"Get a valuation done" sounds like one instruction. In India it is several different instructions, because different laws recognise different valuers. A report signed by the wrong professional isn't a small defect — it can invalidate the transaction it was meant to support. Here is the map we wish every founder and CFO had pinned above their desk.
The three kinds of valuer Indian law recognises
- Registered Valuer (RV) — registered with the Insolvency and Bankruptcy Board of India under Section 247 of the Companies Act. For securities and financial assets, this is a specific registration an individual must earn by examination; it is not automatic for CAs.
- Category-I Merchant Banker — a SEBI-registered institution, required principally for income-tax valuations.
- Chartered Accountant — sufficient for certain FEMA pricing certificates and general advisory purposes.
Where each one is mandatory
| Purpose | Governing law | Who must sign |
|---|---|---|
| Further issue of shares (preferential allotment / private placement) | Companies Act — Sec 62(1)(c), Rule 13 PAS | Registered Valuer |
| Sweat equity shares | Companies Act — Sec 54 | Registered Valuer |
| Mergers, demergers & schemes (share exchange ratio) | Companies Act — Sec 230–232 | Registered Valuer |
| Non-cash transactions with directors; minority buyouts | Companies Act — Sec 192, 236 | Registered Valuer |
| Fair value & liquidation value in insolvency | Insolvency & Bankruptcy Code | Registered Valuers appointed by the RP |
| ESOP perquisite FMV at exercise (unlisted company) | Income Tax — Rule 3(8) | Category-I Merchant Banker |
| Receipt of shares below FMV (Sec 56(2)(x), Rule 11UA) | Income Tax | Depends on method — NAV formula, or merchant banker for prescribed methods |
| Issue/transfer of shares between residents and non-residents | FEMA (NDI Rules) | CA, Merchant Banker or Cost Accountant — internationally accepted methodology |
Note on "angel tax": Section 56(2)(viib) — the provision that taxed share premiums above fair value and drove years of DCF valuation disputes — was abolished by the Finance (No. 2) Act 2024. Valuation requirements for share issues under the Companies Act and FEMA still apply in full.
Why the same transaction often needs two reports
A fundraise from a foreign investor is the classic example: the Companies Act requires a Registered Valuer's report to justify the issue price, while FEMA sets a floor price certified under an internationally accepted methodology. One event, two frameworks, two compliance tests. A well-run process gets both from a coordinated team so the numbers reconcile — mismatched reports are a persistent diligence red flag.
Practical guidance
- Before commissioning any valuation, write down the section of law it must satisfy. The answer determines the valuer, the method and often the report format.
- Check the individual's IBBI registration (asset class: Securities or Financial Assets) — the register is public. A firm's brand is not a substitute for the signer's registration.
- Keep valuation dates tight to the transaction date. Stale reports invite questions from the ROC, tax officers and investors alike.
- If a transaction spans laws — ESOPs, cross-border rounds, mergers — sequence the reports so they tell one consistent story.
