Authorized and paid up capital

Spartan (Owner) (24 Points)

08 February 2012  

Hi all, I have a quick question. I am analyzing a private company and I had a few questions:

It has revenues of Rs.5cr and having a steady growth rate. But in the balance sheet, it has authorized and paid up capital of only 37,500 shares @ Rs.10/share face value. Is this normal for a company? To have such low number of shares authorized and paid up? Does it affect the standing of the company in any way, or it doesn't really matter? I am guessing that they have been spending their cash or income on investments and hence kept it low.

And they have valued the company at Rs.12.5cr essentially make the per share value at Rs.3,333, and hence a premium of Rs.3,323. I am just wondering if this is justifiable, or they have to increase the authorized share cap to make the values per share more reasonable.

Will appreciate your responses! Looking forward.

Thanks!