On January 5, 2024, Nestle India announced a stock split in the ratio of 1:10. This meant that each share, previously priced at an astonishing ₹27,000, was converted into ten shares of ₹2,700 each. As a result, Nestle’s stock became more accessible to retail investors, increasing liquidity and potentially making the stock more attractive to a broader range of market participants. Stock splits are often undertaken to enhance liquidity by making shares more affordable, encouraging greater participation from investors, and ensuring efficient price discovery. Naturally, this raises an important question—why hasn’t MRF, one of India’s highest-priced stocks, considered a stock split? MRF’s stock is currently trading at around ₹1.3 lakh per share, making it out of reach for most retail investors. If MRF were to consider a split, what would be the possible scenarios? More importantly, does the company have any incentive to do so? Stock splits are generally announced in common ratios like 1:5, 1:10, or 1:20. Given MRF’s extremely high share price, it would require a significant split to make the stock more affordable. Currently, MRF’s share has a face value of ₹10. A 1:20 split would bring the face value down to ₹0.5, but since the face value cannot go below ₹1, this scenario is not feasible. A 1:10 split, however, would reduce the face value to ₹1, which is acceptable. This would bring the stock’s market price down to approximately ₹13,000 per share. However, this is still a high price for most retail investors. In many cases, stock splits lead to a rally in share prices due to increased demand, so the post-split price could be even higher than ₹13,000. Therefore, even after a 1:10 split, MRF shares would remain expensive, defeating the primary purpose of making the stock more accessible. Instead of a split, MRF could consider a bonus issue, where existing shareholders receive additional shares at no extra cost. For example, if MRF announced a 19:1 bonus issue, meaning shareholders would receive 19 additional shares for every share held, the equity share capital would increase from ₹4.2 crore to ₹84.8 crore. MRF has ample free reserves to support this, and such a move would divide the stock price by 20, bringing it down to ₹5,500 per share. While this is an improvement, it is still on the higher side for most retail investors. To make MRF shares truly affordable, an even bigger dilution would be required—perhaps a 1:39 or 1:49 bonus, which would mean issuing 40 or 50 shares for every existing share held. However, such a large-scale dilution is unprecedented in Indian markets. This brings us to the crucial question: Why hasn’t MRF already taken this step? One of the primary reasons companies opt for stock splits or bonus issues is to increase trading liquidity. More outstanding shares at a lower price attract a wider investor base, increasing trading activity and making price movements more efficient. But what if MRF doesn’t want its shares to be highly liquid? It is possible that MRF prefers a smaller base of serious long-term investors rather than attracting short-term traders. With a high price point, only well-capitalized investors are able to buy the stock, reducing speculative trading and ensuring that the stock’s market value remains closer to its intrinsic business value. A similar approach was taken by Warren Buffett with Berkshire Hathaway. Berkshire Hathaway’s Class A shares currently trade at approximately $550,000 (~₹5 crore) per share, making them one of the most expensive stocks in the world. There have been persistent calls for a Berkshire stock split since the 1990s, when its per-share price first crossed $10,000. However, Warren Buffett has deliberately resisted splitting the stock to discourage speculative trading and attract only serious long-term investors. In the mid-1990s, a new problem emerged in the U.S. market—certain unit trust funds started mimicking Berkshire’s portfolio. Some of these funds only held Berkshire Hathaway stock and sold their own units against it. This led investors to believe that they were essentially investing in Berkshire at a more affordable price. Buffett knew that simply copying a portfolio does not result in similar performance. To counter this, Berkshire introduced a newer, lower-priced share class—Class B shares—which initially carried 1/30th of the voting rights of Class A shares. These Class B shares have since been split further, but Class A shares have never been split. Could MRF find itself in a similar situation? If an investment fund were to emerge that only buys MRF shares and sells its own units against it, retail investors could indirectly gain access to MRF stock without requiring a stock split. This would be similar to what happened with Berkshire Hathaway’s unit trust funds in the 1990s. If such a fund were to gain traction, MRF might consider introducing a lower-priced share class, similar to Berkshire’s Class B shares, rather than undertaking a stock split. But as of now, MRF has shown no indication that it plans to take any such step. While a stock split or bonus issue could make MRF shares more accessible and increase liquidity, the company does not seem to be in favor of such a move. Possible reasons include: Unless MRF sees a clear benefit in making its stock more affordable, it is unlikely to announce a stock split or bonus issue anytime soon. However, if a fund were to emerge that exclusively holds MRF shares, it could force the company to reconsider its stance—just as Berkshire Hathaway did in the 1990s. Until then, MRF will likely remain one of India’s most exclusive stocks, accessible only to a select group of well-capitalized investors.