Face Value Meaning

akshayykumar

Newbie
1 0
The face value is the nominal value of the shares, that is, their original cost as mentioned in the share certificate. It is just an accounting value which could either be Re 1, Rs 2, Rs 5, Rs 10 or even Rs 100.
The concept of face value can be easily understood with an example of an initial public offering (IPO). Take, for example, IRFC IPO. The face value of a single share of IRFC is Rs 10. However, the issue price at which the shares have been issued is Rs 25-26.

The difference between the issue price and the face value is the premium the company is charging from potential investors.

Hence, Issue Price = Face Value + Market Premium

While the face value could be an arbitrary number (which is Rs 10 for most stocks), the premium over face value is not at all arbitrary. It depends on the company’s growth potential and profits and sales figures.
Face value meaning
 
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