All stocks should have face value Re 1: Sebi panel

[anant1a]

All stocks should have face value Re 1: Sebi panel

The face value of shares of all listed companies may soon be Re 1 if a proposal by the Priamary Markets Advisory Committee, or PMAC, is accepted by the Sebi board. The move aims to ensure uniform face values, so that investors can make informed stock comparisons.

It could well be the first major policy decision that CB Bhave the new Sebi Chairman has to make, something that could change the way the Indian capital markets operate.

In a far reaching move, PMAC, a sub-committee under Sebi, recommended to the Sebi board that the face value of shares should be Re 1 for all listed companies. The proposal will now be considered by Sebi in 2-3 weeks time.

Sources say the proposal if it gets through will mean that companies which have a face value of more than Re 1 will have to go in for a stock split. The aim of this move is to ensure uniform face values so that investors can make informed stock comparisons. The move could also result in greater public float of listed companies.

Sources in the PMAC said the ultimate aim is to do away with the face value concept. Stock exchanges abroad do not have the concept of fave value, so any fresh listing does not carry either a premium or a discount with it. The PMAC wants Sebi to benchmark its policies to this international best practice.. The other important fallout wiil be that the public float of stocks will go up, something the government has always wanted, though the market capitalization will remain the same.

The good news is that this will not be an accounting nightmare. Heads of tax practices of top accounting firms have told that the move if adopted will not require a major accounting overhaul though some book adjustments will still have to be made.