Quick Summary
Company Valuation is the process of determining the fair value of a company using various methods like DCF, comparable company analysis, or asset-based valuation.
Company Valuation is required for various purposes including fundraising, mergers & acquisitions, ESOP issuance, sweat equity allotment, and regulatory compliance. In India, registered valuers must conduct valuations for certain transactions.
When Valuation is Required
- Issue of sweat equity shares
- Preferential allotment of shares
- ESOP pricing (for listed companies)
- Merger/demerger
- slump sale
- Transfer pricing
- Financial reporting
Valuation Methods
- DCF (Discounted Cash Flow): Based on future cash flows
- Comparable Company Analysis: Based on similar listed companies
- Precedent Transactions: Based on similar M&A deals
- Asset-Based: Based on net asset value
- Market Capitalization: For listed companies
Registered Valuer
- Registered with IBBI (Insolvency and Bankruptcy Board of India)
- Required for valuations under Companies Act
- Valuation report must be in prescribed format
- Valuation valid for specific period
Key Points
- Determines fair value of company
- Required for sweat equity, preferential issue
- Registered valuer mandatory
- Multiple valuation methods
- Valuation report format prescribed