{"id":3827,"date":"2026-08-29T17:10:42","date_gmt":"2026-08-29T11:40:42","guid":{"rendered":"https:\/\/valugenius.in\/blog\/?p=3827"},"modified":"2026-08-29T17:10:42","modified_gmt":"2026-08-29T11:40:42","slug":"related-party-transactions-why-valuation-matter","status":"publish","type":"post","link":"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/","title":{"rendered":"Related Party Transactions and Ind AS 24: Why an Independent Valuation Is Non-Negotiable"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row][vc_column][vc_column_text]<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#Related_Party_Transactions_and_Ind_AS_24_Why_an_Independent_Valuation_Is_Non-Negotiable\" >Related Party Transactions and Ind AS 24: Why an Independent Valuation Is Non-Negotiable<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#What_Counts_as_a_Related_Party_Under_Ind_AS_24_Quick_Refresher\" >What Counts as a Related Party Under Ind AS 24 (Quick Refresher)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#Why_These_Transactions_Get_So_Much_Scrutiny\" >Why These Transactions Get So Much Scrutiny<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#Where_Independent_Valuation_Actually_Fits_In\" >Where Independent Valuation Actually Fits In<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#RPT_Scenarios_Where_a_Valuation_Isnt_Optional\" >RPT Scenarios Where a Valuation Isn&#8217;t Optional<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#What_Goes_Wrong_When_Companies_Skip_It\" >What Goes Wrong When Companies Skip It<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#How_ValuGenius_Helps_You\" >How ValuGenius Helps You<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/valugenius.in\/blog\/related-party-transactions-why-valuation-matter\/#Final_Thoughts\" >Final Thoughts<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"Related_Party_Transactions_and_Ind_AS_24_Why_an_Independent_Valuation_Is_Non-Negotiable\"><\/span>Related Party Transactions and Ind AS 24: Why an Independent Valuation Is Non-Negotiable<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p>Related party transactions naturally bear a pricing risk. As the two parties are related, they are essentially the same family, therefore, the price is not determined through the competitive price mechanism available in a freely-operating market. That&#8217;s why these transactions are subjected to more rigid scrutiny by regulators, tax collectors, auditors and even minority shareholders in comparison to other items on a balance sheet. Disclosures are covered by Ind AS 24, but it doesn&#8217;t provide any rules for how such transactions should be priced to begin with.<\/p>\n<p>That gap is where corporate valuation becomes essential. Professional business valuation services turn a number that can be questioned into one that can be defended, and for related party transactions specifically, that distinction is often what separates a clean audit from a qualified one.<\/p>\n<p>[\/vc_column_text][vc_separator][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Counts_as_a_Related_Party_Under_Ind_AS_24_Quick_Refresher\"><\/span>What Counts as a Related Party Under Ind AS 24 (Quick Refresher)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Ind AS 24 casts a wider net than most people expect. It&#8217;s not just the obvious cases like a parent and its subsidiary. It also covers:<\/p>\n<ul>\n<li>Anyone with control, joint control or significant influence over the company, or who sits in its key management personnel (KMP), including KMP of the parent<\/li>\n<li>Close family of that person, meaning spouse, children, dependents, and children of a spouse or domestic partner<\/li>\n<li>Group entities: parent, subsidiaries, fellow subsidiaries, associates and joint ventures<\/li>\n<li>Any entity controlled or jointly controlled by a person already covered above<\/li>\n<li>Post-employment benefit plans set up for employees of the company or a related entity<\/li>\n<\/ul>\n<p>Companies usually get the first two right and completely miss the rest, especially the entities controlled by a director&#8217;s relative that don&#8217;t share a name or a logo with the parent company.<\/p>\n<p>[\/vc_column_text][vc_separator][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_These_Transactions_Get_So_Much_Scrutiny\"><\/span>Why These Transactions Get So Much Scrutiny<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The concern isn&#8217;t that related party deals are automatically dishonest. Most of them aren&#8217;t. The concern is that the usual checks on pricing, like two unrelated parties haggling until they land on a fair number, simply don&#8217;t apply. When the buyer and seller answer to the same person, there&#8217;s no natural pressure to get the price right.<\/p>\n<p>That gap is exactly where value can quietly move from one pocket to another. Profits get shifted to a lower-tax entity. A struggling group company gets propped up by an asset sale at an inflated price. A promoter&#8217;s private company buys a brand or a property from the listed entity at a number nobody outside the room can explain.<\/p>\n<p>Regulators know this pattern well. Until late 2025, SEBI&#8217;s materiality test for RPTs was a flat rule: whichever was lower of \u20b91,000 crore or 10% of consolidated turnover, which effectively capped every large listed company at the same number regardless of size. The LODR Fifth Amendment Regulations, notified in November 2025 and in force from mid-December 2025, replaced this with a genuine sliding scale under a new Schedule XII: 10% of turnover for companies up to \u20b920,000 crore, tapering down as turnover rises, with the ceiling now at \u20b95,000 crore for the largest companies instead of \u20b91,000 crore. The mechanics changed, but the intent didn&#8217;t: cross the threshold, and the transaction needs audit committee and shareholder sign-off before it can go ahead. The Companies Act separately asks for a special resolution once paid-up capital or transaction value crosses set thresholds under Section 188. And Ind AS 24 demands detailed disclosure of the transaction and its terms in the financial statements regardless. None of these frameworks tell you how to arrive at the price. That part is left to valuation, and that&#8217;s exactly the gap an independent valuer fills.<\/p>\n<p>[\/vc_column_text][vc_separator][vc_single_image image=&#8221;3823&#8243; img_size=&#8221;large&#8221; alignment=&#8221;center&#8221; style=&#8221;vc_box_shadow_border&#8221;][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Where_Independent_Valuation_Actually_Fits_In\"><\/span>Where Independent Valuation Actually Fits In<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Ind AS 24 itself doesn&#8217;t prescribe a valuation methodology. What it does is force disclosure, so if your related party transaction was priced at anything other than fair market value, that fact (and often the reason) has to show up in the notes to accounts. Auditors read those notes carefully, and so do analysts, rating agencies, and anyone doing due diligence before an investment or acquisition.<\/p>\n<p>An independent valuation gives you a few things a management estimate simply can&#8217;t:<\/p>\n<ul>\n<li><strong>Objectivity. <\/strong>The valuer has no stake in whether the transaction happens or at what price, so the number isn&#8217;t shaped by internal politics or a deal deadline.<\/li>\n<li><strong>A recognised methodology. <\/strong>Registered valuers work under ICAI&#8217;s Ind VS standards, so the approach and the assumptions follow a framework someone else can check, not a one-off internal model.<\/li>\n<li><strong>Defensibility. <\/strong>If the tax department or SEBI questions the pricing later, a documented, methodology-backed report is what stands between you and a penalty.<\/li>\n<li><strong>Audit comfort. <\/strong>Auditors are far more willing to accept a related party price when it&#8217;s backed by a third-party report rather than a management working note.<\/li>\n<\/ul>\n<p>None of this means the valuer&#8217;s number becomes gospel. Boards can still negotiate around it. But once there&#8217;s an independent report on file, everyone in the chain, from the CFO to the audit committee to the statutory auditor, has something credible to point to.<\/p>\n<p>[\/vc_column_text][vc_separator][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"RPT_Scenarios_Where_a_Valuation_Isnt_Optional\"><\/span>RPT Scenarios Where a Valuation Isn&#8217;t Optional<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In practice, these are the situations where we almost always see companies commissioning an independent valuation, and where skipping it tends to cause the most trouble later:<\/p>\n<ul>\n<li><strong>Transfer of business, assets or undertakings <\/strong>between group companies, including slump sales<\/li>\n<li><strong>Loans, guarantees or corporate deposits <\/strong>extended to related parties, where the interest rate needs to be shown as market-linked<\/li>\n<li><strong>Sale or purchase of shares <\/strong>between promoter entities, KMP, or group companies<\/li>\n<li><strong>Brand, royalty or licence fee payments <\/strong>made to a promoter group entity<\/li>\n<li><strong>Mergers, demergers or restructuring <\/strong>involving entities under common control<\/li>\n<li><strong>Lease or rental arrangements <\/strong>with a property owned by a director or relative<\/li>\n<\/ul>\n<p>Almost every one of these ends up in the RPT disclosure note, and almost every one of these is exactly what a tax officer or a minority shareholder&#8217;s lawyer will pull up first if they&#8217;re looking for something to question.<\/p>\n<p>[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Goes_Wrong_When_Companies_Skip_It\"><\/span>What Goes Wrong When Companies Skip It<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>We&#8217;ve seen a few patterns repeat themselves often enough that they&#8217;re worth calling out.<\/p>\n<p>The first is a transfer pricing dispute. When a related party deal isn&#8217;t backed by a valuation, tax authorities are quick to argue the price was set to move profit out of a higher-tax entity. Without a report to point to, the company is stuck defending a number with nothing more than an internal spreadsheet.<\/p>\n<p>The second is an audit qualification. Statutory auditors are increasingly unwilling to accept management&#8217;s own estimate of fair value for anything material. If there&#8217;s no independent backing, the auditor either qualifies the opinion or insists on one before signing off, which usually happens at the worst possible time, right before results are due.<\/p>\n<p>The third, and the one that gets the most attention publicly, is a shareholder or proxy advisory challenge. Institutional investors and proxy firms now routinely flag RPTs that look underpriced or overpriced relative to market comparables. A company with an independent valuation report can respond in a paragraph. A company without one ends up explaining itself at the AGM.<\/p>\n<p>[\/vc_column_text][vc_separator][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_ValuGenius_Helps_You\"><\/span>How ValuGenius Helps You<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>At ValuGenius, related party valuation work makes up a meaningful part of what we do, and it&#8217;s rarely a one-off exercise. It usually needs to hold up across the audit, the tax filing, and the boardroom conversation all at once. Here&#8217;s how we approach it:<\/p>\n<ul>\n<li><strong>Method selection that fits the transaction. <\/strong>A slump sale needs different treatment than a royalty arrangement or a share transfer between group entities, and we build the model around what the transaction actually is.<\/li>\n<li><strong>Documentation built for scrutiny. <\/strong>Every assumption is recorded and explained, so the report holds up whether it&#8217;s the statutory auditor, a tax officer, or a proxy advisor asking questions.<\/li>\n<li><strong>Independence, on paper and in practice. <\/strong>We&#8217;re not part of the deal, so the number reflects the transaction, not the outcome anyone in the room is hoping for.<\/li>\n<li><strong>Plain-language summaries. <\/strong>Boards and audit committees get a report they can actually read and defend, not one that only makes sense to another valuer.<\/li>\n<\/ul>\n<p>ValuGenius Advisors LLP is a Mumbai-based chartered accountant firm, and related party valuation is only one part of a broader corporate valuation practice. The same team handles<a href=\"https:\/\/valugenius.in\/esop-valuation-india.html\" target=\"_blank\" rel=\"noopener\"><strong> ESOP valuation<\/strong><\/a> for companies structuring employee stock plans, <a href=\"https:\/\/valugenius.in\/fema-valuation-foreign-investment.html\" target=\"_blank\" rel=\"noopener\"><strong>FEMA valuation advisory<\/strong> <\/a>for FDI and other cross-border transactions, and valuation support for demergers and acquisitions where group entities need a defensible number. If you&#8217;re evaluating valuation services in Mumbai, having that range of specialisations inside one accounting firm, rather than spread across multiple advisors, tends to make the process considerably simpler.<\/p>\n<p>If related party transactions are a recurring feature of how your group operates, and for most conglomerates and promoter-led businesses they are, it&#8217;s worth having a valuer on call rather than scrambling for one every time a transaction comes up.[\/vc_column_text][vc_separator][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;1\/2&#8243;][vc_column_text]<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Final_Thoughts\"><\/span>Final Thoughts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Ind AS 24 was never really about paperwork. It exists because related party deals sit outside the normal checks that keep pricing honest, and disclosure alone doesn&#8217;t fix that. An independent valuation is what actually closes the gap, giving auditors something to rely on, giving the board a number it can defend, and giving shareholders a reason to trust that value didn&#8217;t quietly move from the company to someone connected to it.<\/p>\n<p>[\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/2&#8243;][vc_single_image image=&#8221;3833&#8243; img_size=&#8221;large&#8221; alignment=&#8221;center&#8221; style=&#8221;vc_box_shadow_border&#8221;][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]If your related party transactions are still being priced on an internal working note, that&#8217;s the part worth fixing before your auditor, your tax officer, or your shareholders ask you to.<\/p>\n<p><strong>Need an independent valuation for a related party transaction? <a href=\"https:\/\/www.linkedin.com\/company\/valugenius\/\" target=\"_blank\" rel=\"noopener\">ValuGenius Advisors LLP<\/a><\/strong> works with audit committees and finance teams across India on exactly this. Reach out and we&#8217;ll walk you through what your specific transaction needs.[\/vc_column_text][vc_separator][\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_column_text] Related Party Transactions and Ind AS 24: Why an Independent Valuation Is Non-Negotiable Related party transactions naturally bear a pricing risk. As the two parties are related, they are essentially the same family, therefore, the price is not determined through the competitive price mechanism available in a freely-operating market. That&#8217;s why these transactions are [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3832,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16,47],"tags":[65,61,70,85,86],"class_list":["post-3827","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-valuation","tag-business-valuation-services","tag-esop-valuation","tag-fema-valuation-advisory","tag-ind-as-24","tag-valuation-services-in-mumbai"],"_links":{"self":[{"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/posts\/3827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/comments?post=3827"}],"version-history":[{"count":5,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/posts\/3827\/revisions"}],"predecessor-version":[{"id":3835,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/posts\/3827\/revisions\/3835"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/media\/3832"}],"wp:attachment":[{"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/media?parent=3827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/categories?post=3827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/valugenius.in\/blog\/wp-json\/wp\/v2\/tags?post=3827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}