Valuation of enquoted equity shares of investment companies and holding companies-Instruction regarding

Valuation of unquoted shares: profit-earning capacity governs valuation, with break-up value only for liquidation or uncertain profits.

Valuation of unquoted equity shares uses the profit-earning capacity (yield) method as primary; break-up value is limited to exceptional cases such as imminent liquidation or where profits are too uncertain. Maintainable profits are the adjusted average of five years' book profits after removing non-recurring items, adding back certain allowances, deducting tax and excluding amounts for preference dividends. Specific capitalisation rates are prescribed by asset nature. A premium applies for substantially but now wholly holding companies, and parent and wholly-owned subsidiaries are treated as one entity for valuation.