Ask (Face Value in the Share Market)
Before you check the face value of a stock, you should know the common questions regarding face value:
Q. Is face value the same as market price?
Reality - No. Face value is fixed, while market price changes every day.
Q. Do I receive the face value when selling a share?
Reality - No. You receive the current market price.
Q. Does face value decide whether a stock will rise?
Reality - No. Stock prices move because of demand, supply, company performance, and market conditions.
Q. Can a stock trade below its face value?
Reality - Yes. If investors lose confidence in the company, its market price may fall below its face value.
Q. Does a higher face value mean a better company?
Reality - No. Face value has nothing to do with a company's actual worth.
How to Check Face Value
You can check the face value of any listed company by visiting:
- NSE
- BSE
- Company's Annual Report
- Company's Investor Relations page
- Stock market apps like Zerodha Kite, Groww, Angel One, etc.
Where is Face Value Mentioned?
Face value can be found:
- Share Certificate
- Annual Report
- Balance Sheet
- NSE
- BSE
Which Face Values Are Commonly Used by Companies in India?
The following face values are commonly used for equity shares by Indian companies:
- ₹1
- ₹2
- ₹5
- ₹10
- ₹100
Note: There is no rule that every company's shares must have the same face value. Each company decides the face value of its shares when they are issued, while following the applicable legal requirements.
Conclusion
In this article, you learned what the face value of a share is, how it is different from the market price, and why it is important. We also explained how face value is used in corporate actions such as dividends, bonus shares, stock splits, and for accounting purposes.
Understanding face value will help you understand the basics of the stock market. However, always remember that when you buy or sell a share, the price you pay or receive is the market price, not the face value.
Disclaimer: The information in this article is for general purposes only and may not fit your personal situation. It is not legal, financial, or professional advice, and you should not rely on it as such. Before making any decisions, consider if this information applies to you and, if needed, get advice from a professional. The information is correct at the time of publication. While we have tried to ensure it is accurate, Finodha.in is not responsible for any loss or damage caused by using this information.
If you have any questions or notice anything missing in this article, you can contact/email me at help@finodha.in. You can also share your queries, and I will update the article to include any missing points, making it a complete guide for everyone.
Disclaimer: The information in this article is for general knowledge purposes only and should not be considered legal, tax, or professional advice.
Hi, Go On, Tell Us What You Think about the Face Value of Shares! Did we miss something to explain in this Article? Come on! Tell us what you think about our article in the comment/e-mail section.FAQs: Get answers to all your queries!
Question. What is Face Value in the stock market?
Answer. Face Value is the original value of a share decided by the company at the time of issue. It remains the same in most cases and is used for important company decisions like dividends and stock splits.
Question. Why is Face Value important?
Answer. Face Value is important because it helps companies manage their shares. It is used for important decisions like paying dividends, splitting shares, and maintaining company records.
Question. What is the difference between Face Value and Market Value?
Answer. Face Value is fixed by the company when the share is issued, while Market Value changes every day based on demand, supply, and the company's performance.
Question. Does Face Value affect the Market Price of a share?
Answer. No, Face Value and Market Price are different. Face Value usually remains the same, whereas the Market Price keeps changing based on how investors value the company.
Question. Can the Face Value of a share change?
Answer. Yes, the Face Value of a share can change, but only through corporate actions such as a stock split or share consolidation. Otherwise, it usually remains the same.
Question. Is Face Value the same as Par Value?
Answer. Yes. Face Value is also known as Par Value or Nominal Value. All three terms refer to the original value of a share decided by the company.
Question. What is the difference between Face Value and a bond's price?
Answer. Face Value is the original amount printed on the bond by the issuer. The bond's price is the amount buyers are willing to pay for it in the market.
In simple words: one is fixed by the issuer, while the other changes according to market demand.
Question. How is the Face Value of a share decided?
Answer. The Face Value of a share is decided by the company before the shares are issued. The company selects a value such as ₹1, ₹2, ₹5, ₹10, or ₹100 based on how it wants to divide its share capital among the total number of shares.
Question. How do you calculate the Face Value of a share?
Answer. The Face Value of a share is found by dividing the company's total share capital by the total number of shares issued. For example, if a company has ₹5 lakh as share capital and issues 1 lakh shares, the Face Value of each share will be ₹5.
Question. How can I find the Face Value of a stock?
Answer. You can easily check the Face Value of a stock on the company's official website, stock exchange websites like NSE or BSE, or any trusted stock market app or financial website.
Question. What is the difference between Face Value and Issue Price?
Answer. Think of Face Value as the company's official value of a share and Issue Price as the price at which the company first sells that share to investors.
For example: If the Face Value is ₹10 and the company sells the share for ₹150, then ₹10 is the Face Value and ₹150 is the Issue Price.
Question. Can the Market Value be lower than the Face Value?
Answer. Yes, the Market Value can be lower than the Face Value. The stock market decides the Market Value, so it can rise or fall depending on demand, supply, and investor sentiment.
Question. What is the Face Value of an IPO share?
Answer. When a company launches an IPO, it first decides the Face Value of each share. It then sets the IPO price, which is the price investors pay. For example, a share may have a Face Value of ₹10 but an IPO price of ₹300.
Question. What is the minimum Face Value of a share?
Answer. There is no fixed minimum Face Value for a share in India. The company decides the Face Value at the time of issue, with ₹1, ₹2, ₹5, ₹10, and ₹100 being some of the most commonly used values.
Question. Is a higher Face Value good or bad?
Answer. A higher or lower Face Value is neither good nor bad. It does not indicate whether a company is a good investment.
Question. Can face value of a share change?
Question. Does face value affect market price?
Answer. No, the face value of a share does not directly affect its market price.
Example: If a share has a face value of ₹10, its market price could be ₹50, ₹500, or even ₹5,000, depending on how the market values the company.
Question. How is face value shown in the balance sheet?
Answer. The face value of a share is shown in the balance sheet under the "Share Capital" section. It is disclosed along with the number of shares issued, subscribed, and paid-up, as well as the face value per share.
Example: If a company has 1,00,000 equity shares of ₹10 each, the balance sheet will show Share Capital: ₹10,00,000 (1,00,000 equity shares of ₹10 each).
Question. What is the face value of a share with example?
Answer. The face value of a share is the fixed value assigned by a company when it issues its shares.
Example: A share may have a face value of ₹10 but trade on the stock exchange at ₹450. Here, ₹10 is the face value (nominal value), while ₹450 is the market price, which changes based on investor demand and the company's performance.
Question. What is the difference between face value and market value of share?
Answer. Let's understand with this below example:
- If a company's share has a face value of ₹10 but is trading at ₹450 on the stock exchange, ₹10 is the face value, while ₹450 is the market value.
Question. Is face value important for investors?
Answer. Yes, face value is important, but it is only one part of the picture. A good investment decision depends more on the company's business, earnings, and market value.
Question. What is the good face value of share?
Answer. There is no "good" or "bad" face value for a share. A face value of ₹1, ₹2, ₹5, or ₹10 does not indicate whether a company is a good investment.
Question. What happens when face value is increased?
Answer. When the face value is increased, shareholders receive fewer shares, but each share has a higher face value. This change does not normally affect the overall value of their investment.
Example:
Suppose you own 100 shares with a face value of ₹10 each (total face value = ₹1,000). If the company increases the face value to ₹20, you will generally receive 50 shares of ₹20 each. The total face value remains ₹1,000, and the overall value of your investment generally stays the same, subject to market price changes.
Question. What is the face value of stock for example?
Answer. The face value of a stock is the base value assigned by the company for accounting and legal purposes. It is different from the stock's market price.
Example: If a stock has a face value of ₹2 and is trading at ₹180, ₹2 is the face value and ₹180 is the market price.
Question. What is the face value in the share market?
Answer. The face value in the share market is the original value of a share decided by the company when it is issued. It does not change with daily trading and should not be confused with the market price of the share.
Question. What are the key differences between face value and issue price?
Answer. Let's understand with the below example:
Eg: If a share has a face value of ₹10 but is issued to investors at ₹150, then ₹10 is the face value and ₹150 is the issue price.
Question. How is the face value different from the market value?
Answer. Understand through this example:
Eg: If a company's share has a face value of ₹10 but is trading at ₹500 on the stock exchange, ₹10 is the face value, while ₹500 is the market value (market price).
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