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

Under a scheme of arrangement, Tanvi Engineering Ltd. (unlisted) is to be merged into Zenith Industries Ltd. (listed). Zenith's shares trade at ₹200 on the recognised stock exchange, whose SEBI pricing formula gives a floor of ₹180 for preferential-type issues, while the registered valuer's fair value of Zenith is ₹210. Tanvi's valuer value is ₹105 per share. Using the valuer's values for both companies, how many Zenith shares are issued for every 10 Tanvi shares?

Five Zenith shares for every ten Tanvi shares. The exchange ratio is the valuer's value of Tanvi per share, ₹105, divided by the valuer's value of Zenith per share, ₹210, which equals 0.5. Market price or the pricing floor is not the basis specified here.

  1. A5 sharesCorrect
  2. B10 shares
  3. C5.83 shares
  4. D4.5 shares

Explanation

Share exchange ratio = value of Tanvi share / value of Zenith share = 105/210 = 0.5. So 10 Tanvi shares receive 5 Zenith shares. Using market price ₹200 gives 5.25, and using the ₹180 floor gives 5.83; those mix in a wrong basis for Zenith, while the stated task is to use valuer values for both.

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