The face value is the original value printed on a bond or stock certificate. For bonds, it is the amount repaid at maturity. For stocks, face value is the value assigned to each share when issued.

For example, Meera buys a 10-year government bond with a face value of ₹1,000 and a coupon rate of 8%. Every year, she receives ₹80 (8% of ₹1,000) as interest, regardless of whether the bond trades at ₹950 or ₹1,100 in the market.

At the same time, Raj buys a company share with a face value of ₹10. The company declares a 50% dividend, so Raj gets ₹5 per share. This was calculated on face value, not on the current trading price of ₹250.

The table below summarises the data given in the example.

Person	Instrument	Face Value	Market Price	Return Calculation	Actual Benefit
Meera	Govt Bond	₹1,000	₹950 – ₹1,100	8% of ₹1,000 = ₹80/year	₹80 yearly + ₹1,000 at maturity
Raj	Share	₹10	₹250	50% Dividend = ₹5/share	₹5 dividend despite high market price

In both cases, interest (bonds) and dividends (stocks) are linked to face value. Here, the market value or the price Meera and Raj paid to purchase them is not of much use. Face value is the base value at which interest or dividends are paid to you. This might look a little jarring. Let’s break down this concept in this blog.

What Is the Face Value (Par Value)?

Face value is also known as the par value or nominal value. It is the original and fixed value which is assigned to every bond or stock. Unlike the market value, which changes very fast, the face value is constant. Only corporate actions like stock splits or consolidations can change face value.

In India, it's estimated that most listed companies have a face value of ₹10. Although many have reduced this via splits to ₹5, ₹2, or even ₹1, so that the bond or stock becomes more accessible and liquidity is maintained within the organisation.

Example 1: Infosys Ltd. has a face value of ₹5 per share, and the current market price is approximately ₹1,500 per share

Now, Raj buys 100 shares of Infosys.

Investment Cost (Market Price):
100 × ₹1,500 = ₹1,50,000
Company Announces Dividend:
Infosys declares a 200% dividend. Dividend is always on face value, not market price. So, the calculations will be:

Dividend per share = 200% of ₹5 = ₹10
Raj holds 100 shares; in this case, 100 × ₹10 = ₹1,000 dividend

The table below summarises Raj’s example.

Item	Amount
Shares Bought	100
Market Price per Share	₹1,500
Total Investment (Market)	₹1,50,000
Face Value per Share	₹5
Dividend Declared	200%
Dividend per Share	₹10
Total Dividend Raj Gets	₹1,000

Even though Raj invested ₹1,50,000, his dividend is based on the face value of ₹5. This proves how face value is related to dividends and company accounts, and how market price shows demand in the market.

Example 2: Floating Rate Savings Bonds (FRSB) are issued by the RBI and sold through SBI and other banks. These are issued exactly at their face value (100%). This means that if the face value is ₹1,000, the issue price is ₹1,000. One must make a minimum investment of ₹1,000 (and in multiples, like ₹2,000, ₹3,000 and so on).

Anita wants to invest in a safe option, so she buys RBI Floating Rate Savings Bonds through SBI. Her finances with bonds are shown in the table given below.

Item	Value
Face Value per Bond	₹1,000
Bonds Bought	5
Total Investment	₹5,000 (5 × ₹1,000)
Annual Interest Rate (FRSB)	7.35%
Annual Interest Earned	₹367.50 (7.35% × ₹5,000)
Principal Returned at Maturity	₹5,000

For Anita, the face value (₹1,000) decides both the amount she invests and the interest she earns. Market rates do not affect these 2 values.

How is Face Value Regulated?

The face value of shares must be stated in official documents like the Memorandum & Articles of Association and printed on share certificates. These regulations are set under the Companies Act and SEBI regulations. It also states the following:

In India, we usually follow these denominations: ₹1, ₹10, ₹100, etc.. However, on stock exchanges, listed companies commonly use ₹1, ₹2, or ₹10. This rule keeps accounting simpler.
The total face value of issued shares equals a company’s legal share capital on its balance sheet.

For example, a company issues 50,000 shares at a face value of ₹10 each. In such a case, the legal capital recorded is ₹5,00,000. The table below shows how total share capital is calculated and how it is different from face value.

Shares Issued	Face Value (₹)	Total Share Capital (₹)
50,000	10	5,00,000 (50,000 × 10)
1,00,000	1	1,00,000 (1,00,000 × 1)
20,000	100	20,00,000 (20,000 × 100)

By using face value, the government sets a standardisation that maintains legal uniformity and is easier to account for.

Corporate Actions

In the previous section, it was stated that the face value of shares can be changed either through stock splits or bonus issues. In both cases, we see an increase in the number of shares, but face value and capital are affected differently. Let’s see how they are impacted in this section.

Stock Splits

A stock split increases the number of shares. However, this action reduces the face value per share. The key point is that the company’s overall share capital has to remain constant; that is why only the per-share denomination changes.

A stock split is done by companies to improve liquidity and make shares more affordable for retail investors.

To understand this better, let’s take an example of a 1:2 Stock Split:

A company, TMC Ltd., has 10,00,000 shares at ₹10 face value. So, their total share capital will be: 10,00,000 × ₹10 = ₹1,00,00,000.
After a 1:2 split, we see the following changes:

Number of shares doubles to 20,00,000.
Face value halves to ₹5.
Total share capital remains ₹1,00,00,000.

Let’s compare both situations in the table given below.

Stage	Shares	Face Value (₹)	Total Share Capital (₹)
Before Split	10,00,000	10	1,00,00,000
After Split	20,00,000	5	1,00,00,000

With this example, we learn that stock splits make shares more affordable but do not change the company’s overall capital base. This is the reason why the face value gets affected.

Bonus Issues

When a company issues additional shares to existing shareholders without any fee, then that action is referred to as a bonus issue. They use accumulated reserves to introduce new shares. Here, the face value per share stays the same, but the number of shares increases. This can raise the company’s total paid-up capital if reserves are capitalised.

Let’s take an example with a 1:1 Bonus Issue.

A company, MTS Pvt. Ltd has 5,00,000 shares at ₹10 face value. So, its total share capital = ₹50,00,000. After a 1:1 bonus, the following changes are observed:

Shareholders receive one extra share for each share they hold.
The number of shares doubles to 10,00,000.
Face value remains ₹10.
Total share capital increases to ₹1,00,00,000.

The table given below compares both situations.

Stage	Shares	Face Value (₹)	Total Share Capital (₹)
Before Bonus	5,00,000	10	50,00,000
After Bonus	10,00,000	10	1,00,00,000

Bonus issues are good for shareholders as they get additional shares without spending a penny. This action also increases the share capital, but each share continues to carry the same face value.

Conclusion

Face value is a fixed legal nominal amount which is used for share capital, bond principal and dividend/coupon calculations. It neither shows the market price nor is affected by the ever-changing values. It is necessary to introduce face value to make accounting simpler and make investing a fairer financial activity.

Frequently Asked Questions

What’s the difference between face value and market value?
Face value is the original nominal amount; market value is the trading price driven by supply and demand, and can be much higher or lower.

How does face value affect dividend yield?
Dividend amount may be declared on face value, but yield = (dividend received ÷ market price). So yield depends on market price, not face value.

Can companies increase face value (reverse split)?
Yes, through a consolidation (reverse split), a company can raise face value per share while reducing share count; it requires shareholder approval and regulatory filings.

What is the securities premium account?
When shares are issued above face value, the excess is recorded in the securities premium account and can be used only for specified purposes under the Companies Act.

Does face value determine buyback price?
No, buyback offers are generally priced relative to market value (or fixed by the board). Face value does not set the buyback consideration.

Does face value affect EPS or market capitalisation?
No, EPS and market cap use market figures and the number of shares. Face value only affects legal capital, not market cap or EPS calculations directly.

Are there tax implications linked to face value?
Generally, no capital gains and dividend taxes are based on actual transaction amounts (purchase/sale price, dividend received), not face value.