Can dcf price be less than face value

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Anjali Jain (Querist)

26 September 2012 For issue of shares to Non resident, can the price calculated as per DCF (Discounted Cash Flow) be less than Face Value of the Share.

For example,
Face Value is of one share is Rs 10. Now the present value of the share is Rs 1.32. When we calculate the price at which shares are to be issued as per DCF method, the valuation comes to Rs 2.68. Will SEBI or RBI allows to issue shares to NR at DCF price which is much lower than the face value?

CA. Anuj Gupta

CA. Anuj Gupta (Expert)

27 September 2012 As per the law the shares from indian Company or Indian resident should be at price GREATER than the price arrived by DCF, hence the shares can be transferred at any value more than 2.68/-(value arrived in your case)

Ther is recent circular from RBI which allows shares to be issued at Face value in case of SUBSCRIPTION TO MOA shares.

Anuj
femaquery@gmail.com

Anjali Jain

Anjali Jain (Querist)

27 September 2012 Mr. Anuj,
Thanks for your reply.
My query still remains unresolved.
My question was that whether the DCF can be less than Face value for FDI.

Will RBI allow us to accept FDI at a price (decided by DCF method) lower than the Face value?

CA. Anuj Gupta

CA. Anuj Gupta (Expert)

27 September 2012 Yes but not in case of SUBSCRIPTION to MOA.

Anuj
femaquery@gmail.com

Anjali Jain

Anjali Jain (Querist)

27 September 2012 But sir anyhow in case of issue of shares at discount, Section 79 does not allow to issue shares at the discount of more than 10%.

But by this way,if we issue the shares to NR against FDI at Rs.2.68 (calculated by DCF method) and the face value is Rs.10, we are giving him the discount of 75% approximately.

Is it allowed?

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