tag:blogger.com,1999:blog-3202774368551476669.post221530589530178590..comments2023-09-15T16:21:31.980+05:30Comments on INDIAN CORPORATE LAW: Changes to Minimum Pricing Norms for FDI in Unlisted CompaniesUmakanth Varottilhttp://www.blogger.com/profile/12438677982004444359noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-3202774368551476669.post-48168243894155993292011-04-11T19:45:26.908+05:302011-04-11T19:45:26.908+05:30(The above comment was added by Rajesh M.J.)(The above comment was added by Rajesh M.J.)Mihir Naniwadekarhttps://www.blogger.com/profile/10774588998184976540noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-74388621138866607412011-04-11T19:44:45.117+05:302011-04-11T19:44:45.117+05:30Do these circulars apply to private companies seek...Do these circulars apply to private companies seeking to issue shares to their foreign parent company, in pursuance of a proposed increase in capital? Supposing an Indian subsidiary (private company) wishes to issue shares to its parents, can it do so at the face value of the shares?Mihir Naniwadekarhttps://www.blogger.com/profile/10774588998184976540noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-19133681529899701942010-04-30T12:59:07.464+05:302010-04-30T12:59:07.464+05:30Tanmay - thanks for the response. Did bear in mind...Tanmay - thanks for the response. Did bear in mind that 5(c) could be rendered otiose; but legislative 'over-zealousness' leading to bad-drafting will certainly have a terrible impact on deal valuation and on the market, as a whole! As business lawyers, we must bear client interests in mind as they will need to go in for higher valuation as DCF will certainly be higher than CCI valuation (unless 'innovative' CAs/Merchant Bankers find a way out). Perhaps we can delve further on this using the 'pref allotment' language added in the end of 5(c) and use that to make some sense of the entire amendment. Will let you know if i do stumble upon / discover 'another' interpretation... till then, i am not advising my clients to go in for 2 valuations!Jay Parikhhttps://www.blogger.com/profile/05976381529887221651noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-73230741366498668152010-04-29T12:54:09.361+05:302010-04-29T12:54:09.361+05:30Hi Jay!
Thanks for your comment. As I've ment...Hi Jay!<br /><br />Thanks for your comment. As I've mentioned, it does appear from media reports that it may have been RBI's intention to replace the CCI value with DCF Value, as the base price. However, we have no official / formal indication of the same. And the provision does merit some clarification.<br /><br />That said, going by the existing drafting, if we take your interpretation, then limb (c) is rendered completely otiose, and as per principles of statutory interpretation, an interpretation which renders any provision(s) meaningless must, as far as possible, be avoided. <br /><br />Based on the same, it would be the safest and perhaps the most prudent interpretation to state that the base price would be the higher of DCF and CCI Values.<br /><br />As regards advice to the clients, till such time that a clarification is issued, it would be a minor inconvenience to them in terms of cost and time spent in obtaining an extra valuation. <br /><br />However, given that base price can, henceforth, certainly not be lower than DCF Value and the CCI Value would, in all probablility be lower than the DCF Value, there may not be any adverse practical impact of taking the interpretation I suggested, while advising the clients. And it would have the huge benefit of the client avoiding being the guinea pig in any potential regulatory action/ compounding.Tanmaynoreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-28194168584050765102010-04-29T10:28:00.889+05:302010-04-29T10:28:00.889+05:30Tanmay - dont quite think your analysis and view, ...Tanmay - dont quite think your analysis and view, albeit being the "safest" one to adopt, about the interpretation of 5(c), is what was intended by the legislature.<br />In my view, the intent was to ensure that SEBI guidelines was adpoted for listed companies and DCF valuation was adhered to for unlisted companies. In that sense, (c) clearly looks like an addition that has no meaning. The point is this surely warrants a clarification, but such time what should be the advise to clients? I am very averse to advising higher of the DCF and CCI valuations - that, to my mind, is completely incorrect.Jay Parikhhttps://www.blogger.com/profile/05976381529887221651noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-49365581392247495592010-04-28T13:10:18.393+05:302010-04-28T13:10:18.393+05:30Why has 5 (c) been qualified for preferential allo...Why has 5 (c) been qualified for preferential allotment? Considering that pricing for rights issue is dealt with in Reg-6, what other modes of share allotment was the RBI contemplating? Another possible interpretation could be that for pref allotment, only cci would be used-but then that would be defeating the amendment altogether. <br />Further, considering "; and" has been used after (b), (c) should also apply to (a) - which would result in market price being compared with market price in the case of a listed company. <br />Shoddy drafting I'd say.Unknownhttps://www.blogger.com/profile/11519076016418713257noreply@blogger.com