Valuation of Share

Understanding Share Valuation: A Comprehensive Guide

This course delves into the crucial world of share valuation, exploring its diverse applications and practical methods. You'll gain a solid understanding of why determining a company's share price is essential in various business scenarios.

Why is Share Valuation Important?

Knowing the value of shares is vital for numerous reasons:

• Amalgamation & Mergers: Understand how share valuation plays a key role in corporate combinations. We'll examine real-world examples like:
  • Glaxo + SmithKline Beecham = GSB
  • Arcelor Ltd + Mittal Steel Ltd = Arcelor Mittal Ltd
  • Brooke Bond Ltd + Lipton Ltd = Brooke Bond India Ltd
  • Vodafone Ltd + Idea Ltd = Vodafone Idea Ltd
  • IDFC Bank + Capital First = IDFC First Bank Ltd
  • Fox Wagon India Pvt Ltd + Fox Wagon Group Sales India Pvt Ltd + Skoda Auto India = Skoda Auto Fox Wagon India Pvt Ltd
    We'll explore amalgamation on both a purchase and internal reconstruction basis.
• Internal Reconstruction: Learn how share valuation is used during a company's internal restructuring.
• Share Conversion: Discover the role of share valuation in share conversion processes.
• Private Company Shares: Gain insights into valuing shares in private companies, which often have unique valuation considerations.
• Gift of Shares: Understand the implications of share valuation when shares are given as gifts.
• Loan Security: Learn how share valuation is used when taking loans secured by shares.
• Wealth Tax Determination: Explore the application of share valuation for calculating wealth tax.
• Nationalization of Companies: Understand the valuation process involved in government nationalization of companies.
• Absorption of Companies: Analyze examples of company absorption and mergers, including:
  • Hindustan Unilever Ltd - Kwality Foods Ltd
  • Jet Airways - Sahara Airlines
  • Hutch - Essar
  • Vodafone - Hutch
  • Mahindra - Satyam Computers
  • Microsoft - Skype
  • Google - YouTube
  • Google - Motorola

Methods of Share Valuation

This course covers several key methods for determining the value of shares:

1. Asset Valuation Method:
   • Valuation by Assets (for ESC): Learn how to value shares based on total assets and external liabilities, considering scenarios where face value and paid-up value differ.
   • Valuation by Assets (for PSC): Understand the specific rules for valuing preference shares using the asset valuation method.
2. Income Valuation Method:
   • Dividend Yield Method: Valuation of both equity and preference shares based on dividend yield.
   • Rate of Earning Method: Learn how to value shares based on the company's earnings potential.
3. Fair Valuation Method (Average Method): Explore the concept of fair value and the average method for share valuation.
4. Earnings Per Share (EPS) Method: Understand how to calculate and utilize Earnings Per Share for share valuation.

This course provides a comprehensive overview of share valuation techniques, equipping you with the knowledge to analyze and assess the value of shares in various contexts.