Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Why valuation still matters
It justifies the price for the ROC filing, sets the floor/ceiling for foreign investment, and protects you in any future scrutiny.
Who can value it
A registered valuer or, for FEMA pricing, a merchant banker, using the Rule 11UA methods (DCF or NAV).
When and why a valuation is still required
Even with angel tax gone, a share valuation is needed at several points, so it’s worth knowing which rule bites when. For foreign investment, FEMA requires that shares be issued to a non-resident at or above a price set by an internationally accepted methodology, certified by a merchant banker or chartered accountant — the floor price. For a fresh issue under the Companies Act, a registered valuer’s report supports the price for the offer and the ROC filing. For income-tax purposes on issues to residents, Rule 11UA methods (NAV or DCF) underpin the price, and a DCF must rest on realistic, defensible projections rather than optimistic ones, because an inflated DCF is the kind of thing that draws scrutiny. A valuation is also wise whenever you set an ESOP exercise price or bring in a new investor at a stepped-up price. The valuer should be independent and appropriately registered, and the report should be dated close to the transaction. Keeping a current, methodology-appropriate valuation on file is cheap insurance that supports every filing and any future question. Match the type of report — merchant banker for FEMA, registered valuer for the Companies Act — to the transaction. Confirm the current rules, which have shifted in recent years.