The Hindu Business Line : Some say `fairness opinion' on share valuation unfair

A SECTION of corporate India is against any regulatory move that would mandate a `fairness opinion' on the share valuation made by a valuer in relation to amalgamations, acquisitions, mergers/demergers or buyback.

This stance comes even as the Government is yet to adopt the report on valuation principles for corporate assets and shares, submitted by an expert group headed by Mr Shardul S. Shroff, who is Managing Partner of Amarchand Mangaldas advocates and solicitors.

Fairness opinion from another expert is usually resorted to when justification is required on whether the values, quoted by the expert, represent true values of the company.

Speaking to Business Line, Mr Shroff held that there might be situations that necessitate a "fairness opinion" on the valuations submitted by a valuer.

A Federation of Indian Chambers of Commerce and Industry (FICCI) official said, "Obtaining a fairness opinion under all circumstances should not be mandatory since it amounts to questioning the work of an expert in that field." The official pointed out that valuation is a judgement based on subjective factors and interpretation.

However, the official held that in situations were valuations are challenged in some manner or the other by the shareholders or the management, it is advisable to resort to `fairness opinion' of another expert to justify whether the values quoted by the expert represent true values of the company or not.

"Before any decision on the issue of fairness opinion is reached, the issues must be deliberated on at various forums," FICCI official said. Valuation is an exercise of analysis and interpretation of a financial statement backed with practical appreciation of business affairs vis-à-vis economic scenario prevailing in the industry per se and country as a whole, FICCI said.

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