Sunrise Textiles Ltd., a listed company, has shares that are not frequently traded. For a preferential issue, the merchant banker has provided the following valuation parameters: Book Value per share: ₹120 Comparable tra

Answer 3(b) (i) Issue Price of the shares as per Regulation 165 of SEBI (ICDR) Regulations, 2018 Regulation 165 of SEBI (ICDR) Regulations, 2018 provides that where the shares are not frequently traded, the price determined by the issuer shall take into account valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies. Here, Book Value = ₹120 Trading Multiples valuation = ₹150 DCF Method = ₹135 In this case, the preferential issue price would be ₹150 (highest valuation considered). (ii) Adjustment under Regulation 166 of SEBI (ICDR) Regulations, 2018 Regulation 166 of SEBI (ICDR) Regulations, 2018 provides that the price determined for a preferential issue in accordance with Regulations 164, 164A, 164B or 165, shall be subject to appropriate adjustments, if the issuer, amongst others, divides its outstanding equity shares including by way of stock split. Further the effect on the price of the equity shares of the issuer due to material price movement and confirmation of reported event or information may be excluded as per the framework specified under sub-regulation (11) of regulation 30 of the SEBI (LODR) Regulations, 2015 for determination of the price for a preferential issue in accordance with Regulations 164, 164A, 164B or 165. If Sunrise Textiles Ltd. undertakes a stock split after the preferential issue, the price determined must be adjusted proportionately to reflect the new number of shares. For example, if one share of ₹150 is split into two shares, the adjusted price would be ₹75 per share.