– In case of listed shares – as per Securities and Exchange Board of India (SEBI) guidelines
– In case of unlisted shares – at fair valuation done by a Chartered Accountant as per the erstwhile Controller of Capital Issues (CCI) guidelines
– At a price not lower than the price at which such shares are offered to resident shareholders.
Changes in pricing guidelines
Reserve Bank of India (RBI) has, by a notification dated 7 April 2010 amended the FDI Regulation with regard to pricing guidelines. The amendments are made effective from 21 April 2010. The highlights of the amendments are as under:
– In case the shares of a company are listed on a recognized stock exchange in India, the price would need to be worked out in accordance with the SEBI guidelines as applicable.
– In case the shares of a company are not listed on a recognized stock exchange in India, the fair valuation of shares would be undertaken by a SEBI registered Merchant banker or a Chartered Accountant as per the Discounted Free Cash Flow (DCF) method.
– Where the issue of shares is on a preferential allotment basis, the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by RBI from time to time.
– In case of the shares of a company listed on a recognized stock exchange in India, at a price determined by the company
– In case of the shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which offer on right basis is made to resident shareholders.
Source: Notification No. GSR 341 (E) FEMA 205 /2010 – RB dated 7 April, 2010 issued by RBI.