In India’s insolvency ecosystem, valuation is not a theoretical exercise—it directly determines whether a Corporate Insolvency Resolution Process (CIRP) succeeds or collapses into liquidation, and whether liquidation maximises value or destroys it.
Across CIRP and liquidation matters, I have consistently seen one truth:
i. Poor valuation leads to poor outcomes.
ii. Accurate valuation drives resolution, recovery, and credibility.
With increased judicial scrutiny and stakeholder awareness, valuation has become the central pillar of insolvency outcomes.
1. Valuation Is the Backbone of CIRP Decision-Making
Under the IBC framework, valuation impacts:
- determination of fair value and liquidation value
- CoC’s assessment of resolution plans
- reserve price benchmarking
- viability comparison between resolution vs liquidation
- negotiation leverage with resolution applicants
If valuation is flawed, the entire CIRP process becomes distorted.
Common issues seen:
- outdated or incomplete financial data
- unrealistic cash flow assumptions
- mechanical DCF models
- ignoring business continuity risks
- lack of sector-specific analysis
Such reports often fail before CoC, bidders, and courts.
2. Judicial Trend: Courts Are Closely Examining Valuation Reports
NCLT and NCLAT benches are no longer treating valuation as a “black box”.
Recent trends show scrutiny on:
- methodology selection
- assumption rationale
- data reliability
- independence of valuers
- consistency between valuation and resolution plan outcomes
In multiple cases, valuation reports have been challenged, rejected, or relied upon to set aside resolution plans.
Valuation today must be defensible, explainable, and well-documented.
3. Impact of Valuation on CIRP Outcomes
Overvaluation
- discourages genuine resolution applicants
- results in no bids or cosmetic bids
- leads to CIRP failure and liquidation
Undervaluation
- allows asset stripping at low prices
- invites litigation from stakeholders
- erodes creditor confidence
- exposes RP/Valuer to scrutiny
Balanced Valuation
- attracts serious bidders
- enables competitive resolution plans
- supports CoC decisions
- withstands legal challenge
4. Valuation in Liquidation: The Difference Between Recovery & Write-Off
In liquidation, valuation determines:
- reserve price
- auction strategy
- mode of sale (piecemeal vs going concern)
- success or failure of auctions
Common liquidation valuation failures:
- ignoring going-concern potential
- poor asset segmentation
- no market benchmarking
- unrealistic reserve prices
- lack of stakeholder consultation
This results in:
- multiple failed auctions
- steep price reductions
- value destruction
- prolonged liquidation timelines
5. Going Concern Valuation: A Missed Opportunity in Many Liquidations
IBC allows going-concern sales even in liquidation, yet many cases fail to explore this properly.
Accurate valuation can identify:
- viable business segments
- continuity value
- workforce & operational synergies
- better outcomes than asset-by-asset sale
Going-concern valuation requires business understanding, not just asset listing.
6. Valuation & Avoidance Transactions: A Hidden Link
Valuation plays a silent but critical role in:
- preferential transaction analysis
- undervalued transaction detection
- fraudulent trading claims
Weak valuation undermines:
- Sections 43–51 & 66 applications
- recovery prospects
- accountability enforcement
Strong valuation supports forensic conclusions and litigation outcomes.
7. What Stakeholders Expect from Valuation
CoC expects:
- credibility
- comparability
- clarity
Investors expect:
- risk-adjusted numbers
- sector realism
- downside protection
Courts expect:
- logic
- documentation
- transparency
Valuation reports today are not just financial documents—they are quasi-legal evidence.
8. What Makes an Effective Insolvency Valuation
An effective valuation in insolvency must include:
- multiple valuation approaches
- scenario analysis
- sensitivity testing
- clear assumptions
- business & asset segmentation
- explanation of risks and constraints
It must answer not just “what is the value?” but “why?”.
Conclusion: Valuation Decides the Fate of Insolvency Outcomes
Whether a company is resolved, liquidated efficiently, or stuck in endless litigation often comes down to one factor—valuation quality.
In 2025, insolvency valuation is:
- strategic
- scrutinised
- consequential
A strong valuation:
1. improves recoveries
2. attracts serious bidders
3. reduces litigation
4. strengthens CoC confidence
5. ensures regulatory compliance
A weak valuation does the opposite.
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Author Note
The author is a Registered Valuer (Securities & Financial Assets) and Insolvency Professional, with extensive experience in CIRP and liquidation valuations, going-concern sales, and distressed asset advisory. For any queries, you may reach out at: kritmassociates@gmail.com | Phone No: +91 99108 59116
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