Consolidation of shares, also known as reverse stock split, is a corporate action where a company reduces the number of its outstanding shares while increasing the share price proportionally. This process does not change the overall market capitalization of the company but aims to adjust the capital structure to meet certain strategic or regulatory objectives.

 Reasons for Consolidation:

1.  Improving Perceived Value:  Consolidation of shares is often used to increase the share price to a level that is more attractive to investors or to meet minimum price requirements for stock exchange listings.

2.  Capital Restructuring:  It simplifies the capital structure by reducing the number of outstanding shares, which can make financial statements clearer and easier to understand for investors and analysts.

3.  Meeting Regulatory Requirements:  Some stock exchanges or regulatory bodies may have minimum price or shareholding requirements that companies must meet to remain listed or compliant.

 Process:

During a consolidation, existing shareholders receive a reduced number of shares in exchange for their current holdings, typically in a ratio such as 1-for-2 or 1-for-10. For example, in a 1-for-5 consolidation, a shareholder who holds 100 shares before the consolidation would receive 20 shares after consolidation. The share price increases proportionally to maintain the same market capitalization.

 Impact:

-  Shareholder Ownership:  While the number of shares held decreases, the proportional ownership in the company remains the same.

-  Market Perception:  A higher share price may enhance the company's image and attract a different category of investors.

-  Financial Ratios:  Key financial metrics like earnings per share (EPS) and price-to-earnings (P/E) ratio may change post-consolidation due to the adjusted number of shares.