Valuation Report for Startups

Registered valuer and Merchant banker valuation report


Registered valuer and merchant banker valuer valuation report are required when you issue equity or preference shares to the investors. A valuation report from a CA is required if you issue the shares to the foreign investors. There are two types of valuation reports.

  • Valuation report by a registered valuer required for issuing equity shares, CCPS or CCD required under companies act, 2013.
  • Valuation report by a Merchant Banker for income tax purposes
  • Valuation report by a Chartered Accountant for FCGPR when raising funds from a foreign investor.
Any kind of valuation report can be obtained in 4-5 business days. The cost for obtaining valuation report starts from Rs 25000. The details required are 5 year profit and loss and balance-sheet projections.

The difference between both the valuation reports are mentioned below:

Other details of the valuation report :

Valuation report by registered valuer and a  report by a Merchant Banker is required when issuing equity shares or preference shares under private placement. Valuation report is also required the companies raise investment from foreign shareholder. Valuation report is also mandatory for converting CCD to equity.

What kind of report is required and when?

Valuation report under Companies Act 2013 under section 42 for private placement of shares – Valuation from a Registered valuer required:

For any kind of private placement as per section 42 the details of valuer and valuation report have to be mentioned in the offer letter. The valuation report from the registered valuer is required in this case.

As per the companies act, the requirements for Private placement are as :

For the purposes of sub-section (2) and sub-section (3) of section 42, a company shall not make an offer or invitation. to subscribe to securities through private placement unless the proposal  has been previously approved by the shareholders of the company, by a special resolution. for each of the offers or invitations:

Provided that in the explanatory statement annexed to the notice for shareholders’ approval, the following disclosure shall be made:-

(a) particulars of the offer including date of passing of Board resolution;

(b) kinds of securities offered and the price at which security is being offered:

(c) basis or justification for the price (including premium, if any) at which the offer  or  invitation is being made;

(d) name and address of valuer  who performed valuation;

(e) amount which the company intends to raise by way of such securities;

(f) material terms of raising such securities, proposed time schedule, purposes or objects of offer, contribution being made by the promoters or directors either as part of the offer or separately in furtherance of objects; principle terms of assets charged as securities”

Valuation report under Income tax Act

For income tax purposes whenever company issues new shares or whenever there is a transfer of shares, the valuation report from a Merchant Banker is required if valuation is done on DCF technique . The rules and details of valuation are mentioned in Section 11UA of the act. If the valuation is done on book value then it can be obtained from a chartered accountant.

Valuation report for FCGPR filing under RBI when raising funds from foreign investors

Whenever new share are issued to the foreign investors or shares are transferred from Indian Residents to Non – Indian residents the valuation report from a Merchant banker or a chartered accountant is required for FEMA and for filing FC GPR.

We can assist to prepare the  report for your startup. The time taken to get a valuation report in India is 7 business days. the cost for registered valuer report is Rs 25000 and for merchant banker report is Rs 75000

Type of Activity

Valuation report form registered valuer under Companies Act 2013

Valuation report from Merchant Banker

Valuation report from a CA

Our comments

Raising of funds through private placement by Issuing Equity
Shares/preference shares

Yes, this is required as per the companies act 2013

Yes, this is required as per the income tax act

Not required

Generally, start-ups take only a report from Registered valuer.

Raising of funds by issuing equity shares through rights issue

Not required

Yes , required as per the income tax act. Not required if the valuation is done on NAV method

Not required

This is the best way to avoid valuation report expenses

Raising of funds through CCD i.e. convertible debentures

Not required if the CCD will be converted at the future valuation

Required if the conversion ratio is already decided when issuing the

Not required for issue.

Required when CCD are converted to equity shares

Not required

Convertible Notes

Not required at time of issue.

Required when convertible notes are converted into equity shares

Not required at time of issue.

Required when convertible notes are converted into equity shares

Not required

The start-up should be registered under start-up India scheme and
minimum amount to be raised from 1 investor should not be less than 25 lakhs

What kind of report does a startup need when raising a fund from investors?

Instruments to be Issued

Registered Valuer Valuation report

Merchant Banker valuation report


Equity shares through private Placement



Around Rs 1.5 lakhs for both the reports

Equity shares through rights issue

Not required

Not required if Valuation done through NAV method


CCD (compulsorily convertible debentures)

Required if the minimum price of conversion already decided

Not required. Required only on conversion

Rs 40000 for 1 report

CCPS (compulsorily convertible preference shares)


Not required. Required only on conversion

Same as above

Convertible notes

Not required

Not required


When raising the funds there are 3 authorities that can issue the report:

1) Valuation report from a Registered valuer under companies act, 2013 for issuing shares to investors

2) Merchant Banker valuation report under income tax act

We can assist you with preparing the report for raising funds.


Details Required to prepare the valuation report required under Companies Act 2013 from a registered valuer:

1Detailed description of the business model of the Company
2) What are the major risks in the business model of the Company?
3) Historical audited financial statements of the Company for past 2 financial years.
4) Financial statements of the Company till date
5) Financial projections of the Company for 5 years in MS excel-Income statement, balance sheet and cash flow statement.
6) Justification for the major assumptions used in the projections like sales growth, working capital and capex.
7) Details of any prior investment in the company and the valuation report forming the basis of the said investment.

8) Major competitors of the company-Both listed and unlisted.

9) Details of any recent funding in comparable companies, if  available.(Comparable company might be Indian or global)
10) Term sheet

Do I need a Merchant Banker report even if I am issuing shares to the existing shareholders?

No. If you are issuing the shares to the existing shareholders through rights issue, a Merchant Banker report is not required. Income tax authorities may still ask for the same.

What information do you need to prepare valuation report?

The information needed to prepare a valuation report are as follows:

  1. Nature of business
  2. Names of similar companies
  3. Financials till date
  4. Next 5 years projections
  5. Method to arrive at projections

Is Valuation report a good way to value company?

No. A valuation report can just be used as legal evidence for your valuation. The founders themselves have to arrive at the value and convince the investors of the same.

Why is Merchant banker report Needed?

As per the new rules the government has made it mandatory to get the share valuation done by the Merchant banker when a start-up issues the shares to the investors. This is to determine the fair value of shares. As per the new notification only Merchant bankers are allowed to give the valuation report. Earlier the CA’s were allowed to issue the same.

What methods are used by the Merchant Banker or registered valuer to conduct the valuation of the company?

There are different valuation models that can be used to value a company:

  1. Net Asset Value: In this method the total of assets is taken and the outstanding liability is subtracted from the same. This is most basic and easiest way to do a valuation. This method is most suitable for family and offline businesses where brand name is not important.
  2. Discounted Cashflow Method: This is the most common way to get the valuation done. In this method the future cashflows that is projections are considered for arriving at the valuation. To go though this valuation the projections, budgets and cashflow for next 5 years are prepared.
  3. Comparable company Analysis: In this method the merchant banker valuer identifies a similar company as yours and then conducts a valuation. This is also a commonly used method.


The cost to get a registered valuer report starts from Rs 25000/- and cost to get a merchant banker report starts from Rs 75000/-

Yes we will issue you a report signed by valuer registered under IBBI or sebi as the need may be.

After you submit the projections, financial statement and the details about your business it we take 10-12 business days to get the report.

No the valuation report is not required when issuing any instrument which is convertible at future valuation date.

Valuation is only required for private placement and not for rights issue.

The information required for preparing the Valuation report is:

  • Projection of profit and loss and balance-sheet for 5 years
  • Latest audited financials
  • Information about the business model

A CA if registered under IBBI as a registered valuer can issue the Valuation report. Its mandatory to have the IBBI certification for the valuation report.

There is no validity mentioned for valuation report in the Companies act 2013. But usually ROC requires the report which is not older than 3 months from the date of investment.

When issuing shares the date of valuation report should be prior to the board meeting date which proposes the issue of shares.

A valuation report is required from Merchant banker for income tax purposes. The valuation report from registered valuer is required under companies act 2013 for issue of shares.

The valuation report is mandatory for Private placement of Equity Shares and Preference Shares

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