Are Berkus and Scorecard Acceptable to a Professional Valuer?

These are real tools with a real function, covered in Startup Valuation Methods: Deal Heuristics vs. Fair Value Reporting. The question here is narrower: could a registered valuer, or a Chartered Accountant, use one to certify a number for a Companies Act filing, a Rule 11UA computation, or a SEBI-regulated valuation.

ICAI VS 103 sets out the Income, Market and Cost approaches as the recognised framework, each with named methods underneath it, covered in Valuation Approach vs. Valuation Method: What the Words Actually Mean.

• Income: converts future cash flows or income to a single present value. DCF sits here.
• Market: derives value from actual market prices or historical transactions, comparable companies or comparable deals.
• Cost: values an asset by what it would cost a market participant to recreate it, adjusted for obsolescence.

Berkus assigns fixed amounts to five qualitative factors. Scorecard and Risk Factor Summation adjust a peer-group average by a weighted checklist. None of the three discounts a cash flow, derives from an actual transaction, or prices a replacement cost. They do not sit inside any of the three approaches, which is a different thing from being a weak version of one.

As covered in Angel Tax Is Abolished. Rule 11UA Isn't, the menu is specific and closed. For residents, the net-asset-value formula or DCF. For non-resident investors, under the sub-rule added by CBDT Notification 81/2023, five more: the Comparable Company Multiple Method, the probability-weighted expected return method, the option pricing method, the milestone analysis method, and the replacement cost method.

Every one of those five is a recognised professional technique, most covered in the Startup Valuation Methods piece as part of the IPEV Guidelines. None is Berkus, Scorecard, or Risk Factor Summation. The rule did not forget these heuristics. It named a closed list of alternatives to DCF and NAV and chose not to include them.

ITAT and Delhi High Court rulings on Rule 11UA valuations establish a narrow protection: once an assessee has chosen a method from the Rule's own list, typically DCF or NAV, the assessing officer cannot override it with a different method from that same list unless the assumptions are shown to be patently erroneous or made in bad faith. Projections are judged against what was known at the time, not against how the company later performed.

That protection is doing real work, and it is anchored to the Rule's own list. It says which of the prescribed methods a taxpayer gets to pick. It is not a general endorsement of any method that seems reasonable. A valuation built on Berkus or Scorecard has no equivalent foothold, because no rule text names it in the first place.

Use them where they belong, and stop before the report. Berkus and Scorecard exist to give an angel investor and a founder a number to start negotiating from, before any product, revenue or audited balance sheet exists to build an Income or Market Approach on. That happens before a professional valuer is typically in the room.

The moment a number has to survive a Companies Act filing, an Assessing Officer's scrutiny or a SEBI-regulated process, switch frameworks entirely rather than dressing up the heuristic: DCF, comparable transactions, replacement cost, or where the transaction calls for it, calibration to a recent investment, scenario analysis, or the option pricing method.

A negotiating heuristic and a certified valuation are different documents, written for different moments in the same company's life. Only one of them is built to be challenged.