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Most people often get confused between the face value of a share and market value of a share. They may sound similar but in reality both are very different. By reading this article we assure you that you will never be confused again about these two terms. So, let’s dive in and clearly understand the difference between face value and market value of shares in the simplest way possible.
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When a company is created it needs to fix a base price for its shares that base price is called the face value.
It’s like saying: “Each share of my company will officially start with a value of ₹10.”
This doesn’t mean the share is worth ₹10 in the market, it’s just the starting number (or first price) used for accounting, dividends and legal purposes.
So what are its uses-
1) Dividends are Declared on Face Value
Companies announce dividends as a percentage of face value and not on market price.
Example: If face value = ₹10 and company declares 50% dividend → Dividend = ₹5 per share.
2) Stock Splits Reduce Face Value
When shares split the face value also splits means when the market value or share price splits in two.
For example the shares of ₹100 splits into two shares of ₹50 then its face value will also split into two.
Example:
FV ₹10 → share split into 2 → FV becomes ₹5
FV ₹5 → split again → FV becomes ₹2
FV ₹2 → split again → FV becomes ₹1
FV ₹1 = Minimum legal limit (cannot be split further).
3) Accounting & Legal Purpose
Face value helps companies record share capital in their books and is important for legal compliance.
In short: Think of it like the price printed on a product. The actual selling price can be higher or lower but the printed price gives a reference point.
The market value of an unlisted share is the price at which investors buy and sell the share in the market (It fluctuates regularly)
Market value depends on:
-Demand and supply of the share
-Company’s financial performance
-Growth prospects
-Investor sentiment (what people feel about the company’s future)
In Simple Words - If you open a trading platform and place a buy or sell order then the price at which your order gets executed is the market value of that share.
For Example
Today, if NSE shares are trading at ₹2,095 then that is the market value per share at that time.
Tomorrow it may be higher or lower depending on demand, supply and performance.
|
Aspect |
Face Value (FV) |
Market Value (MV) |
|
Meaning: |
Fixed base price of a share decided by the company at the time of issue of the share |
The actual trading price of the share in the unlisted/grey market |
|
Who Decides it: |
Company (when creating or issuing the shares) |
Investors & market forces (demand, supply, performance and sentiment of the market) |
|
Changes: |
Rarely changes (only during corporate actions like stock split) |
Changes daily with demand, supply and investor outlook |
|
Purpose: |
Used in accounting methods, recording share capital, dividends and legal compliance |
Shows the real worth of the share in the market at present |
|
Dividend Basis: |
Declared as % of face value (e.g., 50% on ₹10 FV = ₹5 dividend) |
Not used directly for dividend calculation |
|
Example: |
A company issues shares at FV ₹10 that stays fixed |
If NSE trades at ₹2,095 today that’s its market value today |
Used by companies for accounting (to calculate total share capital of the company).
Base for declaring dividends on the share of the company
Important in corporate actions like stock splits, bonus issues and rights issues.
Used in legal and regulatory filings.
For bonds and preference shares interest and redemption is calculated on face value.
Used by investors to decide the buying and selling price of the shares.
Reflects the current worth of shares of the company in the market.
Helps in valuing investments and calculating returns and profits on them.
Used in ratios like P/E (Price to Earnings), P/B (Price to Book) and Market Cap.
Face value and market value may sound similar but they serve for very different purposes.
Face value is the fixed base price of the share which is mainly used for accounting, dividends and legal compliance while Market value is the real trading price of the share that reflects investor demand, company performance and future growth potential of any company.
Understanding both is very important because face value helps you to see how companies record and manage their shares while market value shows you what investors are willing to pay for the share.
In short, the face value is the foundation but market value tells the real story. For more insights on unlisted shares and investing, visit Sharescart.com
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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