Face value in an IPO refers to the nominal value of a share set by the company. It plays a key role in determining the capital structure but is not linked to the market price.
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Face value in an IPO is the original cost of the share as stated in the company’s books. Also called par value, it is usually ₹1, ₹2, or ₹10 in India. It is fixed when the company issues shares and remains unchanged unless a stock split or consolidation occurs. While the IPO face value is important for accounting and dividend purposes, it does not reflect the share’s market worth.
Face value is calculated using the formula:
Face Value = Equity Share Capital ÷ Total Number of Shares
If a company has ₹10 crore equity capital and 1 crore shares,
Face Value = ₹10 crore ÷ 1 crore = ₹10 per share
This value is used in IPO filings and financial statements.
| Aspect | Face Value | Issue Price (Price Band) |
|---|---|---|
Definition |
Nominal value of the share |
Price at which shares are offered in IPO |
Fixed or Variable |
Fixed by company |
Determined by market demand & valuation |
Includes Premium? |
No |
Yes – includes premium over face value |
Example |
₹10 |
₹250 (₹10 face + ₹240 premium) |
The price band includes a floor price and a ceiling price, guiding investors during bidding.
Face value is not market-driven. It is set by the company and used to:
Determine share capital.
Calculate dividend per share.
Adjust for stock splits or consolidations.
For example, if a stock with ₹10 face value is split 1:5, the new face value becomes ₹2, even after the IPO listing.
| Use Case | Role of Face Value |
|---|---|
Dividend Declaration |
Dividends are declared as a % of face value |
Stock Splits |
Face value changes post-split (e.g., ₹10 → ₹2) |
Capital Structure |
Helps calculate equity capital |
Accounting |
Used in balance sheets and financial disclosures |
Face value is essential for internal financial metrics, not for market valuation.
TCS had a face value of ₹10.
It announced a 1:1 bonus and later a stock split to ₹1.
Investors holding 100 shares at ₹10 face value now hold 1,000 shares at ₹1 face value.
Such changes affect share count but not total investment value.
Face value in an IPO is a fixed, accounting-based figure. It helps define capital structure and dividend payouts but does not influence the share’s market price. Market participants typically assess issue price and fundamentals, as face value is largely accounting-based.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Because it includes a premium based on company valuation, demand, and market conditions.
Rarely. Most IPOs are priced above face value due to investor demand and company valuation.
No. Market price is driven by demand, supply, and fundamentals—not face value.
No. Face value is an accounting measure used for share denomination. It does not represent a company’s growth prospects, profitability, or market performance.
Face value is mainly relevant for understanding capital structure or dividend yield, and does not influence price appreciation.