Valuation report: when a startup needs a registered valuer
A valuation report states the fair value of shares or assets. Company law needs a registered valuer for preferential issues; FEMA accepts a CA.
Short answer
A valuation report is a document setting out the fair value of a company's shares, business or assets, prepared by a qualified valuer using recognised methods. Company law needs a registered valuer for preferential allotments, while FEMA pricing can be certified by a CA, merchant banker or cost accountant.
- Company law valuer
- Registered valuer under section 247
- FEMA valuer
- CA, SEBI-registered merchant banker or cost accountant
- Common methods
- DCF, net asset value, market comparables
When you need a valuation
Different laws trigger valuations for different purposes, and the same transaction may need more than one report, possibly by different valuers. The most common situations in a startup's life are these.
- Preferential allotment and private placement under section 62(1)(c) and rule 13
- Sweat equity shares, for both the shares and the IP or know-how
- Issue or transfer of shares to or from non-residents under FEMA pricing rules
- Share transfers where income-tax fair market value rules apply
- Mergers, demergers and schemes of arrangement
- ESOP fair value for accounting and perquisite tax
What the report contains
A valuation report states the purpose, valuation date, information relied on, methods used and the conclusion of value. Common methods include discounted cash flow, which projects future cash flows and discounts them to present value, net asset value based on the balance sheet, and comparisons with similar companies or transactions. Valuers must follow the applicable valuation standards and disclose assumptions and limitations. Reports are usually dated close to the transaction, because a stale valuation may not be accepted.
Why it matters for startups
After the abolition of angel tax, share premium is no longer taxed as income in the company's hands, but valuations remain essential for company law, FEMA and transfer taxes. Commission the report early in a round, align the valuation date with the expected closing, and make sure the valuer type fits every law that applies.
Related services
Sources
- Insolvency and Bankruptcy Board of India: registered valuers
- Reserve Bank of India: FEMA master directions
- India Code: official repository of central Acts
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is a valuation report needed for every share issue?
Not for every issue. A rights issue at any price usually does not need one under company law, but a preferential allotment does, and FEMA requires pricing support for issues to non-residents.
Can one valuation report serve both company law and FEMA?
Yes, if it is prepared by a person who qualifies under both, such as a registered valuer who is also a CA, and it addresses both purposes.
How long is a valuation report valid?
There is no fixed validity in the Companies Act, but it should be recent relative to the transaction date. Practice often treats reports older than a few months as stale.