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February 6, 2025Consulting, Knowledge Base, Valuation

Mandatory Valuations Under SEBI Regulations – Requirement Guide

Valuation is a cornerstone in maintaining transparency, fairness, and compliance in financial transactions, particularly those governed by SEBI regulations. Registered Valuers play a critical role in conducting valuations for listed companies to ensure compliance with regulatory mandates. Below, we explore scenarios where SEBI explicitly requires valuations by a Registered Valuer:

1. Schemes of Arrangement

Regulated by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Regulation 37), valuations are mandatory for mergers, demergers, or amalgamations involving listed companies.

Requirement: Valuation of securities or swap ratio to ensure equitable transactions.
Valuer: A Registered Valuer provides the report to justify the Equity Share Swap Ratio and ensures fairness.
Additional Requirement: A fairness opinion from a SEBI-registered Merchant Banker is also mandatory.

2. Valuation for Real Estate and Infrastructure Trusts

SEBI mandates valuations under its REITs and InvITs Regulations, 2014.

Requirement: Initial valuation during listing, semi-annual valuations, and valuations for related-party transactions.
Valuer: A Registered Valuer under the Companies Act, 2013 or SEBI’s guidelines must perform these assessments.

3. Delisting of Equity Shares

Under the SEBI (Delisting of Equity Shares) Regulations, 2021, valuations ensure fairness in pricing during the delisting process.

Requirement: Determination of floor price and exit price based on SEBI’s pricing framework.
Valuer: Independent valuation by a SEBI-registered Valuer is mandatory to maintain compliance.

4. Valuation for Open Offers

The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 govern this.

Requirement: Determine fair value for shares of target companies with infrequent trading.
Valuer: A SEBI-recognized Registered Valuer ensures the fair pricing of shares in alignment with regulations.

5. Employee Stock Options and Sweat Equity Valuation

SEBI mandates valuations for ESOPs and Sweat Equity Shares under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

Requirement: Valuation of equity instruments or shares before issuance.
Valuer: Certified Registered Valuers must ensure compliance with SEBI standards.

6. Alternative Investment Funds (AIFs)

Valuation requirements under SEBI (Alternative Investment Funds) Regulations, 2012 aim to protect investor interests.

Requirement: Periodic valuations of portfolio investments to reflect their Equity Valuation accurately.
Valuer: Registered Valuers ensure adherence to valuation standards.

7. Valuation Under Insolvency & Bankruptcy Code

Fair Valuation Under the Insolvency and Bankruptcy Code

SEBI guidelines extend to companies undergoing insolvency resolution.

Requirement: Determination of fair and liquidation values under the Insolvency and Bankruptcy Code.
Valuer: Registered Valuers appointed under the IBBI framework are mandatory.

8. Mergers and Amalgamations

SEBI circulars govern valuations for corporate actions such as mergers and amalgamations.

Requirement: Valuation reports are essential for shareholder and regulatory approvals.
Valuer: SEBI requires Registered Valuers to justify the valuation of mergers and acquisitions.

Valuation Standards and Qualifications

SEBI mandates compliance with ICAI Valuation Standards or internationally accepted standards under the Companies (Registered Valuers and Valuation) Rules, 2017. The Registered Valuer must be certified by the IBBI and appointed under the Companies Act, 2013.

Why Choose ValuGenius?

At ValuGenius Advisor LLP – the Top valuation firm in Mumbai, we specialize in delivering exceptional valuation services for businesses and transactions governed by SEBI regulations. With a team of experienced chartered accountants in Borivali, we ensure transparency, compliance, and reliability.