FinTech Glossary

Meaning

Par value, also called face value or nominal value, is the value assigned to a financial instrument at the time of issue. For shares, it represents the nominal value per share recorded in the company’s share capital. For bonds, it usually represents the principal amount on which coupon payments may be calculated and which may be repaid at maturity if the bond is redeemed at par.

Par value is not the same as market value. A share with a face value of ₹10 may trade at ₹500, and a bond with a face value of ₹1,000 may trade above or below that amount depending on interest rates, credit risk and market demand.

Business Context

Par value is important in accounting, corporate law, securities issuance and investor communication. For companies, face value helps determine share capital. The amount received over face value is generally treated separately as securities premium, subject to applicable accounting and legal rules.

For debt instruments, par value helps define the principal amount, coupon base and redemption reference. When a bond is issued or traded:

• At par: issue or trading price equals face value

• Above par: price is higher than face value

• Below par: price is lower than face value

For investors, par value is a reference point, not a guarantee of current market worth.

How It Works

Example for shares:

A company issues 1,00,000 equity shares with a face value of ₹10 each at an issue price of ₹150 per share. The share capital component is ₹10 per share, while ₹140 per share is generally treated as premium, subject to accounting and legal treatment.

Example for bonds:

A bond has a face value of ₹1,000 and a coupon rate of 8 percent. Annual coupon is usually calculated on ₹1,000, so the coupon amount is ₹80 per year, even if the bond trades at ₹950 or ₹1,050 in the secondary market.

This is why investors should separate face value, issue price, coupon rate and market price while evaluating any security.

Why It Matters for Businesses and Investors

Par value matters because it influences share capital accounting, bond coupon calculations, corporate actions and investor understanding. Confusing par value with market value can lead to incorrect conclusions about valuation.

For businesses, par value is relevant during:

• Incorporation and capital structuring

• Share issuance and premium calculation

• Stock splits or consolidation

• Rights issues and bonus issues

• Bond issuance and redemption planning

For investors, it helps interpret terms like issued at par, redeemed at par, premium, discount and yield. A security’s real attractiveness depends not only on par value, but on price, cash flows, risk, maturity, liquidity and tax treatment.