Upcoming Stock Splits, How It Works & Why a Company Does It?
The American Yankee legend Yogi Berra once said, “You better cut my pizza into four slices because I’m not hungry enough to eat six.” But the taste of the pizza remains the same no matter how many pieces it’s cut into, right? That’s basically what a stock split means.
Whether you’re an experienced investor or just starting out in finance, let’s begin with the basics. In this blog, we’ll be understanding stock splits, why companies do them, and how stock splits impact the share price and your investment strategy.
Let’s start by demystifying this important concept in the stock market.
What is a Stock Split in India?
A split share refers to a corporate action that allows a company to divide its existing shares into multiple new shares. It’s important to understand that once the stock is split, the investor’s stake and market capitalisation (total value of the common shares owned by a stakeholder) remain unaffected.
A company splits its stock using a specific split ratio. This helps in determining how many shares it will be divided into. The stock split can be in the form of a forward or reverse stock split.
Let’s understand this concept through an example.
Imagine you own 1 share of Company X priced at ₹100. The company announces a 2:1 stock split. After the split, you will have 2 shares, each priced at ₹50. The total value of your shares remains ₹100, and the company’s market cap doesn’t change. This is called a forward split, where you get more shares at a lower price.
| Company Name | Split Ratio | Number of stocks before the split | Price per share of stocks before the split | Number of stocks after the split | Price per share of stocks after the split |
| Company A | 2:1 | 1 | ₹100 | 2 | ₹50 (each) |
Upcoming Stock Splits in 2025
Wondering if you should invest in companies that have announced stock splits?
We have prepared a list of companies that have announced their share split for 2025. Refer to the table for a better understanding.
| Company | Old FV | New FV | Announcement | Record Date | Split Date |
| Dev Information Tech | 5 | 2 | 25th November, 2024 | 21st August, 2025 | 21st August, 2025 |
| Algoquant Fintech Limited | 2 | 1 | 3rd July, 2025 | 18th August, 2025 | 18th August, 2025 |
| Mos Utility Limited | 10 | 2 | 11th June, 2025 | 8th August, 2025 | 8th August, 2025 |
| India Glycols | 10 | 5 | 30th May, 2025 | 12th August, 2025 | 12th August, 2025 |
| Sprayking Ltd | 2 | 1 | 10th June, 2025 | 8th August, 2025 | 12th August, 2025 |
| GTV Engineering | 10 | 2 | 7th June, 2025 | 28th July, 2025 | 28th July, 2025 |
| RIR Power Electronics | 10 | 2 | 29th May, 2025 | 25th July, 2025 | 25th July, 2025 |
| Kellton Tech Solutions | 5 | 1 | 14th June, 2025 | 25th July, 2025 | 25th July, 2025 |
| Indo Thai Securities | 10 | 1 | 30th May, 2025 | 18th July, 2025 | 18th July, 2025 |
| Paras Defence and Space Technologies | 10 | 5 | 30th April, 2025 | 4th July, 2025 | 4th July, 2025 |
| Cool Caps Industries | 10 | 2 | 14th May, 2025 | 4th July, 2025 | 4th July, 2025 |
| Padam Cotton Yarns | 10 | 1 | 23rd April, 2025 | 27th June, 2025 | 27th June, 2025 |
| Elitecon International | 10 | 1 | 7th May, 2025 | 25th June, 2025 | 25th June, 2025 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: For real-time updates on share price and market trends, visit the smallcase stocks collection today!
How Does a Stock Split Work?
Meghan Railey, a financial planner and Optas Capital’s co-founder, recalls stock splits as ‘when a company wants to change their per-share prices while making the stocks more accessible to people.’
The main reasons for a stock split are that the companies choose to split their stocks to lower their share trading prices and offer a more affordable range to the investors. Hence, the existing shareholders get extra shares based on the split ratio, like 2-for-1 or 3-for-1.
For example, many investors prefer owning 100 shares of a ₹100 stock rather than just 1 share priced at ₹1000. So, when share prices get high, the company’s board can decide to split the stock in ratios such as 2:1, 3:1, 5:1, or even 100:1. In a 3-for-1 split, you get three shares for every one you owned before.
Why Do Companies Split Stocks?
The reasons for stock split indicates that a company is thriving, which is a good indicator. But the management decides to split their stocks. This mainly happens when they believe that their share prices are relatively ‘high’ or above the ‘optimal’ share trading range. As per the companies, they may look more enticing to investors.
Let’s understand this with a renowned share split example of MRF.
MRF has split shares only twice –
- 1:2 split in 1970
- 3:10 split in 1975
This means if you owned 1 share before the 1970 split, you then had 2 shares. Before that split, the share price was roughly ₹10 – ₹20 per share; after, it was almost halved. Similarly, in 1975, for every 10 shares held, shareholders received 3 additional shares. At that time, the share price was around ₹65 – ₹70 per share. Since then, MRF has not split shares, maintaining its very high share price, which is over ₹1,44,000.00 per share as of 2025. This approach preserves exclusivity and targets long-term, committed investors.
What Happens When a Stock is Split?
One of the main benefits of splitting a stock is to make a company’s share cheaper for the budding or low-risk appetite investors.
- Although stock splits increase the number of outstanding shares, the total market value remains unchanged because splitting shares does not create additional value.
- When a stock split is executed with a specific ratio, the share price is automatically adjusted on stock exchanges such as BSE and NSE.
Example:
Suppose Company A has 10,000 shares at ₹60 each. The company announces a 2-for-1 share split, doubling the total shares to 20,000.
Before the split:
- Tara owns 6% (600 shares)
- Lara owns 2% (200 shares)
After the split:
- Tara has 1,200 shares (still 6%)
- Lara has 400 shares (still 2%)
Even though the number of shares doubled, their ownership percentages and total value remain the same.
Note: In a 2-for-1 split, the number of shares doubles, but the share price is roughly halved, so the overall value held by investors stays the same.
Factors That Can Impact the Investors During a Stock Split
Here are some of the factors that can impact investors.
- Changes in the Number of Shares Held: When a company does a stock split, the number of shares held by an investor changes, but the total value of their investment remains the same. This means that the investor’s ownership percentage in the company remains the same, but the number of shares they hold and the price per share change.
- Effects on Share Price: The effects of a stock split on the market include a temporary impact on a company’s share price. Consequently, this makes the stock more affordable to investors and increases demand.
Types of Stock Split
There are two main types of stock splits that companies can use to increase the number of outstanding shares. These are: forward stock Split and reverse stock split. Let’s understand these types in detail.
What is a Forward Stock Split?
A forward stock split is the most common type of stock split. In this, a company increases the number of outstanding shares by dividing each existing share into multiple shares.
For example, in a 2-for-1 stock split, each existing share splits into two new shares. As a result, the total number of shares outstanding is doubled, but the value of each share is halved.
Before the split:
| Type of Stock | Number of Shares | Price Per Share | Total Value of Shares |
| Common Stock | 1,000 | ₹100 | ₹1,00,000 |
After a 2-for-1 split:
| Type of Stock | Number of Shares | Price Per Share | Total Value of Shares |
| Common Stock | 2,000 | ₹50 | ₹1,00,000 |
What is a Reverse Stock Split?
This is the opposite of a forward stock split. In this, a company reduces the number of outstanding shares by combining multiple shares into one.
Let’s understand through a reverse stock split example.
In a 1-for-5 reverse stock split, every five existing shares of stock are combined into one new share. As a result, the total number of shares outstanding is reduced by a factor of five, but the value of each share is increased proportionally.
Before the reverse split:
| Number of Shares | Share Price (Rs) | Total Market Cap (Rs) |
| 10,000 | 50 | ₹5,00,000 |
After the reverse split:
| Number of Shares | Share Price (Rs) | Total Market Cap (Rs) |
| 2,000 | 250 | ₹5,00,000 |
How Do Stock Splits Affect Short Sellers?
Stock splits generally do not significantly impact short sellers’ overall positions or their potential profit and loss, though some adjustments occur due to changes in share count and price:
Changes in Position
- Number of Shares: After a stock split, the short seller owes more shares in proportion to the split ratio. For example, in a 2-for-1 split, if you were short 100 shares before, you now owe 200 shares.
- Share Price: The price per share decreases proportionally to the split. So, a ₹100 stock price would become around ₹50 after a 2-for-1 split.
Impact on Profit/Loss Potential
- Total Position Value: Despite these changes, the overall value of the short position remains constant before and after the split. Using the example, the short position worth ₹10,000 before the split (100 shares × ₹100) remains ₹10,000 after the split (200 shares × ₹50).
- Impact on Closing the Position: Although the initial value stays the same, the cost of closing your short position can vary based on how the stock price moves after the split. If the price falls further, you can buy back shares at a lower price and make a profit. Conversely, if the price rises, it will cost more to close your short position, potentially reducing profits or increasing losses.
Is a Split Good for a Stock?
Share splits, in general, are neither good nor bad. A stock split occurs when companies aim to make their stock more attractive to potential investors. However, as mentioned above, it is usually a good indicator of a growing company and may present the future growth prospects.
Should You Invest in a Share After a Stock Split?
Before 1999, SEBI only permitted two face values – ₹10 and ₹100. Nowadays, the split ratios can vary for different companies, such as 2:1, 10:1, or 5:1.
Recent studies suggest that there has been a negative impact on wealth following stock split announcements post-1999, thereby refuting the signalling hypothesis. However, an examination of the top 30 companies from 2001 to 2010 revealed that exactly half of the stock splits resulted in positive returns during the one-year period following the event. Conversely, the remaining stocks yielded negative returns.
Another analysis dismisses the trading range hypothesis, as most stock splits are announced for stocks already trading at low prices.
Note: For investing in companies with a stock split, do your research or consult a financial advisor to make a better investment decision.
Impact of Stock Splits Among Investors
Once a split is announced and implemented in the market in a specific split ratio (including reverse split like 1:3 or 1:2), it doesn’t affect your investment value. However, if the company issues cash dividends to its existing shareholders, it will also issue a record date.
In the long term, investing in multiple stocks diversifies risk compared to holding only one stock, since a portfolio spreads exposure across various companies rather than relying on a single investment. Do your own research before investing in the stock market.
What are the Advantages of a Stock Split?
Splitting stocks by a company can provide several advantages. Here are some of the most significant stock split advantages:
- Increases Liquidity: A stock split for investors increases the number of outstanding shares and can boost the trading volume of the stock. This higher volume of shares traded can increase liquidity and make it easier for investors to buy or sell the stock.
- Attracts New Investors: A lower share price after a split can make the share more accessible to a broader range of investors, for whom the high cost may have previously deterred.
- Improves Perceived Affordability: A stock split can create a perception of affordability among investors. For example, some investors may view a company’s stock that trades at ₹1,000 per share as unaffordable. However, after a 2-for-1 stock split, the same company’s stock will be trading at ₹500 per share, making it more accessible to those investors.
- Increases Market Capitalisation: A share split can result in more outstanding shares, increasing the company’s market capitalisation. This could attract institutional investors who may have previously been unable to invest in the company due to its low market capitalisation.
What are the Disadvantages of a Stock Split?
While a split can provide several advantages, there are also some potential disadvantages of a stock split. Here are some of the most significant disadvantages:
- No Change in Company Value: A stock split does not affect the underlying value of a company. The company’s market capitalisation, earnings, and fundamentals remain unchanged before and after the split.
- Volatility: A share split can increase the stock’s volatility, which may lead to wider bid-ask spreads and higher volatility for short-term traders.
- Perception of Financial Difficulty: In some cases, a company splitting its stock can be perceived as a sign of financial difficulty or a lack of confidence in the company’s future performance. This perception may negatively affect the stock price and investor sentiment.
Stock Split Examples
Let’s consider Company X, where the original share price is ₹1,400, and the split ratio is 2:1.
Before the Split:
- An investor owns 10 shares of “Company X” at ₹1,400 each.
- Total investment: 10 shares x ₹1,400/share = ₹14,000
After the Split:
- The investor receives 2 additional shares for each existing share, resulting in a total of 10x 2 shares = 20 shares.
- The share price is adjusted to reflect the split ratio, becoming ₹1,400 / 2 = ₹700 per share.
- The investor’s total investment remains the same: 20 shares x ₹700 = ₹14,000
Are Stock Splits Important with Widespread Fractional Share Investing?
As fractional investing becomes more popular, some experts think stock splits might become less important because fractional shares let investors buy parts of a company at almost any price. However, for this, Holden also says it’s hard to know for sure since there isn’t much data yet. He believes it will take a long time before fractional investing fully replaces the need for stock splits.
Also, the way people think matters. Many investors prefer owning whole shares because round numbers feel more appealing to them, which keeps stock splits relevant.
What is a Basket Order?
A basket order is a type of order that allows investors to buy or sell multiple securities at the same time in a single go. Think of it like a shopping cart for your investments. You can add different stocks, bonds, or other assets to your basket and then submit the order all at once.
To Wrap It Up…
When a company announces a stock split, your overall stake and the company’s market value don’t change. Whereas the number of shares you own adjusts, and your actual ownership remains the same. So, whether you buy before or after the split, your true position stays intact.
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Frequently Asked Questions on Stock Splits
A stock split is a corporate action where a company decides to divide its existing shares into multiple shares. This results in an increase in the number of shares and a proportionate decrease in share price, commonly seen in large-cap stock splits to improve liquidity without affecting market capitalisation.
The stock split ratio is the proportion in which a company divides its existing shares. For example, in a 2:1 stock split, shareholders get 2 shares for every 1 share held. This ratio directly impacts stock split and price adjustments on the exchange.
A stock split involves an increase in the number of shares and a proportionate decrease in price per share. So it’s neither good nor bad in itself. It increases the number of shares and decreases the price per share proportionately. Impact on investor sentiment depends on the stock split announcement impact and market perception.
Benefits include increased liquidity, lower share price, more accessible to retail investors and potentially positive market sentiment.
Buying before the split means buying at a higher per-share price, but you get more shares post-split. Buying after the split is more cost-effective, and the stock can potentially go up. This depends on small-cap stock splits vs large-cap stock splits, as the volatility and market dynamics are different.
Stock splits often mean confidence and growth, and you shouldn’t sell immediately. Although you may not make immediate profits, splits can be a bullish sign with long-term gains. Understand the long-term effects of a stock split before you make a sell decision.
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