A stock split divides each existing share into several smaller shares by reducing its face value, for example, one ₹10 face-value share becoming five ₹2 shares. You end up with more shares at a proportionately lower market price, and the total value of your holding stays the same.
What exactly gets "split"?
Every share carries a face value, its original nominal value on the company's books, usually ₹1, ₹2, ₹5 or ₹10, and unrelated to the market price. (New to the term? Read what is the face value of a share first.) In a split, the company cuts this face value, and every share divides in the same proportion.
Say Himalaya Agro shares have a ₹10 face value and trade at ₹3,150. The company announces a 5-for-1 split: face value drops from ₹10 to ₹2. Harpreet's 40 shares become 200 shares, and on the ex-date the market price adjusts to about ₹630. His holding is worth roughly ₹1,26,000 before and after. Nothing about the business changed. The same cake is now cut into thinner slices.
Companies usually split when the per-share price has climbed so high that small investors find even one share expensive. A lower price per share can widen participation and improve trading liquidity.
How is a split different from a bonus issue?
Both multiply your share count and shrink the per-share price without changing your total value, but the accounting is different.
| Stock split | Bonus issue | |
|---|---|---|
| Face value | Reduced (e.g. ₹10 → ₹2) | Unchanged |
| New shares created from | Dividing existing shares | Company's reserves |
| Company's share capital | Unchanged | Increases |
| Your total holding value | Unchanged | Unchanged |
A bonus issue capitalises reserves to create new shares at the same face value; a split just re-denominates the shares that already exist. From your side as an investor, though, the experience is nearly identical: more shares appear in your demat account, and the price chart adjusts.
What do I need to do when a split happens?
Nothing. If you hold the shares before the ex-date, the split applies to you automatically, the depository replaces your old shares with the new, smaller-face-value ones a few days after the record date. As with a bonus, your quantity, average price and P&L in the app can look wrong while the credit is in progress; how bonus and stock split shares reflect in your account explains that temporary state. Eligibility follows the standard date rules covered in what is the difference between record date and ex-date.
The reverse also exists: in a reverse split (consolidation), a company merges several low-face-value shares into one bigger share, often to lift a very low per-share price. The same value-neutral logic applies, just in the opposite direction.
Things to keep in mind
- A split changes the share count and price, not the value of your investment or the worth of the company.
- Historical charts are adjusted for splits, so old prices are restated, don't mistake the adjusted chart for a price crash.
- A lower price after a split does not make the stock "cheap". Valuation depends on the business, not the per-share number.
Read next
What is a bonus issue? — Similar in effect to a split, different in mechanics.