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Introduction
Valuation has emerged as an integral part of the financial and regulatory environments of today and plays a significant role as the Indian economy continues to develop rapidly. Valuation services are becoming a necessary part of mergers, taxation, financial reporting, regulatory compliance and insolvency, and there is now a formalized network of professionals and organizations that jointly administer these services. Therefore, knowledge of the various types of valuers and the legal framework that governs their respective roles is vital for all involved in those services; A business, their advisors and stakeholders, all require this knowledge.
The valuation process is governed by different pieces of legislation in India, such as the Companies Act, 2013; the Income Tax Act 1961; and the Insolvency and Bankruptcy Code, 2016. These pieces of legislation provide for specific categories of valuers to carry out valuations in respect to specific statutory purposes.
The major types of valuers are Registered Valuers under the Companies Act - administered by the Insolvency and Bankruptcy Board of India; Merchant Bankers (registered with the Securities and Exchange Board of India) carry out valuations of Securities and public transactions; a Chartered Accountant or other professionals perform the valuations prescribed under taxation statutes; and Insolvency Professionals engage the services of valuers during the resolution process.
All categories function within set parameters, Supported by authority, qualifications, and reporting standards. The structure in place confirms the credibility, transparency, and consistency of the valuation result across various domains.
This blog will provide you an understanding of the many types of valuers and their governing authorities as well as when/how to use their services so that you can better understand your valuation options and the process of one.
SUMMARY— VALUER TYPES & PRIMARY SERVICES
|
Type of Valuer |
Primary Services |
|
IBBI Registered Valuer (RV) [Securities or Financial Assets class] |
Companies Act Sec 247 (share issuance, mergers, minority buyout, non-cash transactions, sweat equity, compromise with creditors) | IBC/CIRP Liquidation | Slump Sale Rule 11UAB | NAV-method IT valuation | AIF valuation | PPA / Ind AS | ESOP accounting |
|
SEBI Registered Category-I Merchant Banker (MB) |
FDI / FEMA inbound share valuation | ESOP perquisite (Income Tax) | DCF-method IT valuation (Rule 11UA) | SEBI open offer / takeover / fairness opinion | Non-cash promoter transactions | Preferential issue floor price | ODI > USD 5 million or share swap |
|
Chartered Accountant (CA) [ICAI member in practice] |
NAV-method IT valuation (Rule 11UA) | FEMA FDI valuation (unlisted, non-DCF) | SEBI open offer / non-cash promoter (with 10 yrs experience) | ODI valuation < USD 5 million | Diminution in ODI value certification |
|
Practicing Cost Accountant (CMA / CoA — ICAI-CMA member) |
FEMA valuation for FDI / share transfer (RBI NDI Rules) — explicitly permitted alongside CA and MB under RBI pricing guidelines |
|
Certified Public Accountant (CPA) [Host country CPA — e.g., US CPA] |
FEMA ODI: (a) Valuation of foreign company for ODI < USD 5 million [alongside CA] per RBI FEMA 19 ODI forms | (b) Certifying diminution in value of overseas investment under FEM (Overseas Investment) Rules, 2022 — Rule 18 |
|
Investment Banker / Merchant Banker [Registered in host country] |
FEMA ODI: Valuation for ODI > USD 5 million or share swap transactions — must be registered with the appropriate regulatory authority in the host country |
|
BSE / NSE Enrolled Independent Valuer |
SEBI: Exit opportunity valuation for listed company shareholders (delisting / buyback) — must be enrolled with BSE or NSE |
DETAILED SERVICE-WISE ELIGIBILITY TABLE — ALL REGULATORY FRAMEWORKS
|
# |
Valuation Service / Purpose |
Governing Law / Section |
Person(s) Eligible to Conduct Valuation |
Key Notes |
|
1 |
Further Issue of Shares (Preferential Allotment) |
Companies Act 2013 Sec 62(1)(c) |
IBBI Registered Valuer (SFA Class) |
CA or MB alone not valid unless IBBI-registered. Report required before allotment. |
|
2 |
Mergers, Amalgamations & Demergers (Swap Ratio) |
Companies Act 2013 Sec 230–232 |
IBBI Registered Valuer (SFA Class) |
NCLT submission requires registered valuer report; Fairness Opinion also needed (SEBI LODR for listed). |
|
3 |
Minority Stake Buyout / Exit Pricing |
Companies Act 2013 Sec 236 |
IBBI Registered Valuer (SFA Class) |
Exit price for minority shareholders must be certified by registered valuer. |
|
4 |
Non-Cash Asset Transactions with Directors |
Companies Act 2013 Sec 192 |
IBBI Registered Valuer (SFA Class) |
Prevents conflict of interest in director–company non-cash asset swaps. |
|
5 |
Compromise / Arrangement with Creditors & Members |
Companies Act 2013 Sec 230 |
IBBI Registered Valuer (SFA Class) |
Accompanies restructuring scheme filed with NCLT. |
|
6 |
Sweat Equity Issuance |
Companies Act 2013 Sec 54 |
IBBI Registered Valuer (SFA Class) |
For valuing IP / know-how contributed by employees or directors. |
|
7 |
Company Administrator Authority / Liquidation |
Companies Act 2013 Sec 260 & 281 |
IBBI Registered Valuer (SFA Class) |
Covers administrator-led valuation and court-supervised liquidation proceedings. |
|
8 |
Related Party Transaction (RPT) Valuation |
Companies Act 2013 Sec 188 |
IBBI Registered Valuer (SFA Class) |
Arm's length pricing; registered valuer report required before board / member approval. |
|
9 |
ESOP Valuation — Accounting (Compensation Expense) |
Ind AS 102 / AS 102 (Share-Based Payments) |
IBBI Registered Valuer OR SEBI Cat-I Merchant Banker |
For recording ESOP compensation expense in books. Both professionals accepted. |
|
10 |
ESOP Valuation — Income Tax (Perquisite at Exercise) |
Income Tax Act Rule 3(8)(iii) |
SEBI Registered Category-I Merchant Banker |
Statutory requirement; IBBI RV alone is not sufficient for income tax perquisite purposes. |
|
11 |
ESOP Valuation — Listed Companies (SEBI) |
SEBI (SBEB & Sweat Equity) Regulations |
IBBI Registered Valuer (preferred) / SEBI MB |
For determining exercise price and accounting cost; SEBI ICDR floor price formula applies additionally. |
|
12 |
Share Valuation — FMV DCF Method (Rule 11UA) |
Income Tax Act 1961 Rule 11UA |
SEBI Registered Category-I Merchant Banker |
Mandatory MB sign-off for DCF method. CA or RV alone not sufficient for DCF under Rule 11UA. |
|
13 |
Share Valuation — FMV NAV Method (Rule 11UA) |
Income Tax Act 1961 Rule 11UA |
IBBI Registered Valuer OR Chartered Accountant (CA) |
Standard for asset-heavy companies; no Merchant Banker requirement for NAV method. |
|
14 |
Slump Sale / Business Transfer Valuation |
Income Tax Act 1961 Rule 11UAB |
IBBI Registered Valuer |
Mandatory for transfer of business undertakings; determines FMV for tax computation. |
|
15 |
Capital Gains — FMV / Cost of Acquisition |
Income Tax Act Sec 50CA & 56(2)(x) |
IBBI RV or CA (NAV method) SEBI MB (DCF method) |
Protects buyer (deemed income under 56(2)(x)) and seller (inflated gains under 50CA). |
|
16 |
Intangible Asset Valuation (Brands, Patents, Goodwill) |
Income Tax Act / Ind AS 38 / Ind AS 103 |
IBBI Registered Valuer |
For tax compliance, M&A; Purchase Price Allocation, and financial reporting purposes. |
|
17 |
ESOP Perquisite — Share Value at Exercise |
Income Tax Act Rule 3(8)(iii) |
SEBI Registered Category-I Merchant Banker |
TDS computation on perquisite requires MB-certified FMV on date of exercise. |
|
18 |
FDI — Inbound Share Issuance (FC-GPR Filing) |
FEMA NDI Rules 2019 RBI Pricing Guidelines |
SEBI Cat-I Merchant Banker OR Chartered Accountant (CA) OR Practicing Cost Accountant |
RBI mandates internationally accepted methodology (DCF preferred). All 3 professionals permitted per RBI NDI Rules 2019. |
|
19 |
FDI — Share Transfer Resident to Non-Resident (FC-TRS) |
FEMA NDI Rules 2019 RBI Guidelines |
SEBI Cat-I Merchant Banker OR Chartered Accountant (CA) OR Practicing Cost Accountant |
AD Banks increasingly also prefer reports backed by IBBI Registered Valuers for enhanced credibility. |
|
20 |
ODI — Overseas Direct Investment < USD 5 Million |
FEMA 19 / FEM (OI) Rules 2022 |
Chartered Accountant (CA) OR Certified Public Accountant (CPA — host country) |
Explicitly permitted per RBI FEMA 19 ODI forms: 'Chartered Accountant or a Certified Public Accountant.' |
|
21 |
ODI — Overseas Direct Investment > USD 5 Million or Share Swap |
FEMA 19 / FEM (OI) Rules 2022 |
SEBI Cat-I Merchant Banker OR Investment Banker / MB Registered in Host Country |
Host-country Investment Banker must be registered with the appropriate regulatory authority in that jurisdiction. |
|
22 |
ODI — Diminution in Value of Overseas Investment (Rule 18) |
FEM (Overseas Investment) Rules 2022, Rule 18 |
IBBI Registered Valuer OR Valuer Registered in Host Country OR CPA (Host Jurisdiction) |
Applies when ODI > USD 10 million OR diminution > 20% of outstanding dues. CPA explicitly named in Rule 18 proviso. |
|
23 |
CCPS / CCD Valuation for Foreign Investors |
FEMA NDI Rules 2019 (Equity Classification) |
SEBI Cat-I Merchant Banker OR CA / Cost Accountant |
CCPS/CCD treated as equity from issuance date under FEMA; incorrect valuation triggers RBI non-compliance. |
|
24 |
Preferential Issue — Floor Price (Listed Companies) |
SEBI (ICDR) Regulations 2018 |
IBBI Registered Valuer (intrinsic value opinion) |
Floor price formula-driven (VW AP 90/10 day); Registered Valuer provides independent intrinsic value opinion. |
|
25 |
Exit Opportunity to Shareholders (Delisting / Buyback) |
SEBI Regulations (Delisting / Buyback) |
Independent Valuer enrolled with BSE or NSE |
Must be enrolled with stock exchange; not a general requirement — specifically exchange-enrolled independent valuer. |
|
26 |
Business Assets Issued to Promoters (Non-Cash Consideration) |
SEBI Regulations |
Merchant Banker (MB) OR Chartered Accountant (CA) |
Both permitted; minimum 10 years' experience required for open offer / takeover valuation. |
|
27 |
Open Offer / Takeover Pricing (Fairness Opinion) |
SEBI (SAST) Regulations SEBI (LODR) Regulations |
Merchant Banker (MB) OR CA with min 10 yrs experience |
Must accompany NCLT / exchange filings; protects directors from shareholder litigation. |
|
28 |
AIF / PE Fund Portfolio Valuation |
SEBI AIF Regulations |
IBBI Registered Valuer |
For periodic NAV computation and reporting to investors under SEBI AIF framework. |
|
29 |
CIRP — Corporate Insolvency Resolution Process |
IBC 2016, Reg 27 & 35 (IBBI CIRP Regulations) |
IBBI Registered Valuer (Two independent RVs) |
Two independent registered valuers mandatory; average of both values used. No other professional accepted. |
|
30 |
Liquidation Valuation |
IBC 2016 (Liquidation Process Regs) |
IBBI Registered Valuer |
Covers all three asset classes: Land & Building, Plant & Machinery, Securities / Financial Assets. |
|
31 |
Voluntary Liquidation |
IBBI (Voluntary Liquidation Process) Regulations 2017 |
IBBI Registered Valuer |
Same three-asset-class requirement; IBBI RV mandatory throughout. |
|
32 |
Fast Track CIRP |
IBBI (Fast Track CIRP) Regulations 2017 |
IBBI Registered Valuer |
Applies to smaller companies / start-ups under fast-track insolvency proceedings. |
|
33 |
Purchase Price Allocation (PPA) Post M&A; / Business Combination |
Ind AS 103 / IFRS 3 |
IBBI Registered Valuer |
Allocation of acquisition cost to identifiable assets (goodwill, customer lists, brands etc.) post-acquisition. |
|
34 |
Impairment Assessment — Goodwill / Investments |
Ind AS 36 / IAS 36 |
IBBI Registered Valuer |
Annual or trigger-based impairment testing; recoverable amount determination required. |
|
35 |
Investment Property Valuation |
Ind AS 40 / IAS 40 |
IBBI Registered Valuer |
For fair value measurement of investment properties held for rental / capital appreciation. |
|
36 |
Financial Instruments — Fair Value Measurement |
Ind AS 109 / Ind AS 113 |
IBBI Registered Valuer |
Covers complex debt/equity instruments; fair value hierarchy (Level 1, 2, 3) compliance required. |
|
37 |
409A Valuation (US-facing Indian Startups) |
US IRC Section 409A |
Independent Qualified Appraiser (IRS-compliant; typically CA / RV with relevant expertise) |
Required for US stock option pricing compliance; not an Indian regulatory category but applicable for India-US structures. |
|
38 |
Transfer Pricing Valuation (Cross-Border Related Party) |
Income Tax Act, Sec 92 (Transfer Pricing Rules) |
CA / RV / Certified Transfer Pricing Specialist |
Arm's length price determination for cross-border related party transactions; TP documentation mandatory. |
Conclusion
In conclusion, valuation in India is no longer a discretionary exercise and require detail understanding of law—it is a highly structured and regulation-driven function governed by multiple laws and regulatory bodies. Each category of valuer, whether an IBBI Registered Valuer, Merchant Banker, Chartered Accountant, or other authorized professional, operates within purview of regulations and expertise.
With our deep expertise in valuation of businesses, financial assets and Securities and applicable regulatory framework, we assist businesses in navigating these complexities with accurate, compliant, and practical valuation solutions tailored to their needs.
Contact CompaniesNext if you have any query or require any service.