Reverse Stock Split
A consolidation of several shares into one, raising the face value and the price proportionally.
Formula
New Share Count = Old Count / Consolidation Ratio; Adjusted Price = Old Price x Consolidation Ratio
Unit
shares
In depth
A reverse split raises the price without changing anything about the business, which is why it is usually done to meet a minimum price requirement or to shed a penny-stock appearance. It is rarer in India than in the United States, where exchange listing rules impose price minimums. Like a forward split it creates no value, and it does not improve the prospects that caused the low price in the first place. Fractional entitlements are typically sold and the proceeds distributed, which creates a small taxable event for holders with odd lots.
Worked example
A 1-for-10 consolidation takes 5,000 shares at ₹4 to 500 shares at ₹40 — ₹20,000 either way. The company now looks like a ₹40 stock and is exactly as valuable as it was.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Reverse Stock Split” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.