A Listed Share Escapes the Registered Valuer Only When It Actually Trades

Section 62(1)(c) of the Companies Act, 2013 allows a preferential issue "if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed." Read alone, that reads as a blanket requirement, listed or not. Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 supplies the prescribed conditions, and immediately splits the two cases apart. Rule 13(2) routes a company whose shares are listed on a recognised stock exchange to "the provisions of the Act and regulations made by the Securities and Exchange Board," and routes everyone else to the Rules themselves.

Only the unlisted branch, Rule 13(2)(g), actually says "the price of the shares or other securities to be issued on a preferential basis... shall be determined on the basis of valuation report of a registered valuer." A proviso inserted into Rule 13(1) in 2016 makes the exclusion explicit for the listed side: "the price of shares to be issued on a preferential basis by a listed company shall not be required to be determined by the valuation report of a registered valuer." The Section 62(1)(c) mandate survives; the registered valuer drops out the moment SEBI's regulations pick up the pricing job instead.

What SEBI substitutes is not an appraisal. Regulation 164 of the SEBI (ICDR) Regulations, 2018 prices a preferential allotment of "frequently traded shares" at the higher of the volume-weighted average price for 90 trading days or for 10 trading days preceding the relevant date, a formula the January 2022 amendment tightened alongside the definition it depends on: "frequently traded shares" now means shares with turnover of at least 10 per cent of the total shares of that class during the 240 trading days preceding the relevant date, replacing the older 12-calendar-month test. No valuer, registered or otherwise, features anywhere in Regulation 164. But Regulation 165 exists specifically for the companies that formula can't reach: "where the shares of an issuer are not frequently traded, the price determined by the issuer shall take into account the valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies," and the issuer must submit "a certificate stating that the issuer is in compliance of this regulation, obtained from an independent registered valuer." That word "registered" is not original to Regulation 165; the SEBI (ICDR) (Amendment) Regulations, 2022, the same amendment that inserted Regulation 166A, separately inserted it into Regulation 165 too, closing what had briefly been a gap between an unlabelled "independent valuer" and a named registered one.

Regulation 166A itself pulls a registered valuer back in even for frequently traded shares whenever the allotment changes control or exceeds 5 per cent of post-issue diluted capital, requiring its own valuation report as an added floor on top of the VWAP price. The exemption Rule 13 grants is conditional the whole way through: it holds only as long as the market itself is generating a price SEBI trusts.

Income tax runs the same split under a different name. Rule 11UA(1)(c)(a) values a quoted share at "the lowest price of such share quoted on any recognised stock exchange" on the valuation date, or the last trading day before it, another pure market-price rule with no valuer role. But "quoted share or security" is itself a defined term under Rule 11U, and the definition is doing real work: a share "quoted on any recognised stock exchange with regularity from time to time, where the quotations of such shares or securities are based on current transaction made in the ordinary course of business." Everything failing that test is "unquoted," including a share that is formally listed but simply isn't trading. An unquoted share falls to Rule 11UA(1)(c)(b), the net asset value formula, or, at the assessee's election under Rule 11UA(2), a discounted cash-flow report from a merchant banker.

Consistent with Cross-Border Share Pricing: Why FEMA Doesn't Recognise a Registered Valuer, the professional named here is a merchant banker or Chartered Accountant, not a Section 247 registered valuer, though the NAV formula's own jewellery-and-artistic-work component reaches for a registered valuer specifically for that sub-item. Listing status is not the operative test anywhere in Rule 11UA. Genuine, regular trading is.

Regulation 8(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 prices an open offer at the highest of several inputs: the highest negotiated price under the triggering agreement, the volume-weighted average price paid by the acquirer over the preceding 52 weeks, the highest price it paid over the preceding 26 weeks, and, "provided such shares are frequently traded," the 60-trading-day VWAP. Where the target's shares are not frequently traded, Regulation 8(2)(e) hands the job to "the acquirer and the manager to the open offer," who must price it using "book value, comparable trading multiples, and such other parameters as are customary," the same vocabulary Regulation 165 uses, but assigned to the deal's own merchant banker rather than an independent valuer.

SEBI keeps a separate, discretionary reserve power under Regulation 8(16) to order a valuation "by an independent merchant banker... or an independent chartered accountant," on the acquirer's expense, again without ever naming a registered valuer. The SAST Regulations even define "frequently traded" on a different clock than ICDR does: 10 per cent turnover over the 12 calendar months preceding the announcement, not ICDR's 240-trading-day window. Three regimes, three different professionals, three slightly different thresholds for the same underlying question, of whether the market's own price can be trusted.

The SEBI (Delisting of Equity Shares) Regulations, 2021, as amended in September 2024, break the pattern above. Regulation 19A(1) sets the reverse book-building floor price at the highest of five components: 52-week and 26-week price benchmarks, the 60-trading-day VWAP "provided such shares are frequently traded," a valuation-parameter price for shares that are not frequently traded, and, critically, "adjusted book value... as determined by an independent registered valuer." That fifth component is not conditioned on illiquidity at all. It sits in the comparison for every voluntary delisting, PSUs excepted, whether or not the target's shares trade every day.

A frequently traded listed company delisting today gets a registered valuer's adjusted book value tested against its own market price as a matter of course, a genuine departure from the preferential allotment and open offer regimes above, where a liquid trading history is enough on its own to keep any valuer out of the room entirely.

Section 247 and the Companies (Registered Valuers and Valuation) Rules, 2017 draw no line between listed and unlisted anywhere in their text; Rule 1(3) applies to any valuation "required to be made... under the provision of the Act or these rules," full stop. The listed/unlisted split is entirely a downstream artefact, built separately into Rule 13, SEBI's ICDR Regulations, the SAST Regulations, Rule 11UA, and the Delisting Regulations, and each of those four regimes draws the line at a different place and hands the resulting work to a different professional: a registered valuer under Regulation 165, Regulation 166A, and Regulation 19A(1)(iii), or a merchant banker or Chartered Accountant under the SAST Regulations and Rule 11UA, the naming inconsistency mapped fully in Who Counts as a 'Valuer'? Six Statutes, Five Different Answers and rooted in the history covered in Why India Carved Out a Separate Profession Just for Valuation. What stays constant is the underlying test. A liquid, regularly traded listed share gets priced off the tape, not off anyone's opinion, in every regime checked here.

The registered valuer, or a professional doing recognisably the same job under a different label, comes back the moment that trading thins out, the deal crosses a control or dilution threshold, or, since September 2024, the company tries to leave the exchange altogether. None of that turns on the word "listed." It turns on whether the market is still actually pricing the share.