What is Face Value?

If you’ve ever looked at a share certificate, a bond, or even a company’s financial statement, you might have come across a term called “Face Value.” And let’s be honest – it sounds more complicated than it actually is.

So, let’s break it down in the simplest, most relatable way.

Face Value: The price printed on the ticket

Imagine you’re watching a movie. Your ticket says Rs. 200. That printed value is the official price of the ticket.

Face value works exactly like that. It is the original value of a financial instrument, like a share or a bond, as decided by the company when they issue it.

It’s the value printed on the face of the security. That’s why it’s called face value.

Face value of shares

When a company issues shares, each share has a face value, usually Rs.1, Rs.5, or Rs.10 in India.

But here’s the interesting part:

• You don’t buy shares at face value in the stock market.
• You buy them at the market price, which keeps going up or down based on demand, performance, news, and sentiments.

Face value is just the starting point. Think of it as the birth certificate of a share – important, but not indicative of its current worth.

Face value of bonds

For bonds, face value matters even more. If a bond has a face value of Rs.1,000, that means:

• That’s the amount the issuer will repay you on maturity.
• Interest (coupon rate) is also calculated based on this face value.

So, yes – in bonds, face value directly affects how much money you earn.

Why does face value matter?

Even though you don’t trade shares at face value, it still plays an important role:

• Helps calculate dividends
• Helps understand stock splits
• Matters in accounting and balance sheets
• Crucial for bond investors (interest + repayment)

So, it’s a small number with a big role.

A simple example

Let’s say a company issues a share with:

• Face value: Rs.10
• Market price: Rs.850

You don’t buy it at Rs.10, you buy it at Rs.850. But dividends, accounting, and certain calculations still use that Rs.10 as the base.

Final Thought

Face value is the original value decided at the time of issuing a share or bond. It doesn’t change with the market.

It’s like the MRP printed on a product – the selling price may differ, but the printed value stays constant.