Valuation of underlying businesses and companies forms an integral part of any transaction including fundraising, divestment, merger and acquisitions, resolution of family or shareholder disputes, etc. Usually, the success or failure of any transaction is dependent on the valuation which is mutually agreeable to the parties involved.

Considering the importance of valuation, the government intends to develop and regulate valuation as a separate profession. It has introduced the Draft Valuers Bill, 2020 based on the recommendations of a Committee of Experts constituted by the Ministry of Corporate Affairs. It proposes to set up a National Institute of Valuers to register and regulate valuers. Further, it also proposes to set up a Valuation Professional Organisations and a Valuer’s Institute to conduct education programmes.


Currently, in the Indian context, for most of the transactions, valuation is warranted under various statutory laws such as the Companies Act, 2013 (Co Act), the Foreign Exchange Management Act, 1999 (FEMA), the Income Tax Act, 1961 (IT Act), laws under the Insolvency and Bankruptcy Board of India (IBBI) and the Securities and Exchange Board of India (SEBI). The qualification and the eligibility requirement to undertake valuation under these statutes also differs amongst Registered Valuer (RV) (with IBBI), Chartered Accountant (CA), Cost Accountant (CoA) and Merchant Banker (MB). For instance, a transaction like the issue or transfer of shares requires multiple valuation reports under various laws from different valuers, e.g. if an Indian private company issues compulsorily convertible preference shares (CCPS) to a non-resident investor, the valuation reports are required from (i) RV under the Co Act; (ii) CA or MB under the IT Act; and (iii) CA or CoA or MB under FEMA.

Further, there are pricing guidelines under various laws which put a cap or a floor on the value below/above which the transaction can be consummated. Say a transaction involves the transfer of CCPS of an Indian private entity from a non-resident to a resident. In such a transaction, a valuation report from a CA or CoA or MB is required under FEMA and the transaction can be done at a price, not more than the fair value as per the report. Also, a valuation report from a CA or MB is required under the IT Act and if the transaction is done at a price less than the fair value, then there shall be tax implications to the parties involved. Thus, such a transaction needs to be done exactly at the fair value as per the valuation report (issued by the same CA or MB) to comply with FEMA and avoid tax implications under the IT Act.

To streamline the valuation requirement under various laws, the government had come up with the concept of RV (currently governed by IBBI) in 2017 and in many cases, the valuation is now required to be issued by an RV, except in the IT Act and FEMA. As per the draft regulations issued by the RBI in August 2021, it is proposed that the valuation shall be undertaken by an RV in case of overseas investment. Hence, one could expect that there could be only one eligible valuer i.e., an RV who can issue valuation reports under various Indian statutes. This should help simplify the compliance requirements from a client’s perspective.

Also, the introduction of the Draft Valuers Bill, 2020 discussed above will benefit the valuation profession as it shall conduct qualifying examinations, protect the interest of the users, ensure standard quality of service and mandatory compliance with setting out valuation standards.

The author is Partner, BDO, a tax, accounting and advisory firm