Explain briefly the features which must be taken into consideration for arriving at valuation of equity shares of a company in a particular transaction.

Valuation of equity shares must take note of special features in the company or in a particular transaction. These are briefly stated as under: Importance of the size of the block of shares: The holder of 75% of the voting power in a company can always alter the provisions of the articles of association; a holder of voting power exceeding 50% and less than 75% can substantially influences the operation of the company even to alter the articles of association of comfortable influences the operation of the company even to alter the articles of association of comfortable pass a special resolution. A controlling interest therefore, carries a separate substantial value. Restricted transferability: Along with principal consideration of yield and safety of capital, another important factor is easy exchangeability or liquidity. Holders of shares unquoted public companies or private companies do not enjoy easy marketability; therefore such shares, however good, are discounted for lack of liquidity at rates, which may be determined on the basis of circumstances or an increase in the normal rate of return. Dividends and valuation: Generally, companies paying dividend at steady rates enjoy greater popularity and the prices of their shares are high while shares of companies with unstable dividends do not enjoy confidence of the investing public as to return they expect to get and, consequently, they suffer in valuation.