Understanding the financial worth of a company is important for business owners, investors, shareholders, and other stakeholders. Whether a company is raising funds, issuing shares, restructuring its capital, or planning a merger, an independent valuation can help establish a reasonable financial value. In India, registered valuers play an important role in specific valuation assignments governed by applicable legal and regulatory requirements.

A professional Business Valuation provides an assessment of a company's economic worth based on its financial performance, assets, liabilities, market position, and future prospects. However, the reliability of the report depends on the valuation purpose, methodology, supporting documents, and professional qualifications of the person conducting the assignment.

Who Is a Registered Valuer in India?

A registered valuer is a professional registered under the Companies (Registered Valuers and Valuation) Rules, 2017, framed under Section 247 of the Companies Act, 2013. Registered valuers are authorised to undertake valuation assignments covered by the applicable provisions.

Registration is granted for specified asset classes, including:

• Land and building

• Plant and machinery

• Securities or financial assets

A registered valuer must meet the prescribed eligibility requirements, including relevant qualifications, experience, examination requirements, and other applicable conditions.

The Insolvency and Bankruptcy Board of India (IBBI) is the authority responsible for regulating registered valuers under this framework.

Why Is a Registered Valuer Important for Business Valuation?

An independent valuation can help companies and investors make decisions using a structured assessment rather than relying only on internal estimates.

The role of a registered valuer is particularly important where the law specifically requires valuation by a registered professional.

Key benefits include:

1. Independent Assessment

A registered valuer evaluates the relevant financial and commercial information objectively. This can help reduce the influence of personal expectations or internal business interests on the estimated value.

2. Regulatory Compliance

Certain transactions under the Companies Act, 2013, require valuation reports from registered valuers. Engaging an eligible professional helps companies address these statutory requirements.

3. Better Financial Decisions

Valuation information can help directors, shareholders, and investors understand the company's financial position before making important decisions.

4. Transparency in Transactions

An independent valuation report can provide a documented basis for share pricing, restructuring, and other corporate transactions, subject to the applicable legal framework.

5. Investor Confidence

Investors may use valuation reports as one source of information when assessing a company's financial position, growth potential, and proposed investment terms.

Legal Framework Governing Registered Valuers in India

The registered valuer framework is mainly governed by Section 247 of the Companies Act, 2013, and the Companies (Registered Valuers and Valuation) Rules, 2017.

Section 247 of the Companies Act, 2013

Section 247 provides for valuation by registered valuers where valuation is required under the Companies Act. It establishes requirements relating to the appointment, conduct, and responsibilities of valuers.

A registered valuer must exercise due diligence, make an impartial assessment, and comply with the prescribed valuation standards and applicable rules.

Companies (Registered Valuers and Valuation) Rules, 2017

These rules prescribe the eligibility, qualifications, experience, registration process, professional conduct, and other requirements for registered valuers.

They also establish the framework for professional oversight and disciplinary action in cases of non-compliance.

Applicable Valuation Standards

Registered valuers must follow the valuation standards prescribed or recognised under the applicable framework. The valuation approach should be appropriate for the asset, company, transaction, and purpose of the assignment.

When Is a Registered Valuer Required?

A registered valuer may be required for specific transactions under the Companies Act, 2013, and other applicable legal provisions.

Common examples include:

1. Valuation During Corporate Restructuring

Companies undertaking certain restructuring arrangements, mergers, or amalgamations may require valuation reports to support the proposed transaction and relevant approvals.

2. Valuation for Preferential Allotment

A company issuing shares through a preferential allotment may need valuation support under the applicable provisions of company law and securities regulations. The precise requirement depends on the company type and transaction.

3. Valuation for Non-Cash Consideration

When shares or securities are issued for consideration other than cash, valuation may be required to establish the value of the consideration and securities, depending on the applicable provisions.

4. Valuation During Corporate Insolvency

Valuation is also important in insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. Separate eligibility and regulatory requirements may apply to registered valuers appointed for insolvency assignments.

5. Valuation of Shares and Securities

Certain company law transactions involving shares or securities require valuation by a registered valuer. However, not every share transfer or investment transaction automatically requires a report under Section 247.

Methods Used by Registered Valuers

The appropriate valuation method depends on the nature of the company, its financial information, the valuation purpose, and applicable standards.

Discounted Cash Flow Method

The Discounted Cash Flow (DCF) method estimates value by forecasting future cash flows and discounting them to their present value. It is commonly considered for businesses with identifiable future cash flows and reliable financial projections.

Market Multiple Method

This approach compares the company with similar businesses or relevant market transactions. Financial multiples such as EV/EBITDA, price-to-earnings, and revenue multiples may be used where suitable comparable information is available.

Asset-Based Method

The asset-based approach estimates value by considering the company's assets and liabilities. It may be appropriate for asset-intensive businesses, holding companies, or situations where net asset value is particularly relevant.

A valuer may consider more than one method and explain why a particular approach is suitable for the assignment.

Documents Required for a Registered Valuation Assignment

The documents required depend on the company's business activities and the purpose of valuation. Generally, the following information may be requested:

• Certificate of Incorporation and company constitutional documents.

• Audited financial statements for the previous three to five years, where available.

• Latest provisional financial statements.

• Details of share capital and existing shareholding.

• Memorandum and Articles of Association.

• Details of assets, liabilities, and outstanding loans.

• Business plans and future financial projections.

• Details of major customers, suppliers, and contracts.

• Information about intellectual property and intangible assets.

• Details of ongoing litigation or contingent liabilities.

• Proposed transaction details and relevant agreements.

Complete documentation helps the valuer understand the business and evaluate the assumptions used in the report.

Responsibilities of a Registered Valuer

A registered valuer has professional responsibilities that must be followed throughout the assignment.

Maintain independence: The valuer should conduct the assignment objectively and disclose relevant conflicts of interest.

Exercise due diligence: Financial information, assumptions, and supporting documents should be reviewed carefully.

Select suitable methods: The valuation approach should be appropriate for the asset and the purpose of the assignment.

Prepare a reasoned report: The report should explain the valuation basis, methodology, assumptions, limitations, and conclusion.

Maintain confidentiality: Information obtained during the assignment should be handled according to applicable professional and legal requirements.

Follow professional standards: The valuer must comply with applicable laws, valuation standards, and the prescribed code of conduct.

How to Choose the Right Registered Valuer

Companies should carefully evaluate a professional before appointing them for a statutory or independent valuation assignment.

Consider the following factors:

1. Valid registration: Verify registration with the appropriate authority and confirm the relevant asset class.

2. Relevant experience: Choose a professional familiar with the company's industry and transaction type.

3. Technical expertise: Check their understanding of valuation methods, financial analysis, and applicable regulations.

4. Independence: Ensure there are no conflicts that could affect the assignment.

5. Clear reporting: Confirm that the professional can provide a detailed report explaining the valuation methodology and assumptions.

6. Professional reputation: Review relevant experience and the quality of previous assignments where appropriate.

Companies should also confirm whether a registered valuer is specifically required or whether another qualified professional is permitted for the particular transaction.

Conclusion

Registered valuers play an important role in India's corporate valuation framework. Their independent assessments help companies meet specific statutory requirements, support corporate transactions, and provide stakeholders with a structured understanding of financial value.

A properly prepared Business Valuation report should be based on reliable information, suitable valuation methods, and applicable professional standards. Businesses should identify the purpose of the assignment and confirm the legal requirements before appointing a valuer.

If your company needs valuation support for fundraising, share issuance, restructuring, mergers, or other corporate transactions, professional advisory assistance can help identify the appropriate valuation approach, documentation, and compliance requirements. Working with an eligible registered valuer where required can make the process more transparent and reliable.