The term ‘Valuation’ refers to the process and technology that valuers use to estimate the worth of any class of assets, be it land & building, plant & machinery, stocks & shares etc. Valuation of underlying businesses and companies forms an integral part of any transaction including fundraising, divestment, merger and acquisitions, resolution of family or shareholder disputes etc. Usually, the success or failure of any transaction is dependent on the valuation which is mutually agreeable to the parties involved.
Currently, in the Indian context, for most of the transactions, valuation is warranted under various statues and laws such as the Companies Act, 2013 (Co Act), the Foreign Exchange Management Act, 1999 (FEMA), the Income Tax Act, 1961 (IT Act), laws under the Insolvency and Bankruptcy Board of India (IBBI) and the Securities and Exchange Board of India (SEBI).
But there is a lack of coherency amongst these statutes & laws concerning the use of the valuation services from the valuers. To begin with a coherent structure regarding the requirement of valuation, the uniform definition of valuers may be adopted that fits under all such statutes and laws. It also becomes pertinent that the profession comes under regulatory purview and the valuers are bound by a uniform rules, standards and code of conduct to execute.
With the objective to streamline the valuation requirement, the government had come up with the concept of Registered Valuers (RVs) under framework of three-tier regulation where Registered Valuer Organisations (RVOs) are front line regulators governed by IBBI as the Authority under the Rules notified by Ministry of Corporate Affairs. Also, to ensure the accountability for the services provided by RVs, the mechanism of monitoring, grievance redressal and disciplinary action is being enforced through Valuation Rules, 2017.
Though it is evident that this period of five years was full of challenges and opportunities for all the stakeholders due to the transformation of this profession and demand for the professionals under IBC. The biggest of all challenges had been the imposition of regulatory framework and required education and training at entry level. However, these challenges bring opportunities along, whereas, the measure of success depends upon the resilience and the will to respond. Thereby, creation of this regulated valuation ecosystem is gaining preference amongst regulators, institutions and Authorities like SEBI etc.
Considering the importance of valuation and to develop and regulate valuation as a separate profession, the Government has also introduced the Draft Valuers Bill, 2020 based on the recommendations of a Committee of Experts constituted by the Ministry of Corporate Affairs. As per the draft regulations issued by the RBI in August 2021, it was also proposed that the valuation shall be undertaken by an RV in case of overseas investment.
Taking note of all these developments, another deliberation to ensure more effectiveness in this ecosystem is that recently The Financial Stability and Development Council (FSDC) under the chairmanship of Union Finance Minister, Hon’ble Nirmala Sitharaman during its 26th meeting held on 15th September 2022 recognised the need for utilisation of the services of Registered Valuers by all the Government Departments.
It appears to be heading in the right direction where the importance of valuation is not only gaining growth but also providing a solid foundation for creating a credible base of valuers. After the due implementation of this deliberation, valuation profession will surely move a step ahead towards the regulated profession and start attaining confidence of the stakeholders.
Let’s hope that this ecosystem comprehends the mantra i.e. ‘’Sabka Saath, Sabka Vikas or Sabka Vishwas’’ given by our beloved Prime Minister paving the way towards ‘’Atmnirbhar Bharat’’ to obtain 5$ trillion economy and accordingly guide the agenda for way forward.
Author Bio
It is rather surprising that some of us who qualified the FIRST Valuation course of the ICAI ( 2009 -2010) were NOT given accreditation in any of the forums.
Is one to believe that this three hundred hour program and an exam thereafter was not adequate to confer a certificate of REGISTERED VALUER on us? I sometimes wonder why? in fact, we should have been the FIRST lot to have been accredited by ALL FORUMS.