{"id":4323,"date":"2017-10-04T20:15:50","date_gmt":"2017-10-04T14:45:50","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=4323"},"modified":"2021-11-17T17:55:40","modified_gmt":"2021-11-17T12:25:40","slug":"what-is-business-valuation","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/what-is-business-valuation\/","title":{"rendered":"What is Business Valuation?"},"content":{"rendered":"

Business valuation is required at the Growth stage of the company and generally before IPO or takeover Valuation is required. <\/strong><\/p>\n

Why is Business Valuation Important?<\/h2>\n

Valuation is an exercise to assess the worth of enterprise. In merger or amalgamation or demerger or acquisition, valuation is certainly needed. It is essential to fix the value of shares to be exchanged in merger or consideration payable for an acquisition.<\/p>\n

When is Business Valuation required?<\/h2>\n

The following are some of the usual circumstances when the valuation of shares or enterprise becomes crucial:<\/strong><\/p>\n

    \n
  1. When issuing shares to the public either through an initial public offer or by an offer for sale of shares of promoters or for the further issue of shares to the public.<\/li>\n
  2. When promoters want to invite the strategic investors or for pricing a first issue or a further issue, whether the preferential allotment<\/a> or rights issue.<\/li>\n
  3. In making an investment in the joint venture by subscription or acquisition of shares or other securities convertible into shares.<\/li>\n
  4. For making an ‘open offer for acquisition of shares’.<\/li>\n
  5. When the company intends to introduce a ‘buy back’ or ‘delisting of shares’.<\/li>\n
  6. If the scheme of merger or demerger involves the issue of shares. In the schemes involving mergers or demergers, the share valuation has resorted in order to determine consideration for the purpose of issue of shares<\/a> or any other consideration to shareholders of the transferor or demerged companies.<\/li>\n
  7. On the directions of Tribunal or Authority or Arbitration Tribunals directs.<\/li>\n
  8. For determining the fair price for effecting the sale or transfer of shares as per (AOA) Articles of Association of a company.<\/li>\n
  9. As required by the agreements between two parties.<\/li>\n
  10. To determine the purchase price of a ‘block of shares’, which may or may not give the holder thereof a controlling interest in the company.<\/li>\n
  11. To value the interest of dissenting shareholders under a scheme of amalgamation merger or reconstruction.<\/li>\n
  12. Conversion of debt instruments into shares.<\/li>\n
  13. Advancing a loan against the security of shares of the company by the Bank\/Financial Institution.<\/li>\n
  14. As required by provisions of law such as the Companies Act, 2013 or Foreign Exchange Management Act, 1999 or Income Tax Act, 1961 or the SEBI<\/a> (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 [the Takeover Code] or SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 or SEBI (Buy Back of Securities) Regulations, 1998 or Delisting Guidelines.<\/li>\n<\/ol>\n

    Business Valuation\/Acquisition Motives<\/h2>\n

    The reasons could be<\/strong><\/p>\n