Equity Valuation, Valuation Certificate, Goodwill Valuation for Domestic & Foreign Companies

Valuation is the process of determining the current worth of an asset or a company; there are many techniques used to determine value. An analyst placing a value on a company looks at the company’s management, the composition of its capital structure, the prospect of future earnings and market value of assets.

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Types of Valuations

Business Valuation
Valuation of Shares
Valuation of intangibles like Goodwill, Brands, Trademarks, Copyright
Valuation of Immovable Property
Valuation of Stock
Valuation at time of Merger Acquisition

Requirement of Valuations under Companies Act 2016

Issue of new shares-Section 62 (1) (c)

 Valuation is required in case any company proposes to issue new shares (accept a rights issue to existing shareholders or to employees under ESOPs)

Non cash transaction with directors-Section 192 (2)

In the case of sale or purchase of any asset involving a Co. and the directors of the Co. or a person connected with the Director for consideration other than cash.

Compromises, Arrangements and Amalgamations -Section 230 (2) & (3) and Section 232

Valuation is required in case of mergers or amalgamations or compromise with creditors (such as in corporate debt restructuring).

Purchase of minority shareholding- Section 236

In case of acquiring 90% or more of the equity capital in a company, minority shareholding may be acquired at a valuation determined by the Registered Value.

Winding up of a company- Section 281 (1) (a) and Section 305 (2) (d)

Valuation of assets of the company prepared by the Registered Valuer is required in case of winding up, voluntarily or otherwise.

Documents Required for Valuation

  • Valuation means to determine what is current worth of an asset or company. Value may be determined by many techniques/methods like income approach,  Cost approach, market approach etc depending upon type of valuations required to be done.
  • The Cost Approach values intangible assets by accumulating costs that would currently be required to replace the asset.
  • The Market Approach values intangible assets by using prices paid in actual transactions. The transaction price, as a ratio of an asset attribute, such as revenues that is observable in both the market transaction and the subject intangible asset are used to derive a market multiple.
  • The income approach measures value by reference to the economic benefits expected to be received over the remaining useful economic life of the goodwill. This involves estimating the expected future, after-tax cash flows attributable to the brand then discounting them to a present value using an appropriate discount rate. Under the income approach, risks that are not already reflected in future cash flows must be considered in the discount rate.

The following persons will be eligible to apply for being registered as a valuer. For Financial Valuation – Chartered accountant, company secretary, cost accountant, retired member of Indian Corporate Law Service or any person holding equivalent Indian or foreign qualification as the Ministry of Corporate Affairs may recognize; and a Merchant Banker employing persons with above qualifications. For Technical Valuation – Members of Institution of Engineers (India), Institute of Architects etc.

  • Registered Valuer would be appointed by Audit Committee and its absence by Board of Directors

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