In a private deal you agree a price. In a regulated one you clear a floor
The valuation conversation in a transaction changes completely depending on whether anything about the deal is prescribed. Between two private parties, valuation is analysis in support of a negotiation and the parties are free to land where they like. The moment a listed company, a scheme before a tribunal, a minority shareholder or a non-resident counterparty enters the picture, a statutory formula appears, and its job is usually to stop you agreeing a price below a floor rather than to tell you what the business is worth. Confusing the two produces a valuation that is technically fine and commercially useless.
- Share exchange ratios for a scheme, and why two valuations of the same group can both be right
- Open offer pricing under the Takeover Code, including the change that took effect in January 2026
- Delisting floor price, reverse book building and the fixed price route
- Discounted cash flow against multiples against net asset value, and where premiums and discounts actually belong
The share exchange ratio, and what the tribunal is actually looking at
A merger, demerger or amalgamation carried out as a scheme of arrangement under sections 230 to 232 of the Companies Act 2013 does not have a price. It has a ratio: how many shares in the transferee company a shareholder of the transferor company receives. That ratio is supported by a registered valuer's report, and it is the document shareholders, creditors and the National Company Law Tribunal scrutinise.
Why the absolute values matter less than you expect
In a share exchange the two companies are valued on a consistent basis and only the relationship between the two numbers survives into the ratio. A methodology that pushes both valuations up by a similar proportion barely moves the ratio. This is why an exchange ratio report reads differently from a price opinion: the analysis concentrates on consistency of treatment between the two entities, and on the areas where a difference in approach would move the ratio rather than the level.
It is also why the most common ground of objection is not the value but the inconsistency: a forecast used for one company and a net asset basis for the other, a control premium applied on one side only, a surplus asset picked up in one valuation and ignored in the other.
Where a fairness opinion sits
Where a listed company is involved, the valuation report is typically accompanied by a fairness opinion from a merchant banker. These are different documents doing different jobs. The valuer produces the ratio; the merchant banker opines on whether the ratio is fair to the shareholders they are opining for. Neither replaces the other, and a fairness opinion that simply restates the valuer's conclusion without independent work is of little use to anybody.
Squeeze-out of a minority
Where an acquirer holds ninety per cent or more, section 236 permits the purchase of the remaining minority holding, and the price is determined by a registered valuer. This is one of the few places in Indian company law where a valuation directly displaces a shareholder's right to decline a price, which is why the valuation is scrutinised closely and why the independence of the valuer matters more here than almost anywhere else.
Selling a business rather than a company
A slump sale or business transfer moves an undertaking as a going concern for a lump sum consideration, without values being assigned to individual assets and liabilities. The valuation questions it raises are different from a share sale in three ways.
- The perimeter is negotiated, not given. Which contracts, employees, receivables and liabilities travel with the undertaking is a commercial decision, and each one changes the valuation. A valuation of a business transfer that does not open with a precise definition of what is being transferred is not usable.
- Working capital is a live term. In a share sale the balance sheet comes as it is. In a business transfer, the level of working capital included is negotiated, and a completion adjustment mechanism usually follows. Getting the normalised working capital wrong is a more common source of value leakage than getting the multiple wrong.
- The consideration has to be allocated afterwards anyway. The lump sum is not assigned to individual assets for the purposes of the transfer, but the buyer will have to allocate it across identifiable assets, including intangibles, when the acquisition is recognised in its accounts. That exercise is covered in Guide 4, and it goes far better when the underlying analysis was done at deal time rather than reconstructed months later.
Where an undertaking is transferred to a related party, or where the consideration is other than cash, expect the valuation to be examined rather than filed. Section 192 of the Companies Act requires the assets involved in a non-cash arrangement with a director or a connected person to be valued by a registered valuer, and the tax authorities have their own view on the arm's length nature of an intra-group transfer regardless of what the parties agreed.
Open offer pricing under the Takeover Code
Acquiring shares or control in a listed company beyond the prescribed thresholds triggers a mandatory open offer to the public shareholders, and the offer price is not negotiable. It is the highest of a set of parameters, which for frequently traded shares are:
- the price negotiated under the agreement that triggered the offer;
- the volume weighted average price paid by the acquirer and persons acting in concert for acquisitions during the fifty two weeks before the public announcement;
- the highest price paid for any acquisition by the acquirer and persons acting in concert during the twenty six weeks before the public announcement; and
- the volume weighted average market price for the sixty trading days before the public announcement.
The structure rewards planning. Acquisitions made in the months before a deal is signed do not disappear from the calculation, and a single high-priced creeping acquisition can raise the price payable to every public shareholder later.
Infrequently traded shares, and the change in January 2026
Where the target's shares are infrequently traded, market price cannot do the work and the price is determined by valuation, taking into account book value, comparable trading multiples and other customary parameters. Who performs that valuation changed at the start of 2026. The SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations 2025, gazetted on 3 December 2025, came into force on 2 January 2026 and replaced the previous independent merchant banker or independent chartered accountant with an independent registered valuer. A nine month transitional arrangement allows a valuation assignment already underway before that date to be completed by the previously eligible professional. Guide 1 covers the certifier question in full.
A separate carve-out applies to the disinvestment of a public sector undertaking involving a change of control, where the standard frequently traded parameters do not apply.
Change of control through a preferential allotment
Two different provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 require a registered valuer's report on a preferential issue, and they are routinely conflated.
- Regulation 166A applies where the preferential allotment results in more than five per cent of the post-issue fully diluted share capital going to an allottee or to allottees acting in concert, or is likely to result in a change of control. The valuation must address any applicable control premium.
- Regulation 163(3) separately requires a registered valuer's report where the preferential issue is for consideration other than cash. This is not a Regulation 166A trigger, and material that files it under 166A is wrong.
The pricing formula for a preferential allotment is covered in Guide 3.
One correction worth making, because it circulates widely: the relief that allows a stressed listed company to price a preferential issue off a shorter averaging window is a narrow provision for issuers meeting distress criteria, paired with an open offer exemption. It is not a general alternative pricing route for a change of control transaction.
Floor price, reverse book building, and the fixed price alternative
Taking a listed company private is the transaction where valuation and market mechanism collide most directly, because the floor price is only the start of the process rather than the outcome.
The floor price, under the general regime
In the general voluntary delisting framework the floor price is the highest of the volume weighted average price of the acquirer's own acquisitions over the preceding fifty two weeks; the highest price paid for any acquisition in the preceding twenty six weeks; an adjusted book value determined by an independent registered valuer on the basis of consolidated financial statements; and, for frequently traded shares, the volume weighted average market price over the preceding sixty trading days. Where the shares are infrequently traded, the price is instead determined by an independent registered valuer.
The adjusted book value component is the one that most often surprises acquirers. It is a formula rather than a judgement, and for an asset-heavy company with appreciated real estate on the books at historical cost it can sit well above every market-based parameter.
Public sector undertakings follow a separate regime
Amendments notified on 3 September 2025 introduced a distinct framework for the voluntary delisting of eligible public sector undertakings, including a fixed price process and its own valuation-based floor price mechanism. Those amendments did not change the floor price components of the general regime described above. If the target is a public sector undertaking, read the special provisions rather than the general ones.
Reverse book building
In the reverse book building route, public shareholders tender at prices of their choosing at or above the floor, and the discovered price is the one at which the acquirer reaches the threshold that allows delisting. The acquirer may then make a counter-offer in defined circumstances. The practical valuation point is that the floor is not the expected outcome. Shareholders tender with an expectation of a premium, and a valuation exercise that treats the floor as the likely clearing price will mislead the board about the cost of the exercise.
The fixed price route
A fixed price alternative to reverse book building was introduced as Regulation 20A by the SEBI (Delisting of Equity Shares) (Amendment) Regulations 2024, notified on 25 September 2024, for companies whose shares are frequently traded. The acquirer announces a price at least fifteen per cent above the floor, counter-offers are not available on this route, and the acquirer is bound to accept the shares tendered once the combined holding reaches the delisting threshold. The mechanism survived the September 2025 amendments and remains part of the current regulations.
For a board, the choice between the two routes is a valuation question dressed as a process question: the fixed price route buys certainty at a known premium, the reverse book building route risks an unknown one.
Three approaches, and the honest account of what each is good for
| Approach | Works well when | Fails quietly when |
|---|---|---|
| Income, usually discounted cash flow | The business has a forecastable cash profile, a management plan that has survived contact with reality, and a capital structure that is not about to change | The forecast was built for a fundraising rather than for a valuation, or the terminal value carries more than about three quarters of the answer, which is the point at which the exercise has become an argument about the growth rate |
| Market, comparable companies and comparable transactions | There is a genuine peer set, and the metric being multiplied is comparable across it after normalisation | The peers are chosen for their multiples rather than their comparability, or a transaction multiple carrying a control premium is applied to a minority stake without adjustment |
| Asset, net asset value and replacement cost | The business is asset-heavy, holding-company-like, loss-making, or being valued on a break-up basis | Applied to a services business whose value is people and customer relationships, where it produces a number that is defensible on paper and wrong in every commercial sense |
Where more than one approach is credible, run more than one. A reconciliation that cannot be explained is not a presentational problem, it is a signal that an assumption somewhere is doing more work than it should.
Control premium and marketability discount
These two adjustments are responsible for a large share of the arguments in Indian valuation practice, mostly because they are applied by habit rather than by reasoning. Two rules keep it straight.
- A control premium reflects what a controller can do that a minority holder cannot. Change the management, change the dividend policy, sell the assets, realise a synergy. If the valuation already assumes those actions in the cash flows, adding a control premium on top counts the same benefit twice.
- A marketability discount reflects the cost and delay of converting a holding into cash, not the fact that the company is unlisted as a general matter. It attaches to the interest being valued, not to the company. The size of a defensible discount depends on the exit route actually available, and a number picked from a study without reference to the specific holding is the easiest part of a report to attack.
Statutory contexts frequently constrain both. Where a regulation prescribes a pricing formula, the formula usually leaves no room for either adjustment, and where it requires the valuer to address control premium expressly, silence is not an option.
Where transaction valuations actually go wrong
The forecast came from the fundraising deck
A plan built to persuade an investor is not a plan built to value a business. It is usually the single largest source of error, and the fix is not to discount the forecast arbitrarily but to understand which line items were built bottom up and which were reverse engineered from a target.
The cap table was treated as simple
Preference shares with liquidation preferences, convertible instruments, outstanding options and anti-dilution protection all sit between enterprise value and what an ordinary shareholder receives. A valuation that divides equity value by the number of shares outstanding is wrong in any company that has raised institutional capital.
The valuation date drifted
The statutory date, the balance sheet date, the signing date and the completion date are usually four different dates. Statutory formulas prescribe theirs, and using the wrong one is a defect a reviewer can spot in seconds without engaging with the analysis at all.
Synergies were included on the wrong side
Acquirer-specific synergies belong to the acquirer. Including them in the value of the target hands them to the seller in the price. Whether they belong in a particular exercise depends on the basis of value the statute or standard requires, which is a question to settle before modelling rather than during negotiation.
Where to go next
1. Who Can Sign a Valuation Report in India, and When You Need One
The registered valuer regime, the three certifier lists that apply to the same transaction, and what changed between December 2025 and April 2026.
3. Valuation for Fundraising, Convertibles and ESOPs
Two separate pricing tests for a foreign-funded round, convertible instruments, the end of angel tax, employee stock options and sweat equity.
4. Valuation for Financial Reporting: Purchase Price Allocation, Fair Value and Impairment
Fair value and the three level hierarchy, purchase price allocation, contingent consideration, goodwill impairment and hard-to-value instruments.
5. Valuing Intangible Assets, Brands and Intellectual Property
Separating an intangible from goodwill, the four methods that do most of the work, and the settings outside an acquisition where the question arises.
Valuation Services
Back to the main page: which valuation you need, who can sign it, and how an engagement is put together.
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This page is general information, not professional advice. Company law, exchange control, securities regulation, tax law and the accounting standards that sit behind a valuation all change frequently, and several of them changed materially in 2025 and 2026. How any of it applies depends on your own facts. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.