A private ltd company promoted by Foreign Nationals and is yet to commence its operation. Other than Incorporation no other work has been carried out except receipt of inward remittance. Whether DCF has to be adopted for issuing shares at face value for the subscribers to the memorandum. Whether valuation certificate must contain DCF workings in this case.
Thanks
Guest
Guest
(Expert)
28 February 2012
The initial issue of shares shall be done at face value.
Also if shares are issued at face value then there is no need to have DCF workings.
It is assumed that the foriegn nationals are the only investors and there is no premium charged to them for indigenous expertise.
DCF is adopted when any company with business in existence issues shares and its current book value does not reflect the fair value
DCF method will be applicable whether the company is newly incorporated. A CA certificate is required to be attached with Form-FC-GPR which specify how the issue price is derives, if the company shares is non quoted.
28 February 2012
Irrespective of company have not commence its operation or a already established Company..You need to derive at company's Valuation by DCF Method in case of Foreign Capital Infusion. In Your scenario 5 yrs projections to be made which will have rational assumption by the Management and deriving at Discounting rate based on capital structure and industry per se...
Querist :
Anonymous
Querist :
Anonymous
(Querist)
28 February 2012
Dear Friends I do agree that DCF has to adopted for any foreign capital infusion.
However in this case foreign infusion of capital is only towards the shares mentioned in MOA agreed by the subscribers to MOA at the time of Incorporation of the Company.
In case of allotment of shares to the Subscribers to MOA as per the moa on incorporation can be only at par. There is no question of any valuation , or premium or discount in the above case.
Hence for the above case, whether DCF valuation is still required. There is no further issue of shres other than the shares mentioned against their name in MOA .
28 February 2012
what you mean is the Foreign Nationals are subscribers to memorandum and their names are mention in MOA & AOA? Then no need for DCF Valuation>....
Also is this case the company is promoted by foreign nationals and they are the subscriber to MoA nd AoA. May be the purpose is to get benefits of DTAA, SEZ's etc.. In future if any new investor comes in then DCF method may be worked out.