Securities or Financial Assets Valuations

Since 1 February 2019, only a registered valuer can sign off a valuation under the Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016. IBBI splits valuer registration into three Asset Classes. Mine is Securities or Financial Assets (SFA): equity shares, preference shares, debentures and other securities, listed or unlisted. The other two are Land & Building and Plant & Machinery. The regulator, the Insolvency and Bankruptcy Board of India (IBBI), is designated the Authority for registered valuers under Section 247 of the Companies Act, 2013, and administers registration under the Companies (Registered Valuers and Valuation) Rules, 2017.

An SFA-licensed valuer is called in for:

• Statutory share valuations. New share issuances, buy-backs, mergers, demergers and other restructuring schemes, and winding up, wherever company law requires an independent valuation.
• Fair value and liquidation value determinations for financial assets during corporate insolvency and liquidation proceedings under the IBC.
• SEBI-regulated matters involving listed companies: open offers and takeovers, delisting, and employee stock schemes.
• Cross-border share pricing under FEMA and RBI regulations.

Valuations use the Income Approach (Discounted Free Cash Flow) on a going-concern basis, with the cost of equity derived from CAPM. This is the same core methodology used across investment banking and private equity. For preferential share allotments (Section 62(1)(c) of the Companies Act, 2013), it is applied under a specific statutory mandate: Rule 13(1) of the Companies (Share Capital and Debentures) Rules, 2014 requires a registered valuer's report before the price is fixed. Share buy-backs (Section 68) don't carry that same registered-valuer mandate under Rule 17 of the same Rules, which only requires the buy-back price and its basis to be disclosed. The same DCF approach is still applied there, both to ground a defensible price and to give the statutory auditor's solvency certificate something rigorous to rely on.

Work to date has been equity share valuations for unlisted private companies: the kind of valuation a founder or board needs for a funding round or a buy-back. For a funding round, the law requires it be certified by a registered valuer rather than done in-house. For a buy-back, a rigorous valuation isn't itself a legal mandate, but it's what a defensible price and the auditor's solvency certificate both rest on. Clients so far have included an AI-robotics hardware manufacturer and a software and data-analytics services company.