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CS Professional · Corporate Restructuring, Valuation and Insolvency · Valuation of Business and Assets for Corporate Restructuring

Tulsi Retail Ltd has assets with a fair value of Rs 120 crore, including a freehold property bought for Rs 20 crore and now valued at Rs 50 crore. Book value of assets is Rs 90 crore; liabilities are Rs 40 crore. The valuer wants to value on liquidation basis with the following: all assets realise 90% of fair value, liquidation costs are Rs 6 crore, and liabilities are paid at book value. What amount is available to equity shareholders?

Rs 62 crore is available to shareholders. Assets realise 90% of Rs 120 crore, which is Rs 108 crore; deducting liquidation costs of Rs 6 crore leaves Rs 102 crore; paying liabilities of Rs 40 crore leaves Rs 62 crore for equity holders.

  1. ARs 62 croreCorrect
  2. BRs 68 crore
  3. CRs 52 crore
  4. DRs 38 crore

Explanation

Realisable value = 90% x 120 = Rs 108 crore. Less liquidation costs 6 = 102. Less liabilities 40 = Rs 62 crore. Rs 68 crore forgets liquidation costs; Rs 38 crore wrongly starts from book assets of 90 less 6 and 40... (90-6-40=44 is not it) and is simply wrong.

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