Business Valuation

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PARAG PATHAK (Querist)

14 June 2009
The company has equity share capital of Rs 1 crore (Rs. 10/-). It has also issued preference shares of Rs. 28000/- (Rs. 10/-).

The reserves comprise of:

Share Premium - Rs. 10 crores.
Profit and Loss - Rs. 35 crores. This profit is arrived at after considering items of non recurring nature to the tune of Rs. 20 crores.

Please guide me as to what shall be the value per share. should u require any further information, please get in touch with me.

Thanks
Regards

Parveen Bansal

Parveen Bansal (Expert)

17 June 2009 Business valuation should be carried for a purpose.

Generally, there are 3 methods of valuation:

1. Book value based.
2. Profit based
3. Market based.

Book valuation is 11 cr (10+1) / 10 lacs shares = Rs. 110 per shares.

Profit based valuation is sustainable profit Rs. 15 cr (35-20) x profit multiple / 10 lacs. Assuming profit multiple of 10, value per share works out to Rs. 150.

Average of both valuation will be Rs. 130 per share.

What is the purpose to carry business valuation?

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