Business Valuation in India: The Complete Regulatory Guide to DCF, NAV, IBBI and Merchant Banker Reports

Business valuation in India is not a voluntary exercise. Four separate regulatory frameworks — the Companies Act, 2013; the Income Tax Act, 2025; the FEMA Non-Debt Instruments Rules, 2019; and SEBI’s ICDR and LODR Regulations — mandate a formal valuation report for virtually every significant corporate transaction. Share transfers, fundraising rounds, mergers, ESOP grants, family restructurings, and IPO preparations all carry a valuation obligation, and using the wrong methodology or the wrong category of professional can make the transaction legally defective.

This guide covers everything a business owner, CFO, or promoter needs to know about business valuation in India — the applicable regulatory frameworks, the three valuation methods, who is authorised to sign each type of report, the valuation process, and how Marcken Consulting LLP supports companies across India. For city-specific regulatory addresses, sector analysis, and local market context, see our dedicated city guides linked at the end of this page.

1. The Four Regulatory Frameworks That Mandate Business Valuation in India

1.1 Companies Act, 2013 — Section 247

Any valuation required under the Companies Act — preferential allotment, mergers, demergers, buybacks, sweat equity, and court-sanctioned schemes under Sections 230–232 — must be conducted by an IBBI-registered Registered Valuer enrolled with a Registered Valuer Organisation (RVO) recognised by the Insolvency and Bankruptcy Board of India. A Chartered Accountant signing without IBBI registration is not compliant for these purposes. The Registered Valuer must also be independent of the company — the statutory auditor is explicitly excluded.

Under the Insolvency and Bankruptcy Code (IBC), the resolution professional in any insolvency proceeding must appoint a Registered Valuer to determine the fair value and liquidation value of assets — two separate computations both required by the IBBI Valuation Rules.

1.2 Income Tax Act, 2025 — Rule 57 (Formerly Rule 11UA)

The Income-tax Rules, 1962 and Rule 11UA ceased to apply from 1 April 2026, when the Income-tax Act, 2025 and the Income Tax Rules, 2026 came into force. The equivalent provision is now Rule 57 of the Income Tax Rules, 2026. Any valuation report dated after 31 March 2026 must cite Rule 57 — citing Rule 11UA on a post-March 2026 report is incorrect and may invite scrutiny at assessment.

Rule 57 governs the fair market value of unquoted equity shares for two distinct purposes:

• Rule 57(1) — NAV method: For resident-to-resident share transfers and for deemed income computations under Section 56(2) of the Income Tax Act, 2025, the FMV of unquoted equity shares is computed as: (Book value of assets − Book value of liabilities) × (Paid-up value per share ÷ Total paid-up equity capital). Immovable property is taken at stamp duty value; investments in listed securities at their quoted market price; investments in other unquoted companies at their own Rule 57 NAV. This computation may be signed by a CA or a Merchant Banker.
• Rule 57(2) — DCF method: For the issue of shares at a price above FMV, where the assessee opts for the DCF approach, the valuation must be performed by a SEBI-registered Category I Merchant Banker. A CA-signed DCF report is not accepted for this purpose.

1.3 FEMA Non-Debt Instruments Rules, 2019 — Rule 21

Any issue of shares to a non-resident (foreign direct investment) or any transfer of shares between a resident and a non-resident requires a valuation report under Rule 21 of the FEMA Non-Debt Instruments Rules, 2019. The report must be signed by a SEBI-registered Category I Merchant Banker using an internationally accepted pricing methodology — the Discounted Cash Flow method is the standard approach. A CA signature is not accepted for FEMA valuations under any circumstances.

The valuation report must be dated at or close to the pricing date and must accompany the FC-GPR filing through RBI’s FIRMS portal within 30 days of the share allotment. There is no minimum threshold below which this requirement does not apply — the quantum of the foreign investment does not affect the valuation obligation.

1.4 SEBI ICDR and LODR Regulations

Listed companies and IPO-bound companies need valuation reports for preferential allotments, share swap arrangements, and restructuring under the SEBI ICDR Regulations, 2018. Pre-IPO valuations are used to determine the issue price band, to price any preferential allotments made in the 12 months before the DRHP, and to set ESOP exercise prices ahead of the lock-in period. The signing authority depends on the specific provision under which the valuation is required — either an IBBI Registered Valuer or a SEBI Merchant Banker.

2. The Three Valuation Methods Used in Indian Business Valuations

The methodology used in any valuation is determined by the regulatory framework governing the transaction — not by client preference or practitioner convenience. The three primary methods, and when each is prescribed, are:

2.1 Discounted Cash Flow (DCF / FCFE)

The DCF method values a business by projecting its future free cash flows to equity (FCFE) and discounting them to the present at the cost of equity. It is the mandatory method for:

• FEMA valuations under Rule 21 of the NDI Rules (all FDI and ODI transactions)
• Rule 57(2) income tax valuations where the DCF option is elected
• Pre-IPO and investor-facing valuations where commercial credibility is required

A correctly built DCF model includes: revenue projections (with stated assumptions), EBITDA and FCFE computation, working capital build, maintenance and growth capex, cost of equity derived from the Capital Asset Pricing Model (risk-free rate + beta × equity risk premium), terminal value, and a sensitivity analysis on key assumptions. All inputs must be sourced and documented. Marcken Consulting LLP builds all DCF models to the ICAI Valuation Standards, using market-sourced risk-free rates and sector-specific beta derived from listed peer data on BSE and NSE.

2.2 Net Asset Value (NAV)

The NAV method — codified in Rule 57(1) of the Income Tax Rules, 2026 — values unquoted equity shares on the basis of the company’s adjusted book value. The formula prescribed is:

FMV per share = (A + B + C + D − L) × (PV ÷ PE)

Where A = book value of assets; B = immovable property at stamp duty value (in place of book value); C = listed investments at quoted market price; D = other unlisted investments at their own Rule 57 NAV; L = book value of liabilities; PV = paid-up value of shares being valued; PE = total paid-up equity capital. NAV is the mandatory method for:

• Resident-to-resident share transfers under Rule 57(1)
• Gift transactions involving unquoted equity shares
• Floor-price computations for allotments where both parties are residents

2.3 Comparable Company Multiple (CCM)

The CCM approach values a business by applying valuation multiples derived from listed peers to the subject company’s own financials. Common multiples include EV/EBITDA, EV/Revenue, Price/Earnings, and Price/Book — the appropriate multiple depends on the sector. CCM is not standalone mandatory under any regulatory framework but is standard as the cross-check or co-primary method alongside DCF in Registered Valuer and Merchant Banker reports. A weighted average of DCF and CCM (e.g. 60:40 or 70:30) is the typical structure in a multi-method investor valuation report. The peer selection and the applied weights must be documented and justified.

3. Who Can Sign a Business Valuation Report in India?

This is the single most consequential question in any valuation engagement. The signing authority is determined entirely by the regulatory framework governing the transaction — not by who is most accessible or most convenient. Using the wrong signatory makes the valuation legally defective and can invalidate the underlying transaction.

Regulatory Framework	Purpose	Required Signatory	Method
Companies Act, 2013 — Section 247	Mergers, demergers, preferential allotment, buyback, sweat equity, NCLT schemes, IBC fair value / liquidation value	IBBI-Registered Valuer (Securities or Financial Assets)	DCF, NAV, CCM or combination — as appropriate
Income Tax Act, 2025 — Rule 57(1)	Resident-to-resident share transfer, gift, deemed income computation	CA or Merchant Banker	NAV method only
Income Tax Act, 2025 — Rule 57(2)	Issue of shares above FMV where DCF option is elected	SEBI Category I Merchant Banker only	DCF method
FEMA NDI Rules, 2019 — Rule 21	FDI (issue to non-resident), ODI (acquisition by resident abroad), transfer between resident and non-resident	SEBI Category I Merchant Banker only	DCF (internationally accepted methodology)
SEBI ICDR Regulations	Preferential allotment, pre-IPO, share swap, ESOP for listed/IPO-bound companies	IBBI Registered Valuer or SEBI Merchant Banker depending on specific provision	As prescribed by the specific ICDR provision

IBBI Registered Valuer — What This Means

An IBBI Registered Valuer is a professional registered with the Insolvency and Bankruptcy Board of India under the Companies (Registered Valuers and Valuation) Rules, 2017. To be registered, the individual must hold a recognised professional qualification (CA, CFA, MBA Finance, or engineering degree for relevant asset classes), pass the IBBI Valuation Examination, have at least three years of relevant experience, and be enrolled with an IBBI-recognised RVO. The registration covers specific asset classes — Securities or Financial Assets (for equity share valuations), Land and Building, or Plant and Machinery. Marcken Consulting LLP holds IBBI registration for Securities or Financial Assets.

SEBI Category I Merchant Banker — What This Means

A SEBI-registered Category I Merchant Banker is an entity registered with SEBI under the SEBI (Merchant Bankers) Regulations, 1992, with a minimum net worth of ₹5 crore. Category I Merchant Bankers are the only category authorised to sign FEMA valuations and DCF-method income tax valuations. Marcken Consulting LLP coordinates all FEMA and Merchant Banker mandates through established panel Category I Merchant Banker relationships, while remaining the single point of accountability for the engagement.

4. When Is a Business Valuation Mandatory in India? — Complete Reference

Transaction / Situation	Mandatory?	Signatory Required	Method
Transfer of unquoted shares between residents at FMV or below	Yes — Rule 57(1)	CA or Merchant Banker	NAV
Gift of unquoted shares between residents	Yes — Rule 57(1)	CA or Merchant Banker	NAV
Issue of shares to a non-resident (FDI)	Yes — FEMA Rule 21	SEBI Category I Merchant Banker	DCF
Transfer of shares from resident to non-resident or vice versa	Yes — FEMA Rule 21	SEBI Category I Merchant Banker	DCF
ESOP grant — exercise price setting (unlisted company)	Yes — Income Tax Act, 2025	SEBI Category I Merchant Banker	DCF / FMV
ESOP exercise — perquisite valuation (unlisted company)	Yes — Income Tax Act, 2025	SEBI Category I Merchant Banker	DCF / FMV (within 180 days of exercise)
Merger or demerger — Companies Act scheme	Yes — Section 247	IBBI Registered Valuer	DCF + NAV + CCM as appropriate
Preferential allotment — unlisted company	Yes — Section 247	IBBI Registered Valuer	DCF + NAV as appropriate
Buyback of shares	Yes — Section 247	IBBI Registered Valuer	As prescribed
Sweat equity issuance	Yes — Section 247	IBBI Registered Valuer	As prescribed
IBC insolvency — fair value and liquidation value	Yes — IBC Valuation Rules	IBBI Registered Valuer	Fair value + liquidation value (separate)
Slump sale of a business undertaking	Yes — Income Tax Act, 2025	IBBI Registered Valuer or CA	FMV of undertaking
Pre-IPO valuation (SME or mainboard)	Recommended; mandatory for preferential allotments within 12 months of DRHP	IBBI Registered Valuer or Merchant Banker	DCF + CCM
Sale of business to strategic buyer (no regulatory trigger)	Not mandatory; strongly recommended	Any qualified valuer	DCF + CCM

5. The Valuation Process: What to Expect from Marcken Consulting LLP

A standard valuation engagement with Marcken Consulting LLP proceeds in five stages, with a typical turnaround of 5 to 7 working days for standard mandates from receipt of complete documents:

1. Scoping call (Day 1): We confirm the purpose of the valuation, the applicable regulatory framework, the valuation date, the required methodology, and the correct signatory category. This is confirmed in writing before any documents are requested. For ambiguous situations — where multiple frameworks could apply — we work through the specific facts to identify the correct treatment.
2. Document collection (Days 2–3): We issue a structured information required list covering: audited financial statements for the last 3 years; current-year provisional balance sheet and P&L; the MCA company master data sheet; existing business plans or management projections; and the transaction document (share transfer deed, term sheet, scheme draft, or resolution) specifying the valuation date and purpose. For FEMA mandates, the FC-GPR or foreign investment approval is also required.
3. Financial modelling (Days 3–5): We build the DCF or NAV working in Excel. For DCF, this includes revenue and margin projections, working capital build, capex schedule, cost of equity computation using CAPM, terminal value, and sensitivity analysis. For NAV, we apply the Rule 57(1) formula with adjustments for immovable property at stamp duty value and investments at their own computed FMV. All assumptions are sourced and documented in the working.
4. Report drafting (Days 5–6): The valuation report is drafted to ICAI Valuation Standards, comprising the mandate letter, scope and limitations, methodology rationale, key assumptions with sources, the computed value, sensitivity analysis, and the signed opinion of the Registered Valuer or Merchant Banker.
5. Delivery and filing support (Day 7): The final report is delivered in PDF. The working Excel is shared for the client’s auditor or legal team. Where required, we assist with attaching the report to MCA filings, FEMA submissions via FIRMS, SEBI ICDR filings, or NCLT scheme petitions.

6. Frequently Asked Questions on Business Valuation in India

Can my company’s statutory auditor sign the valuation report?

No. A company’s statutory auditor is explicitly prohibited from issuing a valuation report for that company under the Companies Act framework — the Registered Valuer must be independent. Under the income tax framework, a CA who is the company’s auditor under the relevant provision is similarly excluded. Independence is a hard requirement, not a preference.

What is the difference between an IBBI Registered Valuer report and a Merchant Banker report?

An IBBI Registered Valuer report is required for Companies Act purposes — mergers, demergers, preferential allotments, buybacks, NCLT proceedings, and IBC matters. A Merchant Banker report is required for FEMA transactions and DCF-method income tax valuations. The two are not interchangeable. Some transactions require both — for example, a merger involving foreign shareholders may need both a Registered Valuer report for the NCLT scheme and a Merchant Banker report for the FEMA leg. See our detailed comparison in Section 3 above.

Does Rule 11UA still apply for share transfers in 2026?

No. Rule 11UA was part of the Income-tax Rules, 1962, which ceased to apply from 1 April 2026 when the Income-tax Act, 2025 and the Income Tax Rules, 2026 came into force. The equivalent provision is Rule 57 of the Income Tax Rules, 2026. The NAV formula is substantially the same but the rule citation must now read Rule 57. Citing Rule 11UA on a report dated after 31 March 2026 is incorrect and may invite scrutiny at assessment.

How long is a valuation report valid?

There is no single universal validity period. For FEMA valuations, the report must be dated at or near the pricing date — generally not more than six months before the transaction. For income tax purposes under Rule 57, the report should reflect the balance sheet as of the valuation date and be issued contemporaneously with the transfer. For Companies Act purposes, the report should reflect the position as of the record date specified in the scheme or resolution. A valuation report is not a standing document — it is tied to a specific date and a specific transaction.

What documents are needed to start a valuation engagement?

The minimum requirements for a standard engagement are: audited financial statements for the last three years; a provisional balance sheet and P&L for the current year; the MCA company master data sheet (from MCA21 portal); any existing management projections or business plan; and the transaction document specifying the valuation date and purpose. For FEMA mandates, the FC-GPR or foreign investment approval is also required. Marcken Consulting LLP provides a structured information required list tailored to each engagement at the start.

What does a business valuation cost in India?

Fees vary based on methodology (NAV-only being the most accessible; multi-method DCF + NAV + CCM the most comprehensive), signatory category (Merchant Banker-signed reports carry higher fees reflecting additional regulatory obligations), complexity (a single-entity company with audited accounts is straightforward; a multi-entity group or pre-revenue company requires considerably more work), and regulatory framework (FEMA mandates carry additional documentation requirements). Marcken Consulting LLP offers fixed-fee pricing agreed at the scoping stage, with no additions after the fee is confirmed. An initial scoping call — at no charge — is the fastest route to an accurate fee estimate for your specific transaction.

Can the valuation report be used for multiple purposes?

Generally, no. A valuation report is prepared for a specific purpose, on a specific date, under a specific regulatory framework. A FEMA report dated at a fundraising round cannot be used for a subsequent share transfer six months later. A Rule 57 NAV report prepared for an income tax purpose cannot be used to satisfy a FEMA requirement. Each triggering event requires its own report. Where multiple purposes arise simultaneously — for example, a FEMA fundraising and an ESOP grant at the same valuation date — a single comprehensive report can address both provided the methodology and signatory requirements for each are met.

7. Marcken Consulting LLP — Business Valuation Services Across India

Marcken Consulting LLP is a CA-led valuation practice with IBBI Registered Valuer status for Securities or Financial Assets, offering the full range of business valuation services accepted by the Income Tax Department, NCLT, RBI, and SEBI across India:

• DCF (FCFE) equity valuations for fundraising, FEMA, ESOP, and pre-IPO purposes
• Rule 57 NAV workings for resident-to-resident share transfers, gifts, and deemed income computations
• ESOP fair value computations under Ind AS 102 / IGAAP at grant and exercise
• Merger exchange ratio and swap ratio reports for NCLT scheme proceedings
• Slump sale and Purchase Price Allocation (PPA) valuations
• Ind AS 36 impairment testing for investments, goodwill, and CGUs
• Fund-level and portfolio company valuations for AIFs under SEBI AIF Regulations
• IRC Section 409A valuations for Indian-origin companies with US parent or subsidiary structures
• Price of Recent Investment (PORI) valuations for AIF portfolio reporting

All FEMA mandates and Merchant Banker reports are handled through established panel Category I Merchant Banker relationships, with Marcken Consulting LLP remaining the single point of accountability for the full engagement.

8. City-Specific Valuation Guides

For city-specific regulatory office addresses, sector analysis, local market context, and city-specific valuation scenarios, see our dedicated guides:

• Business Valuation Consultant in Ahmedabad — Gujarat: textiles, chemicals, pharmaceuticals, GIFT City, family businesses
• Business Valuation Consultant in Mumbai — Maharashtra: BFSI, NCLT, foreign investment, real estate, pharmaceuticals
• Business Valuation Consultant in Bangalore — Karnataka: technology, SaaS, GCCs, ESOP, foreign VC/PE investment
• Business Valuation Consultant in Delhi — Delhi NCR: trading, infrastructure, defence, real estate, technology
• Business Valuation Consultant in Chennai — Tamil Nadu: automotive JVs, pharmaceuticals, GCCs, port-linked exports

9. Key Regulatory References

• IBBI — Registered Valuer Directory
• RBI — FEMA Non-Debt Instruments Rules, 2019
• RBI FIRMS Portal — FC-GPR and FEMA Filings
• SEBI ICDR Regulations, 2018
• ICAI Valuation Standards
• MCA — Company Master Data

Regulatory positions in this guide are as published by the relevant Indian regulatory authorities as at September 2026 and are confirmed at the date of filing. This guide is general information, not investment, legal or regulatory advice.