The term reverse stock splits is fairly unpopular among retail investors in India and over the past decade, only 114 companies have announced reverse stock splits.
While unpopular, it is still important for you, as an investor, to have basic knowledge on reverse stock splits to decide whether they are beneficial or harmful to your portfolio.
What is a Reverse Stock Split? - Reverse Stock Split Definition
The definition of reverse stock split as per wikipedia is, “Reverse stock split or a reverse split is a process by which shares of companies are merged to form a smaller number of proportionally more valuable shares”.What Does Reverse Stock Split mean? - Reverse Stock Split Meaning
Reverse stock split or simply reverse split is the opposite of a forward stock split. In reverse stock split, the number of shares held by shareholders reduces but the overall value of the shares remains the same.Reverse Stock Split Example - Reverse Stock Split Explained
Assume Mr Ram, owns 500 shares of ABC Ltd and the share price is Rs 200 per share. The total value of Mr Ram’s shares is Rs 1,00,000. Now, ABC Ltd announces a reverse stock split of 5 for 1. This means that your every 5 shares will be combined to form 1 share. Let us see how reverse stock split works. Mr Ram’s position BEFORE reverse stock split| Original number of shares owned by Ram | 500 shares |
| Original share price | Rs 200/share |
| Total original portfolio value | Rs 1,00,000 (Rs 1 Lakh) |
| Reverse stock split ratio | 5-for-1 |
| Shares owned by Ram after reverse split | 100 shares |
| New share price after reverse stock split | Rs 1,000/share |
| Total portfolio value after reverse split | Rs 1,00,000 (Rs 1 Lakh) |
- The number of shares reduced from 500 shares to 100 shares.
- Share Price increased from Rs 200 per share to Rs 1,000 per share. A 5-time increase.
- The value of the portfolio remained the same, Rs 1 Lakh, after and before the reverse stock split.
Reverse Stock Split Vs Forward Stock Split
Let us now understand the key differences between reverse stock split and forward stock split.| Parameter | Reverse Stock Split | Forward Stock Split |
| Number of outstanding shares | Decreases | Increases |
| Share Price | Increases | Decreases |
| Liquidity | Reduces | Increases |
| Synonyms | Reverse split, stock consolidation, stock merger, share rollback. | Stock split, |
| Objective | To attract investors with a high stock price and avoid being delisted or become a penny stock. | To make the share affordable for small investors. |
| When is it done? | When the market feels the stock is undervalued. | When the market feels the stock is overvalued. |
When is Reverse Stock Split Bad for Investors?
A reverse stock split is an artificial method of inflating the share prices. By doing this, the overall market sentiment towards the stock becomes negative.- No concrete growth plan: Investors perceive reverse stock splits as negative because they feel that the management will artificially increase the share price only because it has no concrete plans for the company’s future and is not confident of the share price increasing naturally.
- Consistently falling stock prices: Another reason for reverse stock split being bad for investors is when the share price has been consistently falling reflecting poor earnings and lack of investor confidence in the company.
- Manipulate innocent investors: Reverse stock splits are often a ploy to attract naive investors who see a huge rise in share price as an indicator of the company's quick growth without understanding the real reason for rise in share price.
When is Reverse Stock Split Good for Investors?
Reverse stock split can be While reverse stock splits are often perceived as negative, they can be good for investors if done to:- Attract Big Investors: Often, even though a company is fundamentally strong, it can be classified as a penny stock due to low share price. Also, big investors do not invest in penny stocks. To avoid being considered as a penny stock and damage its reputation among big investors, companies opt for reverse stock split and artificially increase the share prices. This helps them attract big institutional investors and avoid being termed as ‘penny stocks’.
- Avoid Delisting: Many stock exchanges have strict listing regulations regarding minimum share price and number of shares. Whenever a company’s share price reaches near these delisting limits, companies announce reverse stock splits to avoid the public humiliation and effect on investor sentiment.
List of Reverse Stock Split in India in 2020
| Company Name | Ex-Date | Record Date |
| Thinkink Picturez Ltd | 06-02-2020 | 07-02-2020 |
| Arnold Holdings Ltd | 18-03-2020 | 19-03-2020 |
List of Reverse Stock Split in India in 2021
As of now there are no upcoming reverse stock splits in India for 2021.List of Reverse Stock Splits in India between 2010 - 2019
| Company Name | Ex Date | Purpose | Record Date | ND Start Date | ND End Date |
| L.G.BALAKRISHNAN & BROS.LTD. | 15-Mar-10 | Consolidation of Shares | 17-Mar-10 | 10-Mar-10 | 16-Mar-10 |
| LS INDUSTRIES LTD. | 26-May-10 | Consolidation of Shares | 09-Jun-10 | 26-May-10 | 14-Jun-10 |
| ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD. | 29-Jun-10 | Consolidation of Shares | 01-Jul-10 | 24-Jun-10 | 29-Jun-10 |
| INNOVATIVE TECH PACK LTD. | 16-Sep-10 | Consolidation of Shares | 17-Sep-10 | 09-Sep-10 | 16-Sep-10 |
| ASAHI INFRASTRUCTURE & PROJECTS LTD. | 03-Nov-10 | Consolidation of Shares | 04-Nov-10 | 28-Oct-10 | 02-Nov-10 |
| STANDARD BATTERIES LTD. | 09-Nov-10 | Consolidation of Shares | 10-Nov-10 | 03-Nov-10 | 09-Nov-10 |
| GUJARAT METALLIC COAL & COKE LTD.-$ | 04-Mar-11 | Consolidation of Shares | 07-Mar-11 | 25-Feb-11 | 04-Mar-11 |
| GAYATRI SUGARS LTD. | 27-Apr-11 | Consolidation of Shares | 28-Apr-11 | 20-Apr-11 | 27-Apr-11 |
| BAFFIN ENGINEERING PROJECTS LTD. | 17-Jun-11 | Consolidation of Shares | 20-Jun-11 | 13-Jun-11 | 17-Jun-11 |
| INTER GLOBE FINANCE LTD. | 05-Jul-11 | Consolidation of Shares | 15-Jul-11 | 05-Jul-11 | 20-Jul-11 |
| WINSOME TEXTILE INDUSTRIES LTD.-$ | 15-Jul-11 | Consolidation of Shares | 18-Jul-11 | 11-Jul-11 | 15-Jul-11 |
| FIRSTOBJECT TECHNOLOGIES LTD. | 25-Jul-11 | Consolidation of Shares | 26-Jul-11 | 19-Jul-11 | 25-Jul-11 |
| WINSOME YARNS LTD. | 04-Aug-11 | Consolidation of Shares | 05-Aug-11 | 29-Jul-11 | 04-Aug-11 |
| VIJAY TEXTILES LTD. | 02-Sep-11 | Consolidation of Shares | 05-Sep-11 | 25-Aug-11 | 02-Sep-11 |
| SUPERTEX INDUSTRIES LTD. | 07-Sep-11 | Consolidation of Shares | 08-Sep-11 | 30-Aug-11 | 07-Sep-11 |
| SEA GOLD AQUA FARMS LTD. | 15-Sep-11 | Consolidation of Shares | - | 15-Sep-11 | 30-Sep-11 |
| Decipher Labs Ltd | 19-Sep-11 | Consolidation of Shares | 01-Oct-11 | 19-Sep-11 | 04-Oct-11 |
| JAUSS POLYMERS LTD. | 03-Oct-11 | Consolidation of Shares | 15-Oct-11 | 03-Oct-11 | 19-Oct-11 |
| Paisalo Digital Ltd | 04-Oct-11 | Consolidation of Shares | 05-Oct-11 | 27-Sep-11 | 04-Oct-11 |
| DYNACONS SYSTEMS & SOLUTIONS LTD. | 03-Nov-11 | Consolidation of Shares | 04-Nov-11 | 28-Oct-11 | 03-Nov-11 |
| Sezal Glass Limited | 09-Nov-11 | Consolidation of Shares | 11-Nov-11 | 02-Nov-11 | 09-Nov-11 |
| ANKA INDIA LTD. | 13-Jan-12 | Consolidation of Shares | 18-Jan-12 | 13-Jan-12 | 23-Jan-12 |
| RUBFILA INTERNATIONAL LTD. | 16-Jan-12 | Consolidation of Shares | 17-Jan-12 | 10-Jan-12 | 16-Jan-12 |
| Radix Industries (India) Limited | 03-Feb-12 | Consolidation of Shares | 17-Feb-12 | 03-Feb-12 | 22-Feb-12 |
| RADHE DEVELOPERS (INDIA) LTD. | 14-Feb-12 | Consolidation of Shares | 16-Feb-12 | 09-Feb-12 | 15-Feb-12 |
| ADITYA SPINNERS LTD. | 02-Mar-12 | Consolidation of Shares | 05-Mar-12 | 28-Feb-12 | 03-Mar-12 |
| Nandan Denim Limited | 07-Mar-12 | Consolidation of Shares | 09-Mar-12 | 01-Mar-12 | 07-Mar-12 |
| MAHAN INDUSTRIES LTD. | 09-Mar-12 | Consolidation of Shares | 12-Mar-12 | 02-Mar-12 | 09-Mar-12 |
| GANGA PAPERS INDIA LTD. | 12-Mar-12 | Consolidation of Shares | 19-Mar-12 | 12-Mar-12 | 21-Mar-12 |
| PASUPATI SPG.& WVG.MILLS LTD. | 15-Mar-12 | Consolidation of Shares | 16-Mar-12 | 09-Mar-12 | 15-Mar-12 |
| ANJANI SYNTHETICS LTD.-$ | 28-Mar-12 | Consolidation of Shares | 29-Mar-12 | 21-Mar-12 | 28-Mar-12 |
| FOUNDRY FUEL PRODUCTS LTD. | 14-Jun-12 | Consolidation of Shares | 15-Jun-12 | 11-Jun-12 | 14-Jun-12 |
| RESURGERE MINES & MINERALS INDIA LTD. | 14-Jun-12 | Consolidation of Shares | 15-Jun-12 | 08-Jun-12 | 14-Jun-12 |
| ZYDEN GENTEC LTD. | 26-Sep-12 | Consolidation of Shares | 27-Sep-12 | 20-Sep-12 | 26-Sep-12 |
| NOVA IRON & STEEL LTD. | 30-Oct-12 | Consolidation of Shares | 31-Oct-12 | 22-Oct-12 | 30-Oct-12 |
| Rockon Enterprises Ltd | 02-Nov-12 | Consolidation of Shares | 05-Nov-12 | 29-Oct-12 | 02-Nov-12 |
| NOUVEAU GLOBAL VENTURES LTD. | 10-Dec-12 | Consolidation of Shares | 11-Dec-12 | 04-Dec-12 | 10-Dec-12 |
| GLOBAL CAPITAL MARKETS LTD. | 10-Jan-13 | Consolidation of Shares | 11-Jan-13 | 04-Jan-13 | 10-Jan-13 |
| CRESSANDA SOLUTIONS LTD. | 18-Feb-13 | Consolidation of Shares | 20-Feb-13 | 13-Feb-13 | 19-Feb-13 |
| FOURTH GENERATION INFORMATION SYSTEMS LTD. | 22-Feb-13 | Consolidation of Shares | 25-Feb-13 | 15-Feb-13 | 22-Feb-13 |
| DION GLOBAL SOLUTIONS LTD. | 28-Feb-13 | Consolidation of Shares | 01-Mar-13 | 22-Feb-13 | 28-Feb-13 |
| INDOVATION TECHNOLOGIES LTD. | 14-Mar-13 | Consolidation of Shares | 15-Mar-13 | 08-Mar-13 | 14-Mar-13 |
| Mindvision Capital Ltd | 26-Mar-13 | Consolidation of Shares | 28-Mar-13 | 20-Mar-13 | 25-Mar-13 |
| SYBLY INDUSTRIES LTD.-$ | 04-Apr-13 | Consolidation of Shares | 05-Apr-13 | 03-Apr-13 | 04-Apr-13 |
| Adroit Infotech Ltd | 10-Apr-13 | Consolidation of Shares | 12-Apr-13 | 05-Apr-13 | 11-Apr-13 |
| RAMINFO LIMITED | 10-Apr-13 | Consolidation of Shares | 12-Apr-13 | 05-Apr-13 | 11-Apr-13 |
| INDIA INFRASPACE LTD. | 14-May-13 | Consolidation of Shares | 26-May-13 | 14-May-13 | 29-May-13 |
| DUNCANS INDUSTRIES LTD. | 23-May-13 | Consolidation of Shares | 24-May-13 | 20-May-13 | 23-May-13 |
| GOPALA POLYPLAST LTD. | 23-May-13 | Consolidation of Shares | 24-May-13 | 20-May-13 | 23-May-13 |
| Excel Castronics Limited | 07-Jun-13 | Consolidation of Shares | 21-Jun-13 | 07-Jun-13 | 26-Jun-13 |
| Joy Realty Limited | 12-Jun-13 | Consolidation of Shares | 24-Jun-13 | 12-Jun-13 | 26-Jun-13 |
| S&T CORPORATION LTD. | 13-Jun-13 | Consolidation of Shares | 27-Jun-13 | 13-Jun-13 | 02-Jul-13 |
| KUNSTSTOFFE INDUSTRIES LTD. | 11-Jul-13 | Consolidation of Shares | 12-Jul-13 | 05-Jul-13 | 11-Jul-13 |
| VENTURA TEXTILES LTD. | 29-Jul-13 | Consolidation of Shares | 30-Jul-13 | 24-Jul-13 | 29-Jul-13 |
| Matra Kaushal Enterprise Limited | 02-Aug-13 | Consolidation of Shares | 16-Aug-13 | 02-Aug-13 | 21-Aug-13 |
| Neueon Towers Ltd | 07-Aug-13 | Consolidation of Shares | 10-Aug-13 | 02-Aug-13 | 07-Aug-13 |
| NORRIS MEDICINES LTD. | 22-Aug-13 | Consolidation of Shares | 23-Aug-13 | 21-Aug-13 | 22-Aug-13 |
| NEYCER INDIA LTD. | 26-Aug-13 | Consolidation of Shares | 27-Aug-13 | 22-Aug-13 | 26-Aug-13 |
| OMEGA INTERACTIVE TECHNOLOGIES LTD. | 25-Sep-13 | Consolidation of Shares | - | 20-Sep-13 | 26-Sep-13 |
| Proaim Enterprises Ltd | 31-Oct-13 | Consolidation of Shares | 01-Nov-13 | 25-Oct-13 | 31-Oct-13 |
| RAVILEELA GRANITES LTD. | 28-Nov-13 | Consolidation of Shares | 06-Dec-13 | 28-Nov-13 | 11-Dec-13 |
| CIL NOVA PETROCHEMICALS LTD. | 05-Dec-13 | Consolidation of Shares | 06-Dec-13 | 29-Nov-13 | 05-Dec-13 |
| NIHAR INFO GLOBAL LTD. | 22-Apr-14 | Consolidation of Shares | 23-Apr-14 | 15-Apr-14 | 22-Apr-14 |
| KRIPTOL INDUSTRIES LTD. | 23-Apr-14 | Consolidation of Shares | 25-Apr-14 | 17-Apr-14 | 23-Apr-14 |
| KKRRAFTON Developers Ltd | 17-Oct-14 | Consolidation of Shares | 20-Oct-14 | 13-Oct-14 | 17-Oct-14 |
| SYSCHEM (INDIA) LTD. | 12-Dec-14 | Consolidation of Shares | 15-Dec-14 | 08-Dec-14 | 12-Dec-14 |
| Negotium International Trade Ltd | 29-Oct-15 | Consolidation of Shares | 31-Oct-15 | 26-Oct-15 | 29-Oct-15 |
| Quasar India Ltd | 29-Oct-15 | Consolidation of Shares | 31-Oct-15 | 26-Oct-15 | 29-Oct-15 |
| Inceptum Enterprises Ltd | 03-Nov-15 | Consolidation of Shares | 04-Nov-15 | 28-Oct-15 | 03-Nov-15 |
| Infronics Systems Ltd | 05-Nov-15 | Consolidation of Shares | 07-Nov-15 | 02-Nov-15 | 05-Nov-15 |
| MAHALAXMI RUBTECH LTD. | 05-Nov-15 | Consolidation of Shares | 06-Nov-15 | 30-Oct-15 | 05-Nov-15 |
| RANDER CORPORATION LTD. | 26-Nov-15 | Consolidation of Shares | 27-Nov-15 | 19-Nov-15 | 26-Nov-15 |
| CCL INTERNATIONAL LTD. | 04-Dec-15 | Consolidation of Shares | 07-Dec-15 | 30-Nov-15 | 04-Dec-15 |
| Mukta Agriculture Ltd | 14-Jan-16 | Consolidation of Shares | 15-Jan-16 | 08-Jan-16 | 14-Jan-16 |
| NETLINK SOLUTIONS (INDIA) LTD. | 28-Jan-16 | Consolidation of Shares | 29-Jan-16 | 21-Jan-16 | 28-Jan-16 |
| Mystic Electronics Ltd | 08-Feb-16 | Consolidation of Shares | 09-Feb-16 | 02-Feb-16 | 08-Feb-16 |
| VEER ENERGY & INFRASTRUCTURE LTD. | 22-Mar-16 | Consolidation of Shares | 23-Mar-16 | 16-Mar-16 | 22-Mar-16 |
| Palred Technologies Limited | 26-Apr-16 | Consolidation of Shares | 27-Apr-16 | 20-Apr-16 | 26-Apr-16 |
| PS IT Infrastructure & Services Limited | 11-May-16 | Consolidation of Shares | 12-May-16 | 05-May-16 | 11-May-16 |
| Safal Securities Ltd | 13-Oct-16 | Consolidation of Shares | 14-Oct-16 | 05-Oct-16 | 13-Oct-16 |
| Veerhealth Care Limited | 29-Nov-16 | Consolidation of Shares | 30-Nov-16 | 23-Nov-16 | 29-Nov-16 |
| Chandni Textiles Engineering Ind. Ltd | 08-Dec-16 | Consolidation of Shares | 09-Dec-16 | 02-Dec-16 | 07-Dec-16 |
| TTI Enterprise Ltd | 21-Dec-16 | Consolidation of Shares | 22-Dec-16 | 15-Dec-16 | 21-Dec-16 |
| SANGUINE MEDIA LTD. | 19-Jan-17 | Consolidation of Shares | 20-Jan-17 | 13-Jan-17 | 19-Jan-17 |
| ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD. | 17-Feb-17 | Consolidation of Shares | 20-Feb-17 | 13-Feb-17 | 16-Feb-17 |
| AADHAAR VENTURES INDIA LTD. | 02-Mar-17 | Consolidation of Shares | 03-Mar-17 | 23-Feb-17 | 02-Mar-17 |
| SVC Resources Limited | 23-Mar-17 | Consolidation of Shares | 24-Mar-17 | 20-Mar-17 | 23-Mar-17 |
| Veronica Production Ltd | 23-Mar-17 | Consolidation of Shares | 24-Mar-17 | 17-Mar-17 | 23-Mar-17 |
| Ontic Finserve Ltd | 13-Apr-17 | Consolidation of Shares | 17-Apr-17 | 07-Apr-17 | 13-Apr-17 |
| AVANCE TECHNOLOGIES LTD. | 24-Apr-17 | Consolidation of Shares | 25-Apr-17 | 18-Apr-17 | 24-Apr-17 |
| Mishtann Foods Ltd | 05-May-17 | Consolidation of Shares | 08-May-17 | 28-Apr-17 | 05-May-17 |
| Xtglobal Infotech Ltd | 12-May-17 | Consolidation of Shares | 15-May-17 | 05-May-17 | 12-May-17 |
| Global Infratech & Finance limited | 23-Aug-17 | Consolidation of Shares | 25-Aug-17 | 18-Aug-17 | 23-Aug-17 |
| BANAS FINANCE LTD. | 29-Aug-17 | Consolidation of Shares | 30-Aug-17 | 22-Aug-17 | 29-Aug-17 |
| EVERLON SYNTHETICS LTD. | 29-Sep-17 | Consolidation of Shares | 03-Oct-17 | 25-Sep-17 | 29-Sep-17 |
| IND Renewable Energy Ltd | 29-Sep-17 | Consolidation of Shares | 03-Oct-17 | 25-Sep-17 | 29-Sep-17 |
| Danube Industries Ltd | 16-Oct-17 | Consolidation of Shares | 17-Oct-17 | 10-Oct-17 | 16-Oct-17 |
| BLUE CIRCLE SERVICES LTD. | 23-Oct-17 | Consolidation of Shares | 24-Oct-17 | 13-Oct-17 | 23-Oct-17 |
| BAMPSL SECURITIES LTD. | 26-Oct-17 | Consolidation of Shares | 27-Oct-17 | 18-Oct-17 | 26-Oct-17 |
| ESAAR (INDIA) LTD. | 10-Nov-17 | Consolidation of Shares | 13-Nov-17 | 06-Nov-17 | 10-Nov-17 |
| JMD Ventures Ltd | 04-Dec-17 | Consolidation of Shares | 05-Dec-17 | 27-Nov-17 | 04-Dec-17 |
| Confidence Finance And Trading Limited | 27-Dec-17 | Consolidation of Shares | 28-Dec-17 | 20-Dec-17 | 27-Dec-17 |
| ATHARV ENTERPRISES LTD. | 12-Apr-18 | Consolidation of Shares | 13-Apr-18 | 06-Apr-18 | 12-Apr-18 |
| SWADESHI INDUSTRIES LEASING CO.LTD. | 14-Jun-18 | Consolidation of Shares | 15-Jun-18 | 08-Jun-18 | 14-Jun-18 |
| Signet Industries Limited | 13-Aug-18 | Consolidation of Shares | 14-Aug-18 | 07-Aug-18 | 13-Aug-18 |
| UNIMODE OVERSEAS LTD. | 11-Oct-18 | Consolidation of Shares | 12-Oct-18 | 05-Oct-18 | 11-Oct-18 |
| Colorchips New Media Ltd | 22-Oct-18 | Consolidation of Shares | 23-Oct-18 | 15-Oct-18 | 22-Oct-18 |
| BRIJLAXMI LEASING & FINANCE LTD. | 15-Nov-18 | Consolidation of Shares | 17-Nov-18 | 12-Nov-18 | 15-Nov-18 |
| MANGAL CREDIT AND FINCORP LTD. | 26-Nov-18 | Consolidation of Shares | 27-Nov-18 | 16-Nov-18 | 26-Nov-18 |
| COMFORT INTECH LTD.-$ | 24-Jan-19 | Consolidation of Shares | 25-Jan-19 | 18-Jan-19 | 24-Jan-19 |
| Jamshri Realty Ltd-$ | 21-Feb-19 | Consolidation of Shares | 22-Feb-19 | 18-Feb-19 | 21-Feb-19 |
| Sai Baba Investment And Commercial Enterprises Ltd | 28-Mar-19 | Consolidation of Shares | 01-Apr-19 | 25-Mar-19 | 28-Mar-19 |
| DHANLEELA INVESTMENTS & TRADING COMPANY LTD. | 12-Apr-19 | Consolidation of Shares | 15-Apr-19 | 10-Apr-19 | 12-Apr-19 |
Final Thoughts:
Reverse stock split or forward stock split are decided by the management. You, as an investor, do not have the option to accept or decline a reverse stock split. But as long as you are invested in fundamentally strong companies, you shouldn't worry about reverse stock splits as it is merely an accounting tactic. There is no monetary loss or profit in reverse stock splits. As an investor, your goal should be to invest in fundamentally strong companies. Luckily this goal is shared by StockBasket as well. StockBasket runs more than 2 million parameters to expertly handpick the best stocks for investment in India and creates baskets as per your financial goals. To know more, open a FREE StockBasket account today and start investing in the best stocks in India for infinite wealth creation.Think stock market - Think StockBasket
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