10.8What is face value (in an IPO)?
1What is it?
The nominal value of each share (often ₹1, ₹2, ₹5 or ₹10). The issue price is much higher; the difference is the share premium.
2Why does it exist?
It’s an accounting number. Don’t judge an IPO by it.
3Calculation
Premium = Issue price − Face value
- FV ₹10, issue price ₹300 → premium ₹290.
₹290 per share goes to the "securities premium" reserve.
4Quick revision
- FV is nominal.
- Issue price = FV + premium.
- Irrelevant to valuation.
5Knowledge check
Q1. FV ₹2, price ₹150. Premium?Show answer
₹148.
Q2. Does FV tell you if an IPO is cheap?Show answer
No.
Q3. Where does the premium go?Show answer
Securities premium reserve.