CA ROSHAN TIWARI (salaried) (302 Points)
05 September 2013Hi, I wanted to know whether Market price of a share can go below its face value. If yes, then what are the consequences. Certainly it will require revaluation of share capital if the fall is of permanent nature in the books of account.
Will there be any effect on the market price , if the company goes for buy back.... i think the price will go up with the buy back announcement..
Pls comment.
Thanks & Regards,
Roshan Tiwari
SUDIP RAJA
(M.D.)
(42 Points)
Replied 28 September 2013
Respected Sir,
There are so may consequences when share price go below face value.
(1) If Company Sales and profit figure start negative in compare of last five years data. because equity value count on PE ration. There is two type of PE ratio. (1) Trail PE ration (2) Forward PF
(2) Some time Company sales increase every year but due to their sector profit margin as per economy or political condition they not get high profit or also may be get loss
(3) due to high competition in their sector profit margin pressure in very pressure
(4) Some time in some stock speculation also take part in price will go below face value
(5) At present in India and also in international equity market so many stock you will find under face value but it means not that you buy under face value and then promoter will come for buy back.
Which Company promoter Will Come ? The promoter who are interested to develop company , interest to increase and maintain his good will and also he know his company's equity value and when he will see that my company stock under face value then he will come to buy and save shareholder and capital of shareholder. Now if you find this type of promoter then you but their stock which is below face value then you will get return.
Sudip Raja
Financial Consultant
M 9427721997
CAclubindia
