Valuation Services

In today's challenging corporate, regulatory, legal, and accounting environment, there is a need for robust and independent valuation services, which are aligned with globally accepted practices. Valuation is an exercise to assess the worth of an enterprise or a property. In a merger or amalgamation or demerger or acquisition, valuation is certainly needed. It is essential to fix the value of the shares to be exchanged in a merger or the consideration payable for an acquisition.

A registered valuer is an individual or entity which is registered with the Insolvency and Bankruptcy Board of India (IBIBI) as a valuer in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017 who is considered an appropriate person to perform a valuation.

Mandate under Companies Act, 2013

For valuing assets involved in the arrangements of non-cash transactions involving directors
For valuing shares, property, and assets of the company under a scheme of corporate debt restructuring
For valuation including share swap ratio under a scheme of compromise/arrangement, a copy of the valuation report by an expert, if any shall be accompanied
Where under a scheme of compromise/ arrangement the transferor company is a listed company and the transferee company is an unlisted company, for exit opportunity to the shareholders of the transferor company, valuation may be required to be made by the Tribunal
For valuing equity shares held by minority shareholders
For preparing valuation report for determination of liquidation value of assets

Other Aspects

Transactions, which include restructuring and divestments for price determination/negotiation
Financing and strategic management purposes
Financial reporting purposes, which include purchase price allocation, testing for investment/goodwill impairment, ESOP valuation, etc
Litigation, arbitration, and dispute resolution
Financial instruments including debt, hybrid, and convertible instruments
Intangibles like brands, trademarks, Intellectual property, etc
Portfolio valuation for venture capital funds, private equity funds, and other alternative investment funds

The principal valuation approaches are -

Market Approach

The market approach provides an indication of value by comparing the asset with identical or comparable sets for which market prices are available. When comparable market information does not relate to the exact or substantially same asset, the valuer must perform a comparative analysis of qualitative and quantitative similarities and differences between the comparable assets and the subject asset. It will often be necessary to make adjustments based on this comparative analysis. The market approach can employ the following methods:

Income Approach

The income approach provides an indication of value by converting future cash flow to a single current value. Under the income approach, the value of an asset is determined by reference to the value of income, cash flow, or cost savings generated by the asset. It is generally used to value assets under a “Going Concern” basis.

Although there are many ways to implement the income approach, methods under the income approach are based on discounting future amounts of cash flow to present value. They are variations of the Discounted Cash Flow (DCF) method and the concepts below apply in part or in full to all income approach methods”.

Cost Approach

The cost approach focuses on the net worth or net assets of a company. The approach provides an indication of value by calculating the current replacement or reproduction cost of an asset and making deductions for physical deterioration and all other relevant forms of obsolescence. The cost approach indicates value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by construction, unless undue time, inconvenience, risk, or other factors are involved.