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Valuation of Share Premium

jidesh (ca) (23 Points)

11 June 2008

A group of individuals incorporate a company X Private Limited with Rs. 1,00,000 and 10,000 shares of Rs.10/- each, then bring in further capital at a premium of INR 10,000 per share thereby increasing the total share capital to INR 10,00,00,000/- without altering the number of shares? what is the basis of this valuation? Is some ting like this allowed in India, since it is a newly incorporated entity? If not, what is the guideline to be followed. This is going to be a pure private limited company

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Amarnath (Practice) (34 Points)
Replied 11 June 2008

Hi,

The valuation of company can be done on the basis of the company product is going to Manufacture or developement of a product. what is future of the product is taken place in the market. If the similar product or item is already in the market what is the value of the same items compare with that and can be done. Blindly we cannot value of Rs.10,000/- per share. If there is no documentation problem will arise.