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 is blanket, listed or not.

Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 supplies the conditions and immediately splits the cases. Rule 13(2) routes a listed company to "the provisions of the Act and regulations made by the Securities and Exchange Board," and everyone else to the Rules themselves. Only the unlisted branch, Rule 13(2)(g), says the price "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: "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 valuer drops out the moment SEBI picks up the pricing job.

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 90-trading-day or 10-trading-day volume-weighted average price. The January 2022 amendment tightened the definition it depends on: frequently traded now means turnover of at least 10 per cent of the class over the preceding 240 trading days, replacing the older 12-calendar-month test. No valuer appears anywhere in Regulation 164.

Two provisions put one back. Regulation 165 covers the companies the formula cannot reach: where shares "are not frequently traded," the price "shall take into account the valuation parameters including book value, comparable trading multiples, and such other parameters as are customary," certified by "an independent registered valuer." The word "registered" is not original there. The same 2022 amendment that inserted Regulation 166A separately inserted it into Regulation 165, closing a gap between an unlabelled "independent valuer" and a named one.

Regulation 166A then reaches even frequently traded shares, requiring a registered valuer's report as an added floor whenever the allotment changes control or exceeds 5 per cent of post-issue diluted capital.

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. But "quoted share or security" is a defined term under Rule 11U, and the definition is doing the work: quoted "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."

A formally listed share that is not trading fails that test and is unquoted. It falls to the Rule 11UA(1)(c)(b) net asset value formula, or to a merchant banker's discounted cash-flow report at the assessee's election under Rule 11UA(2). Consistent with Cross-Border Share Pricing: Why FEMA Doesn't Recognise a Registered Valuer, the professional named is a merchant banker or Chartered Accountant, not a Section 247 valuer, though the NAV formula reaches for a registered valuer for its jewellery-and-artistic-work component specifically. Listing status is not the operative test anywhere in Rule 11UA. 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 the negotiated price, the acquirer's 52-week volume-weighted average price, its highest price over the preceding 26 weeks, and, "provided such shares are frequently traded," the 60-trading-day VWAP.

Where they are not frequently traded, Regulation 8(2)(e) hands the job to "the acquirer and the manager to the open offer," pricing on "book value, comparable trading multiples, and such other parameters as are customary." That is Regulation 165's vocabulary, assigned to the deal's own merchant banker rather than an independent valuer. SEBI keeps a discretionary reserve power under Regulation 8(16) to order a valuation "by an independent merchant banker... or an independent chartered accountant," again naming no registered valuer.

The thresholds do not even agree. SAST measures 10 per cent turnover over the 12 calendar months preceding the announcement; ICDR measures it over 240 trading days. Three regimes, three professionals, three clocks, one underlying question.

The SEBI (Delisting of Equity Shares) Regulations, 2021, as amended in September 2024, do not condition the valuer on illiquidity at all. Regulation 19A(1) sets the reverse book-building floor price at the highest of five components:

• The 52-week price benchmark
• The 26-week price benchmark
• The 60-trading-day VWAP, "provided such shares are frequently traded"
• A valuation-parameter price, for shares that are not frequently traded
• "Adjusted book value... as determined by an independent registered valuer" — unconditional

That fifth component sits in the comparison for every voluntary delisting, PSUs excepted, whether or not the shares trade every day. A frequently traded company delisting today gets a registered valuer's adjusted book value tested against its own market price as a matter of course. In the preferential allotment and open offer regimes, a liquid trading history is enough on its own to keep any valuer out of the room.

Stop screening for listing status and screen for liquidity instead. Then check which regime governs, because each names a different professional for the same job.

Section 247 and the Companies (Registered Valuers and Valuation) Rules, 2017 draw no listed/unlisted line 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 split is entirely downstream, built separately into Rule 13, ICDR, SAST, Rule 11UA and the Delisting Regulations, with the work handed to a registered valuer under Regulations 165, 166A and 19A(1)(iii), and to a merchant banker or Chartered Accountant under SAST and Rule 11UA, an inconsistency mapped fully in Who Counts as a 'Valuer'? Six Statutes, Five Different Answers and rooted in the history traced in Why India Carved Out a Separate Profession Just for Valuation.

A liquid share is priced off the tape. A thin one is priced off an opinion. The word "listed" decides neither.