I purchased stock of Anchal ispat at a rate of average price of 7.77 (18300)and have an investment value of approx 142191 but my broker ts now reflecting a average of 777 post capital reduction of shares corporate action and the quantity is also reduced to 183. Is this correct or what corporate action effect should ideally be applied @Naman @Mohseen_Usmani @Prithvi @RahulDeshpande @Radhika
Hi @ARVIND1 , it seems you are referring to this - https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20250423-6 .
Aanchal Ispat underwent a significant capital restructuring via an NCLT-approved resolution plan, reducing its share capital by lowering the face value from ₹10 to ₹0.10 (a 99% reduction in face value) Hence the Value remained same after Capital Reduction but the Price & shares were Reduced by 2 Decimals.
@Mohseen_Usmani in the bse notice you shared i exactly want to understand about the third point (point c) as still if you observe in bse the stock still has a face value of 10
@ARVIND1 Point (c) means that after the face value was “legally” reduced from 10 to 0.10, the company immediately consolidated the shares so that 100 shares of 0.10 became 1 share of 10. Hence, the stock’s FV on BSE still shows 10.
0.10 was only a temporary legal step and never appeared for trading, so you only see the final result where the share count is reduced, the price is proportionately higher, and the total investment value remains unchanged.
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@iamshrimohan so you mean to say that from my initial 18300 quantity even after corporate action I should still be able to see 18300 quantities only. And that my broker who is reflecting 183 shares instead is wrong???
@ARVIND1 No. The qty reflecting 183 is correct. Consider this in two steps:
Step 1: 18300 shares got converted to 183 due to reduction on capital. Reduction in capital is a loss for the investor as the value has eroded. No change happens on the share price. This is pure loss.
Step 2: Now post step 1, the FV has become 0.1 and as per SEBI rules, listed company can have Re. 1 as minimum face value. So company choose to club 100 shares into 1 which makes the FV as 10 and price approx as 777. Here share qty does not change, the effect is seen in the price.
@iamshrimohan Sorry to ask again but i invested around 142000 in this stock and now the quantities have been reduced to merely 183. Even if I sell all the quantities (183) now at a rate of 12 (CMP) I’ll be booking a loss since the average price is 777 and sell price would be 12 which isn’t my fault right??
Due to corporate action of the company why should an investor bear the loss. I may be wrong here but during a capital reduction although quantity is reduced but market price must be increased proportionally so that investors does not face any loss due to corporate action.
Any update @iamshrimohan
@ARVIND1 Got your point but capital reduction in laymans terms means cancelling the shares. Usually done to write off losses in the process of resturcturing. A shareholder holds stake into the company and hence faces the heat of the same. Also note that market price is driven by demand and supply so company as such has no role to set the CMP.
@iamshrimohan again sorry to ask again so you mean to say the loss is booked in this instance and I can appeal to nobody in this instance.
@ARVIND1 Unfortunately yes