stock splits: Stock splits could be a reason for cheer, worry too

Mumbai: On June 10 last year, Nvidia, the chipmaker and the world’s most valuable company, executed a 10-for-1 stock split when its shares were trading at $1,224 (over ₹1 lakh in Indian currency). Since then, a record 110 Indian companies have rushed to announce stock splits, with some stocks trading as low as ₹1.

Stock splits are intended to reduce the price of shares, making them more accessible to retail investors. However, several Indian small-cap companies have misused this mechanism, using it as a significant milestone to artificially inflate their stock prices.

Between 2010 and 2020, an average of 48 companies per year opted for stock splits. However, in 2024, a record 152 companies announced stock splits, compared to 83 companies in 2023, 103 in 2022, and 82 in 2021. Interestingly about 88 companies that have announced stock splits in 2024 are currently trading below ₹10.

In 2025, eight companies have already announced their intention to reduce the face value. Among them, Softrak Venture Investment, trading at ₹42, announced a face value subdivision from ₹10 to ₹1. The stock has surged 57% over the past month, even as the Sensex declined by 6% during the same period.

Last week Mangalam Global Enterprise announced a sub-division of its shares from face value of ₹2 to ₹1. The stock which rallied 24% in the past one month is trading at ₹28.88. Similarly, a stock Pradhin which is trading at ₹25.5 announced a ₹10 to ₹1 stock split last week. AA Plus Trade did a stock split from ₹10 to ₹1 on January 8 and the stock is currently trading at ₹1.42.

“A stock split is a corporate action commonly seen in bull markets, but it carries little significance for stocks trading at low single- or double-digits,” said Ravi Sardana, an investment banker. “Smaller companies often exploit this practice, falsely portraying it as a major achievement to manipulate stock prices.”

However, not all stocks that announced stock splits in 2024 are trading in single- or double-digits. For instance, Mazagon Dock executed a stock split from ₹10 ₹Rs 5, and the stock is currently trading at ₹2,315. Similarly, companies like Insolation Energy, Mazda, JBM Auto, Senco Gold, AGI Infra, Knowledge Marine, and IOL Chemicals, all of which have stock prices above ₹1,000, have also announced stock splits.In a stock split, existing shares are divided which results in lower prices. Companies announce stock splits to make a share numerically appealing to retail investors, who generally like shares of lower denomination, said analysts.

“Investors should note that stock split doesn’t impact nor is of any indication about companies’ fundamentals,” said Siddarth Bhamre, head of institutional research, Asit C. Mehta Investment Interrmediates. “In the bull market the number of stocks rally significantly and their value many times reaches above the affordability bracket of small investors. For an efficient price discovery, a diverse set of participants is needed. To enhance liquidity by bringing the price down, a stock split is considered by companies.”

According to Sahil Shah, chief investment officer at Equirus, a share split does not immediately increase the value of the business, it serves as a strategic move to enhance market accessibility and liquidity.