What is Face Value in Share Markets?

Last Updated: 25 Aug 2025

As an investor, it is important to understand the key concept of the face value of shares and bonds. Whenever a publicly listed company issues its stocks through Initial Public Offering (IPOs), it fixes a price which is the face value. It is simply the price at which you purchase the shares of a particular company.Also known as the par value, face value is the value of the company as listed in its books and share certificates. It is fixed by the company, once it decides to issue its shares and bonds.

Understanding working of face value of shares and bonds:

All companies issue shares and bonds at face value. There are no fixed criteria for fixing the face value of shares by a particular company. Typically, it is arbitrarily assigned by the company. Assigning face value is important from the company’s perspective as it helps the entity to calculate the accounting value of its shares. This value is then used in its balance sheet.

The face value of the shares and bonds is clearly mentioned in the share/bond certificate. To know about the face value of shares, you are simply required to refer to your Demat Account. Knowing the face value of shares is the foremost step required, before you start trading in stocks.

Importance of face value in stock markets:

The face value of a security is an important parameter for calculating various key aspects concerning shares and bonds. Face value can help calculate:

• Market value of shares
• Premiums
• Returns
• Interest payments

Let’s understand the significance of the face value of shares with the following example. Consider that a company needs to raise Rs 10 crore from the market to fulfill its business needs. It can issue 10 lakh bonds with a face value of Rs 100 per bond. The face value determined by the company will enable it to calculate the different related expenses, such as interest payments. If the firm has chosen to give 3% interest on its bonds, its payment towards payouts will be Rs 30,000 per annum.

How is the Face Value of Shares Decided?

The face value of shares is usually determined by the company at the time of incorporation. It is a random value, usually fixed at ₹1, ₹2, ₹5, or ₹10, depending upon the structure and choice of the company.

This value is stated in the memorandum of association of the company and is fixed unless changed through certain corporate actions such as a stock split. The face value does not indicate the market price but plays an important role in accounting and compliance with the law.

Impact of Face Value in Financial Statements

Face value is significant in the presentation of a company’s equity in its financial reports. It is used to determine the amount of share capital that appears in the balance sheet.

For instance, if a business sells 1,00,000 shares with a face value of ₹10, then share capital will be posted as ₹10,00,000. This amount also forms the basis of calculating dividends and interpreting stock splits or buybacks.

Face Value of Shares Formula

You can calculate the face value of a share using this formula:

Face Value of a Share = Equity Share Capital ÷ Number of Outstanding Shares
Example:

If a company has an equity share capital of ₹10,00,000 and has issued 1,00,000 shares, then:

Face Value = ₹10,00,000 ÷ 1,00,000 = ₹10 per share

This means each share has a face value of ₹10, which is useful for accounting and corporate actions like dividends or stock splits.

Face value vs market value:

It is easy to get confused between the face value and the market value of a security, especially if you are a new investor. Knowing the difference between the face value and market value is important before you commence trading in stock markets. You can refer to the chart given below.

Face value	Market Value
Remains unaffected by market conditions	Fluctuates according to market conditions. Changes in price can be because of changes in macroeconomic indicators, government policies and international events.
The price is decided by the company	Price at which the stocks are traded in stock exchanges. It will change, once trading commences.
It is the nominal value of stocks at the time of issuance	It is the current price of the stocks as quoted in stock exchange
It can not be calculated as the face value is determined by the company	Market value can be calculated by dividing the total value of the company in the market with the total number of shares issued.

Understanding book value:

Book value refers to the value of shares in the company’s book of accounts. It is another term that is often used while investing in stocks. It is calculated by dividing the company’s net worth or the difference between its assets and liabilities by the number of issued shares.

Can the face value of stocks change?

The face value of shares may fluctuate due to company action, such as a stock split. In the stock split situation, the company splits the current shares into units of lower face value. For example, if a firm with a face value of Rs 20 per share has declared a stock splits of 1:1, then one current share is now being split into two units with a face value of Rs 10 each. A stock split is a method to enhance liquidity and can facilitate realizing the real value of a company’s stock.

Conclusion

Face value, market value and book value become crucial during trading or investment in stocks. It becomes necessary to understand these terms in share trading in order to trade effectively and make money from the stock market.

Frequently Asked Questions

Is there any connection between the face value of a stock and the market price?

No, there is no such direct relationship between the face value of a stock and its market price. Though the face value is fixed, its market price fluctuates as per demand and supply in the stock market.

What is the minimum face value of a share?

Most companies set the face value at ₹10, ₹1, or ₹100. According to SEBI regulations, the minimum allowed face value for a listed company is ₹1.

Can the face value of shares be changed?

Yes, the face value can be changed through corporate actions like a stock split. In a stock split, the existing shares are divided into smaller units, which lowers the face value.

What is the face value of an IPO share?

In an IPO, the face value is the fixed nominal value of each share as decided by the company. It is separate from the offer price and is used for accounting and legal purposes during the capital-raising process.