Stock Split
A stock split is a corporate action where a company divides each existing share into multiple shares with a proportionally lower face value, increasing the total share count without changing the total equity value or the shareholder's percentage ownership.
Understanding Stock Split
Stock splits change the number of outstanding shares and face value but not the company's market capitalisation or your percentage ownership. They are different from bonus issues — bonus comes from reserves, split is purely a re-denomination of existing shares.
Indian regulations distinguish between sub-division (reducing face value) and consolidation (the reverse — combining shares to increase face value). High-priced Indian stocks like MRF, Bajaj Holdings, Eicher Motors have not split in years; meanwhile companies like Reliance, TCS, and HDFC Bank have all done splits at various points.
Why it matters
Stock splits don't change your wealth but make shares more accessible to retail investors and improve trading liquidity. For SIP investors, post-split prices are more aligned with monthly investment amounts. Tax-wise: holding period for split shares carries forward from original — so if you held the original for 13 months, post-split shares qualify for LTCG immediately.
Example
You hold 100 shares of an Indian stock at ₹4,500/share, total ₹4.5 lakh. The company announces a 10:1 split (face value ₹10 to ₹1). On the ex-split date, your holding becomes 1,000 shares at ₹450/share — total still ₹4.5 lakh. Future per-share dividends are also split (₹50/year dividend becomes ₹5/year per share — still ₹5,000/year total for you).
You hold 100 shares of an Indian stock at ₹4,500/share, total ₹4.5 lakh. The company announces a 10:1 split (face value ₹10 to ₹1). On the ex-split date, your holding becomes 1,000 shares at ₹450/share — total still ₹4.5 lakh. Future per-share dividends are also split (₹50/year dividend becomes ₹5/year per share — still ₹5,000/year total for you).