Valuation of Share

Course Description and Objectives:

Introduction of Valuation of Shares

Need or Purposes of valuation of shares:

1. On Amalgamation in nature of purchase

Examples of Amalgamation

1. Glaxo + SmithKline Beecham = GSB

2. Arcelor Ltd + Mittal steel Ltd = Arcelor Mittal Ltd.

3. Brooke bond Ltd + Lipton Ltd = Brooke bond India Ltd.

4. Vodafone Ltd + Idea Ltd = Vodafone idea Ltd

5. IDFC bank + Capital first = IDFC first bank Ltd

6. Fox wagon India Pvt Ltd + Fox wagon group sales India Pvt Ltd + Skoda auto India = Skoda auto fox wagon India Pvt Ltd

2. On the Internal reconstruction of the company

3. On conversion of shares

4. Shares of private companies

5. Transfer of shares as gift

6.For taking loan on share’s security

7. For determination of wealth tax

8. Nationalization of companies

9. On Absorption of a company

Examples of Absorption / Merger

1) Hindustan Unilever Ltd - kwality foods Ltd

2) Jet airways - Sahara airlines

3) Hutch - Essar

4) Vodafone - Hutch

5) Mahindra - Satyam computers

6) Microsoft - Skype

7) Google - Youtube

8) Google - Motorola

Methods of Valuation of Shares

(1) Assets valuation method :-

(a) Valuation of share by Assets valuation method (For ESC) : Total Assets and External Liabilities

Face value different and paid up value different

Face value same but paid up value different

Assets valuation method (For PSC)

Rules for valuation of preference share

(2) Income valuation method

Income valuation method or Dividend yield method

2 (a) Valuation of Share by Rate of Dividend Method : Valuation of equity share, Valuation of Preference share

2 (b) Valuation of share by Rate of Earning Method

(3) Fair valuation method

Fair valuation method or Average method

(4) Earning per share method