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Mumbai , Dec. 17

THE Secondary Market Advisory Committee of the Securities and Exchange Board of India has suggested that no listed company whose average market price in the previous six months is less than Rs 500 per share be allowed to split the value of its equity share.

According to the panel headed by Dr R.H. Patil, even though share-splitting is legal, several companies were resorting to frequent splitting and consolidation.

"Such frequent changes have caused confusion amongst investors as to whether the market price of the shares is based on the pre-split or post-split or post-consolidation. The analysis and comparison of the movement of share prices of such companies with those of other companies in a similar sector becomes difficult under such circumstances. Further, as dividend is also declared as a percentage of the face value of the shares of the company, frequent changes of the value of the shares by way of split and consolidation results in the investors being often misled by a high dividend rate and also creates confusion in the calculation of pay-out from the company," the panel observed.

The panel has recommended that if a company has split or consolidated its equity shares, it should not be permitted to split or consolidate the value of its equity share for three years from the date of the last split.

It said the practice of frequent splitting and subsequent consolidation of the face value of shares is not a healthy one and runs contrary to the spirit of the rule. Rather than being a facilitating measure to help investors and increase the depth of the market, such splitting goes against their interest.

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