1 / 17

DCF METHOD UNDER REVISED PRICING GUIDELINES BY RBI

DCF METHOD UNDER REVISED PRICING GUIDELINES BY RBI. Presentation By CA. Anil Sharma. Foreign Direct Investment. Issue of shares by an Indian company to a non-resident Transfer of shares of an Indian company by A resident (R) to a non-resident (NR) A NR to R

yaron
Download Presentation

DCF METHOD UNDER REVISED PRICING GUIDELINES BY RBI

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. DCF METHOD UNDER REVISED PRICING GUIDELINES BY RBI Presentation By CA. Anil Sharma

  2. Foreign Direct Investment • Issue of shares by an Indian company to a non-resident • Transfer of shares of an Indian company by • A resident (R) to a non-resident (NR) • A NR to R • Listed company or unlisted company.

  3. Revised Pricing Guidelines • Background • Ex CCI valuation • CCI valuation- average of NAV and PECV. • Past performance vs. future performance. • DCF Method.

  4. Listed Companies • Issue of shares • Initial issue • Right issue • Preferential allotment • Transfer of shares • By a non- resident to a resident. • By a resident to a non-resident.

  5. Listed company- Issue of shares

  6. Listed company Transfer of shares- by R to NR

  7. Listed companyTransfer of shares- by NR to R

  8. Unlisted company- Issue of shares

  9. Unlisted companyTransfer of shares- by R to NR

  10. Unlisted companyTransfer of shares- by NR to R

  11. Valuation by DCF Method • Valuation arrived at by DCF Method shall be: -Minimum price to be paid for subscription of new shares by a non-resident and - Maximum price in case of transfer of shares by a non-resident to a resident.

  12. Discount projected cash flows at weighted Average cost of capital to determine the net present value DCF= CF1/(1+r)1 +CF2/(1+r)2 + F3/(1+r)n Where CF = Annual cash flows r = Discount rate Valuation by DCF Method

  13. Valuation by DCF Method Estimated cash flows . Business Plan, industry and business cycle. Regulatory framework. SWOT analysis. Ration analysis and Sensitivity analysis.

  14. Discount Rate. Inflation expectations. Category of debts and interest rates. Fixed or floating rates of interest. Exchange rates. Agreements with fund providers. Valuation by DCF Method

  15. Valuation by DCF Method • Issues • Guidelines do not specify how DCF method is to be used in terms of discount rate and cash flow period. • Inappropriate in case of a newly incorporated company • Not suitable for companies with large asset base but negative cash flows. • Not suitable for start ups with IPs as estimating cash flows would be difficult

  16. Certification by CAs • SAE-3400 The Examination of Prospective Financial Information. • Knowledge of the business. • Documentation. • Disclosure of all material assumptions. • Appropriate disclaimer.

  17. THANK YOU. • Contact me at: • 9811320203 • anil54@gmail.com

More Related