Valuation ADVISORY

Company / Startup Valuation procedure means determining the fair value of a financial asset. Business Valuation practitioners generally conduct valuations of business in the form of tangible assets, intangible assets, intellectual property, financial assets, interests, common & preferred stock, and other securities such as employee stock option plans (ESOPs), partnership interests, warrants, private debt instruments, and other derivative products. Business Valuation provides a business overview to assist clients with dispositions, mergers and acquisitions, restructuring, taxation planning & compliance, insolvency & bankruptcy, financial reporting, litigation, strategic growth planning, dispute resolution, etc. There are three classes of asset categories valuated by a registered valuer in India.

Main classes of Assets:

  • Land and Building
  • Plant and Machinery
  • Securities or Financial Assets

Valuations of securities or Financial Assets

  • Business Valuation of Assets recognizes the market equity value instruments, debt instruments, and derivatives issued by government agencies, financial institutions, and corporate organizations
  • It estimates and determines the appropriate interest rate or interest rates of the expected cash flows.
  • It drives the Valuations of Securities market equity value including liquidity, demand, and supply of similar instruments, stock market rates of similar securities, etc.

Valuation Services include

Business Valuation

  • Valuation of business interests
  • Tangible Assets Valuation
  • Intangible assets valuation, including purchase price allocation
  • Fairness opinions
  • Impairment Test
  • Share-based Payment Valuation

Valuation Advisory Services

  • Fair value measurements in financial reporting
  • Transaction Advisory
  • Fund portfolio valuation
  • Model design and risk assessment for financial instruments
  • Infrastructure / Project Finance Advisory
  • Project Finance Advisory
  • Debt Finance Advisory
  • Project bidding Advisory
  • Project feasibility Study
  • Project Transaction Advisory
  • Financial Modeling

Role of Registered Valuers post The Companies Act 2013, 2017 Rules

  • Through the Companies Act 2013 under section 246, the Startup Valuation shall be done as per provisions of the Act and by a Registered Valuer having the required qualification and experience.
  • Registered valuers provide a framework for the development and regulation of the profession of valuers and the manner of Business valuation, including valuation standards and a code of conduct for registered valuers.
  • From 1st February 2019 on wards valuation under the Companies Act 2013 and the Insolvency and Bankruptcy Code, 2016 needs to be conducted by a Registered Valuer registered with IBBI.

Key reasons for Company Valuation

There are several reasons and purposes for Business valuation, a few of which are mentioned below:

Sale of Business as a Going Concern: When a business is sold, it is more complex compared to other valuations of Assets classes. Company Valuation is required for negotiation while selling the business. The value at which the transaction is done is provided by the Registered Valuer.

Startup Valuation for Taxation Purposes: Business valuation of Assets is also required to be done to arrive at proper tax treatment. The Registered valuer needs to weigh the circumstances and resolve the disagreements between tax authorities and businesses in a way that it does turn out to be a legitimate purpose.

Company Valuation for Liquidation Purposes: Businesses are also valued for liquidation or winding up focusing to close down the business, realize all the assets and pay off all the creditors of the business. Registered valuer plays a very critical role to ensure that the creditors are getting their fair dues and there is the residue left for the owners as well.

Business Valuation for Mergers/Acquisition and Restructuring: Businesses are evaluated from an accounting perspective. Restructuring through takeovers, mergers & acquisitions, and amalgamations result in combination of financial statements and other operations of two or more existing companies into a single business. Most of the company restructure their business with an objective to bring most favourable, profitable segment, and cost-effective deal.

Startup Valuations

We understand that the startups business models are dynamic and a lot of things are evolving for the startups on day to day basis. Many of them may not be cash generating or have suitable comparable companies. In such a scenario, it would be very difficult to assign a value to the startup based on traditional methods.

We are highly active in the startup ecosystem and hence understand the various new methodologies that are being used for valuing the startups. We have discussed some of these methodologies in our insight posts.

How The Startup Trends helps?

  • Advisory for raising the valuation of equity or debt financing, including determining the equity value to be issued to the new partners or shareholders of an entity, or the valuation of equity splits at formation.
  • Evaluations of listed companies, unlisted companies, businesses, shareholdings, goodwill, know-how, brands, and other intangible assets.
  • Advisory for Joint Ventures / Associations on equity value splits at formation or exit in an independent role.
  • Support for litigation or arbitration, expert witness, and adjudication work in business valuation disputes.
  • Evaluation opinions for unquoted debt or equity value instruments and valuations for regulatory purposes e.g. Takeover Code, the Companies Act.
  • Investment decision analysis.
  • Maximizing tax benefits for individuals and businesses.
 
     
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