The Pricing Guidelines
The FEMA (Non-Debt Instruments) Rules prescribe the pricing guidelines for the transfer of shares between residents and non-residents. For a transfer from a resident to a non-resident, the price must not be less than the fair value determined by a recognised valuer. For a transfer from a non-resident to a resident, the price must not exceed the fair value. The NCLT’s exchange ratio is not a substitute for the FEMA valuation.
The Valuation Methodology
The FEMA valuation may use the discounted cash flow method, the comparable companies method, or the net asset value method, depending on the nature of the business. The valuer must be a chartered accountant, a merchant banker, or a cost accountant with the requisite experience. The valuation report must be dated and must state the methodology and the assumptions.
The NCLT’s Scrutiny
The NCLT will review the valuation report as part of the scheme’s fairness analysis. A valuation that is inconsistent with the exchange ratio may lead to a NCLT query or a modification of the scheme. The scheme should reconcile the FEMA valuation with the exchange ratio and explain any difference.
The Documentation
The file should contain: the valuation report; the FEMA pricing computation; the NCLT order; and the FC-TRS or FC-GPR filing. A scheme that adopts an exchange ratio without the FEMA valuation is exposed to a FEMA penalty.
Call to Action: For FEMA valuation of cross-border scheme shares, pricing guideline compliance, or valuation report review, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.