SM Advisory Services Private Limited

Business Valuation

As a business valuation firm/advisors, we carry out valuation of shares and business required for various purposes including for regulatory purposes.

Valuation is gaining its importance in recent times in Indian tax and regulatory landscape. Inbound investment provisions of FEMA require valuation as per Discounted Free Cash Flow Method (DCF), except for initial subscription towards share capital upon incorporation. DCF valuation is mandatory even for transfer of shares between Resident and Non Residents and vice-versa.

Similarly, outbound investment provisions also require valuation while subscribing to shares of overseas company at premium or discount. FEMA, does not prescribe any method for making overseas acquisition and hence choice of valuation method is left to valuer.

The Income tax provisions have undergone substantial changes in last few years leading to taxation of share premium received by company in excess of fair value. Of course, this provision does not apply to Non Residents making investment in Indian company. Further, in case of secondary transaction, the tax incidence crop up in the hands of purchaser if price per share is below its fair value. Thus, determination of fair value has assumed great significance in Indian taxation and regulatory environment.