Infosys, the first Indian company to list on a US exchange when its American Depository Shares (ADS) began trading on Nasdaq in March, said it would split the par value of its domestic shares to Rs five each from Rs 10 each. The company had flatly denied any plan to sub-divide its shares last month.

Infosys scrip had shot up last month following rumours that the company would split its share face value. When the company later denied any such plan, the share price suffered a setback last month.

``The company should have admitted about the stock split plan last month. Why did the company deny it last month? This does not augur well for a company which makes tall claims about corporate governance,'' said an investor. The company said it will convene anextraordinary general meeting on December 29 to seek shareholders' approval for the split. It said the ADS will also be split in a similar ratio while two ADS will continue to constitute one local share. "SEBI has given flexibility to companies to sub-divide the par value of shares to less than Rs 10 and the company has chosen this option to improve liquidity," NR Narayana Murthy, chairman and chief executive officer, said in a statement.

The Infosys shares, a high-flier on the stock markets having risen around 200% since early March, lost ground over general expectations that the firm would announce a higher split ratio to enable more retail participation. "It is a disappointment compared to market expectations of three-for-one or higher. But I expect the company to do more stock splits in future," said an analyst with a mutual fund.

Marketmen said they were expecting a stock split ratio of five shares of Rs 2 each instead of two shares of Rs 5 each. ``This is the second time the company's share price isfalling because of the stock split development. This is not fair,'' said another shareholder.

On Monday, after the initial flare-up during the early hours of trading on the BSE, the scrip dipped and closed lower by almost Rs 380 to Rs 9,235 against its previous close of Rs 9,615. Traded volume was almost 110,000 shares. The weakening of the Infosys shares also pulled the BSE Sensex down.

The firm has the second highest weighting in the index with 12.64% and contributed over 21 points to the overall movement of the index. The index was down 1.17% at 4,650.06. "A lot of speculative positions had been built on the expectation that the split will be to a two rupee or one rupee share. That is why the stock price is reacting," fund managers said.