prpri Valuation and Pricing of Shares (Quoted/Unquoted Shares) Valuation and Pricing of Shares (Quoted/Unquoted Shares)

Under

1. SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018;

2. SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011

3. Companies Act, 2013 and Rules Thereunder;

4. Income Tax Act, 1961 and Rules Thereunder And

5. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017.

MEANING
QUOTED SHARES: UNQUOTED SHARES:
A share or shares that can be bought and sold on a particular stock market. Unlisted shares, not listed on any nationwide or regional stock exchange.

1) Pricing of shares as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.

Pricing of frequently traded shares
Applicable Section /Regulation /Rules Regulation 164 of Valuation of shares as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
Provision If the equity shares of the issuer have been listed on a recognised stock exchange for a period of twenty six weeks or more as on the relevant date, the price of the equity shares to be allotted pursuant to the preferential issue shall be not less than higher of the following:
a.    the average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twenty six weeks preceding the relevant date; or

b.    the average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date.

Method of Valuation The average of the weekly high and low of the Volume Weighted Average Price of

the related equity shares quoted on the recognized stock exchange* during 26 weeks or 2 weeks preceding the relevant date WHICHEVER IS HIGHER.

*In which highest trading volume has been recorded.

Pricing of infrequently traded shares
Applicable Section/Regulation/Rules Regulation 165 of Valuation of shares as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
Provision Where the shares of an issuer are not frequently traded, the price determined by the issuer shall take into account the valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies:

Provided that the issuer shall submit a certificate stating that the issuer is in compliance of this regulation, obtained from an independent valuer to the stock exchange where the equity shares of the issuer are listed.

Method of Valuation As per SEBI SAST Regulations, 2011 i.e. after taking into account parameters including Book Value, Comparable Trading Multiples and such other parameters as are customary for valuation of such companies

2) Pricing of shares as per SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011

Pricing of frequently traded shares
Traded Turnover of Shares ≥ 10% [In the Last Twelve Calendar Months preceding the Month of Public
Announcement (P.A.)]
Method of Valuation

(Valuation to be done by a Merchant Banker or CA with 10 year experience)

1.  Highest    Negotiated    Price    Per    Share     under agreement attracting the obligation to make P.A.

2.  The volume weighted avg. price paid or payable by acquirer or PAC during the 52 Weeks;

3.  The Highest volume weighted avg. price paid or payable by acquirer or PAC in last 26 Weeks;

4.  Volume weighted average Market Price of Shares for a period of 60 trading days HIGHEST PRICE AMONG ALL IS THE VALUE PER SHARE FOR P.A.

Pricing of Infrequently traded shares
Traded Turnover of Shares < 10% [In the Last Twelve Calendar Months preceding the Month of Public
Announcement (P.A.)]
Method of Valuation

(Valuation to be done by a Merchant Banker or CA with 10 year experience)

1.  Book value,

2.  Comparable Trading Multiples;

Such other Parameters as are customary for valuation of shares of such companies HIGHEST PRICE AMONG ALL IS THE VALUE PER SHARE FOR P.A.

3) Valuation of shares as per Companies Act, 2013 and Rules Thereunder;

Valuation of Fair Market Value of Shares
Applicable Section /Regulation /Rules Sec 62 of Companies Act, 2013 read with Rule 13(g) of Companies Share Capital and debenture Rules, 2014.

Sec 42 of Companies Act, 2013 read with Rule 14 of Companies (Prospectus & Allotment of Securities) Rules, 2014

Provision Valuation of Equity Shares and Convertible Instruments (including Non Cash Consideration, if any for Issue of Shares).

The price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of valuation report of a Registered Valuer;

Rule 13(3) of the Share Capital and debenture Rules, 2014 provides that the price of shares to be issued on preferential basis shall not be less than the price determined on the basis of the valuation report

Method of Valuation As per section 247(2)(c) is concerned, Rule 16 of Companies (Registered Valuers and Valuation) Rules, 2017.

1.  Internationally accepted valuation methodology.

2.  Valuation standard adopted by any registered valuer organization.

4) Valuation of shares as per Income Tax Act, 1961 and Rules thereunder.

Valuation of Fair Market Value of Quoted Shares
Applicable Rules Rule 11UA. of Income-tax Rules.
The fair market value of quoted shares and securities shall be determined in the following manner, namely,—

1. if the quoted shares and securities are received by way of transaction carried out through any recognized stock exchange, the fair market value of such shares and securities shall be the transaction value as recorded in such stock exchange;

2.  if such quoted shares and securities are received by way of transaction carried out other than through any recognized stock exchange, the fair market value of such shares and securities shall be,—

a) the  lowest  price   of such     shares   and   securities   quoted  on   any recognized stock exchange on the valuation date, and

b)  the lowest price of such shares and securities on any recognized stock exchange on a date immediately preceding the valuation date when such shares and securities were traded on such stock exchange, in cases where on the valuation date there is no trading in such shares and securities on any recognized stock exchange;

Valuation of Fair Market Value of Unquoted Shares
Rule 11UA. of Income-tax Rules.
The fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner, namely:—

i.   NAV method: As per Rule 11UA, there is no specific requirement that which person will do the valuation. Therefore, one can opine that any registered valuer can do the valuation for issue of shares on fair Market Value.

ii.  Discounted Free Cash Flow Method: As per rule Rule-11UA, 2(b) of Income-tax Rules Valuation under DCF method only Merchant Bannker can do the valuation for issue of shares on fair Market Value.

5) Valuation of shares as per Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.

Pricing of frequently traded shares(listed)
Applicable Section/Regulat ion/Rules Regulation 11 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
Provision The price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;
In case of convertible capital instruments, the price/ conversion formula of the instrument should be determined upfront at the time of issue of the instrument. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with these Regulations.

Pricing of infrequently traded shares (unlisted)
Applicable Section/ Regulation/ Rules Regulation 11 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
Provision The valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm’s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company
Method of Valuation 1.    Internationally accepted valuation methodology.

2.    Valuation standard adopted by any registered valuer organization.

PERSON AUTHORISED TO DO VALUATION AS PER DIFFERENT ACT.

Method of Valuation Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 Companies Act, 2013 and Rules Thereunder; Income Tax Act, 1961 and Rules thereunder Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017
NAV By a Merchant Banker or CA with 10 year experience. By a Merchant Banker or CA with 10 year experience. Registered Valuer Anyone either Merchant banker CA or Registered Valuer. Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant
DCF By a Merchant Banker or CA with 10 year experience By a Merchant Banker or CA with 10 year experience. Registered Valuer By Merchant banker Only Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant

CASES IN WHICH VALUATION REPORT REQUIRED

1. Valuation report for Further Issue of Share.

2. Valuation of Assets Involved in Arrangement of Non cash transactions involving

3. Valuation of shares, property and assets of the Company under a scheme of Corporate Debt Restructuring.

4. Valuation report along with Notice of creditors/shareholders meeting.

5. The report of the expert with regard to valuation, if any, would be circulated for meeting of creditors/Members.

6. The Valuation report to be made by the tribunal for exit opportunity to the shareholders of transferor Company.

7. Valuation of equity shares held by the Minority Share Holders.

8. Valuing assets for submission of report by liquidator.

9. Under SEBI Laws.

10. Under FEMA Laws.

IMPORTANT NOTES RELATED TO VALUATION OF SHARES.

  • From February 01, 2019, only a registered valuer is allowed to undertake valuation required under the Companies Act.
  • The Central Government has delegated its powers and functions under Section 247 of the Companies Act, 2013 to the Insolvency and Bankruptcy Board of India (IBBI) and specified the IBBI as the Authority under the Companies (Registered Valuers and Valuation) Rules, 2017.

Source:

1. https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks.html

 2. Latest Law on Transfer or Issue of Security by a Person Resident Outside India

3. https://www.incometaxindia.gov.in/Pages/rules/income-tax-rules-1962.aspx

4. https://resource.cdn.icai.org/54846vsbfaq.pdf

5. https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=1&ssid=3&smid=0

Author Bio

Qualification: CS
Company: K SUJEET & Co. (Company Secretaries)
Location: DELHI, Delhi, India
Member Since: 14 Nov 2019 | Total Posts: 8
A core Compliant person and specializes in providing Secretarial and Compliance solutions. An experienced Company Secretary since 2013, having more than 7 years of Experience. Area of expertise lies in SEBI (LODR) Regulations, 2015; SEBI (SAST) Regulations, 2011 and SEBI (Insider Trading), Regulatio View Full Profile

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