Rights Issue - Pricing (valuation) of shares

[Vijaykumar Cn]

Hi

 

I just need a small confirmation on this:

 

RBI Pricing Guideline on Rights Issue: In case of an Unlisted Company The price of the share shall be issued at a price not less than the price at which the offer on rights basis is made to the resident shareholders...

 

So kindly confirm whether DCF Valuation or any other methods of valuation is not necessary in case of rights issue to non resident subscribers... It is just that the share price offered to non resident should be = share price offered to resident in rights issue...

 

Awaiting the confirmation of the learned members...

[csyogan .]

i dont think the one you referred is the intent. when there are two restrictions, you have to follow both or the stricter of them that complies both. in this case, you need to prove two things :

- not less than dcf

- not less than the one offered to residents

regards,
yogan.

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[Vijaykumar Cn]

Dear Yogan,

 

The guideline does not speak about 2 restrictions...

 

Master Circular No.15/2013-14 speaks only

• Right Shares: The price of shares offered on rights basis by the Indian company to non-resident shareholders shall be:

1. In the case of shares of a company listed on a recognised stock exchange in India, at a price as determined by the company.

2. In the case of shares of a company not listed on a recognised stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to the resident shareholders.----------

So my inference was on the above point.. In case of rigts issue - Share price of non-resident subscribers should not be less the share price offered to resident subscriber and NO OTHER VALUATION REQUIRED...

 

Seek confirmation from the learned members...

 

 

[Jayashree Chandrasekaran]

Yes....when the issue on Rights basis the share price should not be less that that offered to resident subscribers...and DCF valuation is not applicable

 

Jayashree

C.JAYASHREE
PROPRIETOR
S.GANESH&ASSOCIATES
CHENNAI
98840 17120

[Vaibhav Jain]

As per RBI DCF method needs to be followed for valuation.

[Vijaykumar Cn]

@ Dear Jayashree Madam,

 

Thanks for the confirmation...

 

 

@ Dear Vaibhav,

 

Can you kindly quote the fema provision / rbi circular, under which you have drawn the inference of valuation under DCF...