A stock split is a corporate action that creates more shares by dividing the existing shares into multiple new shares. It does not change the ownership or value of the shareholders, but it makes the stock more affordable and liquid for retail investors.
Nestle India, the FMCG major, announced a stock split in the ratio of 1:10 after its board meeting on Thursday. This means that each equity share of face value of ₹ 10 each will now be subdivided into 10 equity shares of face value of Re 1 each. The company said that this decision was taken to improve the liquidity of its shares in the stock market and to make them more accessible to small investors.
How will the stock split affect Nestle India’s share price and trading volume?
The stock split will bring down Nestle India’s share price to one-tenth of the current price. This will make the stock more attractive for retail investors who may find it difficult to buy the shares at a high price. The lower price may also increase the demand and trading volume of the shares, which may benefit the company and its shareholders in the long run.
On Friday, after the stock split announcement, Nestle India’s shares rose as much as 2.5 percent to hit a record high of ₹ 24,735.50 on BSE. The number of shares changing hands on BSE jumped by 5 times the daily average by the start of the noon session on Friday.
When will the stock split take effect and who will be eligible for it?
The record date for the stock split of existing equity shares has not been announced yet. The company said that shareholders would be intimated later about the same. The record date is the date on which the company checks its records to identify the shareholders who are eligible for the division of their existing shares.
This is the first-ever stock split for Nestle India, which has been listed on BSE since 1989. The company has a market capitalization of over ₹ 2.8 lakh crore and is one of the most valuable FMCG companies in India.