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Want to do investment in a pvt ltd company

Surampudi Sai Indra Kiran (logistics manager) (35 Points)

02 March 2016

hi experts,

I want to do an investment in an existing pvt ltd company ... Kindly guide me that what and how the points are to be considered before doing the investment.

And what are points to be checked while observing the existing pvt ltd company's physical documents.

Kindly guide me.

regards

Kiran

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8 Replies

Ram Kumar (188 Points)
Replied 03 March 2016

1.Check the value of the share - take valuation certificate

2. compliance point of view- Take due diligence certificate from a practising company secretary.

JOJY THOMAS (CHARTERED ACCOUNTANT) (305 Points)
Replied 03 March 2016

1. Go through the last 3/5 years audited results and annual report

2. Have careful study on the pending litigations/ contigent liabilities

3. Have a study on the operations and business contracts of the company and ascertain the future prospects

These are the preliminary things you will have to evaluate before making any investment decision. Share valuation and due diligence can do after your initial evaluation

Surampudi Sai Indra Kiran (logistics manager) (35 Points)
Replied 03 March 2016

Hi Thomas,

Thanks for ur reply.

You being a CA, can you guide me exactly that what points to be noted or observed in the audit report of last 3-5 years.

Regards

Kiran

JOJY THOMAS (CHARTERED ACCOUNTANT) (305 Points)
Replied 03 March 2016

1. Profitability ie Gross Profit ratio, Net Profit ratio with reference to turnover

2. Working Capital = Current Assets- Current Liabilities. Current Assets means value of stock, debtors, cash and bank balance etc. Current Liabilities includes sundry creditors and Provisions . Difference between the sum total of Current Assets and Current Liabilities is the working capital which should be positive.

3. Check whether the company has taken any loans from bank and FI and are repaying the principal and interest on time

Surampudi Sai Indra Kiran (logistics manager) (35 Points)
Replied 03 March 2016

Thanks for your reply.

Surampudi Sai Indra Kiran (logistics manager) (35 Points)
Replied 03 March 2016

Dear Thomas,

I have another question, can you guide me how to decide the profitable %, and is that % will be paid monthly or yearly? Will be there any salary paid apart from the profit?

And how the position or a grade in the company will be designated to the investor?

Regards

Kiran

G soni (CA) (158 Points)
Replied 04 March 2016

Check auditors qualification in the report. Check related party transactions Check ratio of drs outstanding more than 6 months Get company master data from MCA site to check status

JOJY THOMAS (CHARTERED ACCOUNTANT) (305 Points)
Replied 04 March 2016

Normally investment means subscribing shares of the company. Profit are normally Distributed by declaring dividends in the AGM. Your staus will be shareholder