CA Final · Advanced Financial Management · Startup Finance
Neeraja Tech Pvt Ltd raises ₹4 crore through a convertible note. The note converts at the next round at a 20% discount to the round price. The Series A price is ₹200 per share. Ignoring interest and any cap, how many shares will the note holder receive on conversion?
The note holder receives 2,50,000 shares. The 20% discount reduces the conversion price from ₹200 to ₹160, and ₹4 crore divided by ₹160 gives 2,50,000 shares. Using the full round price would understate the shares at 2,00,000.
- A2,50,000 sharesCorrect
- B2,00,000 shares
- C1,60,000 shares
- D3,20,000 shares
Explanation
Conversion price = 200 × (1 − 0.20) = ₹160. Shares = 4,00,00,000 / 160 = 2,50,000. Using ₹200 gives 2,00,000, which ignores the discount.
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