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What is a Stock Split?

By: Akriti Tomar | Date : Mar 3, 25

What is a Stock Split?

A stock split is a corporate action where a company increases the number of outstanding shares by reducing the face value of each share. Companies generally implement stock splits to improve liquidity and make shares more affordable for investors.

Although the share price decreases after a split, the total investment value remains the same. The newly split shares are usually credited to the investor’s Demat Account within 2 days.

Example Scenario

If a stock with a face value of ₹10 undergoes a 2:1 stock split, its face value reduces from ₹10 to ₹5. This doubles the number of shares an investor owns, but the total investment value remains unchanged.

Stock Split Impact Table

Split Ratio Old Face Value (₹) Shares Owned Before Split Share Price Before Split (₹) Investment Value Before Split (₹) New Face Value (₹) Shares Owned After Split Share Price After Split (₹) Investment Value After Split (₹)
2:1 10 100 900 90,000 5 200 450 90,000
5:1 10 100 900 90,000 2 500 180 90,000

In all cases, while the number of shares increases, the price per share decreases proportionally, ensuring that the total investment value remains unchanged.

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