Valuations under SEBI Regulations

Navigating the Valuation Landscape: Exploring Methodologies for Valuation Solutions under the RBI Act – A Strategic Insight into Regulatory Compliance and Financial Precision.

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Valuations under SEBI Regulations

Enterslice provides best-in-class valuation services with the help of our competent and expert valuation advisors. Our valuation advisors have hands-on experience in providing valuation services for businesses in different domains. Enterslice's expert valuation advisors will use and combine multiple valuation methods, like discounted cash flow, income-based valuation methods, etc., to provide the best-in-class valuation service to you and your business needs. Significant and necessary procedures like tax computation, financial reporting, etc., will also be some of the tasks our valuation experts will look after. Enterslice's valuation experts are registered with the respective authorities and have the required educational qualifications. We are known to provide the best accounting and finance-related services as well. Hence, Enterslice is fully equipped to provide the best solution for all your business needs.

Overview of Valuation as per SEBI

The Security and Exchange Board of India has come up with guidelines for the valuation of securities. The standards state that the valuation is to be done by an IBBI-listed valuer who is accountable for making the valuation analysis. SEBI has delivered guidelines for the valuation of securities for numerous fields like- AIFs (Alternate Investment Funds), Mutual Funds, and Money Market and Debt Securities. In January 2023, SEBI discussed the need for a consistent approach to the valuation of an investment portfolio of Alternate Investment Funds. Subsequently, in June 2023, SEBI provided a standardized method for the valuation of AIFs' investment portfolios. The standardized method delivers for the way of valuation of AIF investment but also states the accountability of the manager of an AIF with respect to this valuation in track with the consultation paper on valuation by AIFs. 

Three Categories of Mutual Funds

Traded Securities

When securities, not including debt securities, are not traded on any stock exchange on the day of valuation, the value of that is the value at which it was traded in a specific stock exchange on the most recent day; it does not exceed more than 30 days.

Thinly Traded Securities

The thinly traded securities are further divided into two sections: equity-related securities and thinly traded debt securities. The standards established for non-traded securities will also apply to the valuation of thinly traded securities.

Non-Traded Securities

A security is supposed to be regarded as ‘Non-Traded’ if it hasn’t been traded on any stock exchange since 30 days before the day of valuation. Thinly traded standards are also applicable for securities falling in this category.

Sections of Valuation as per SEBI Rules

Section 163- Issuance of Shares

In case a company aims to make a better allotment of shares for consideration other than cash, the fair value of the possessions given as consideration will be determined by a valuer for physical assets and submitted to the stock exchange where the shares are listed.

Section 158- Conversion of Debt into Equity

In the case of alterable loans/debentures, if the lender has implemented the choice to convert debt into equity and the transformation price has been determined and established on guidelines issued as part of debt reformation, the price at which such transformation is done has to be qualified by two independent valuers of SFA.

Section 165- Shares not traded frequently

Where shares of an entity are not regularly traded, the price at which they are dispensed has to be fixed after valuation by a valuer for SFA. For better issuance of shares that are traded regularly, there is no need for a valuation.

Section 87C- Security Receipts and AIFs

Security receipts that are registered on a stock exchange must be valued by an independent valuer. PE funds, Venture Capital Funds, and Hedge Funds qualify as AIF. They must take a periodical valuation through a valuer for SFA.

Valuation of Mutual Funds as per SEBI Rules

Valuation methods for the three kinds of mutual funds are listed below-

Traded Securities

When a security (other than debt securities) is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the designated stock exchange, as the case may be, on the earliest prior day may be used as long as such date is not more than thirty days prior to the valuation day.

Thinly Traded Equity/Equity-related Securities

Thinly traded securities are those that are valued appropriately when the entire volume traded in a given month is less than 50,000 shares or when trading in equity/equity-related securities is less than Rs. 5 Lacs. Mutual funds may employ a stock exchange's identification of the "thinly traded" shares for the previous calendar month, provided that the exchange applies the requirements and publishes or distributes the necessary information along with daily quotations. If the share is not listed on the stock exchanges that provide such information, then it will be obligatory on the part of the mutual fund to make its own analysis in line with the above criteria to check whether such securities are thinly traded which would then be valued accordingly. The most recent trade price of an equity investment will be taken into account when valuing it, even if trading is halted for a maximum of 30 days. The asset management company or trustee will determine the value standards to be followed, and such standards will be established and recorded if an equity security is suspended for longer than thirty days.

Thinly Traded Debt Security

If there are no individual trades in debt security in marketable lots on the primary stock exchange or any other stock exchange on the valuation date, the security (except government securities) is deemed sparsely traded. The standards established for non-traded debt securities would apply to the valuation of a thinly traded debt security.

Valuation of Debt and Money Market Instrument

Securities with Residual Maturity of up to 91 Days

All money market and debt securities, including floating rate securities, with residual maturity of up to 91 days will be valued at the weighted average cost at which they are traded on the specific valuation day. When securities of this kind are not traded on a specific valuation day, they shall be valued on an amortization cost basis. Amortization cost basis is the procedure of establishing how much an asset or possession costs per term with adjustments.  The floating rate securities are also known as floaters and are a type of investment with interest payments that periodically adjusts itself based on established benchmarks. 

Securities with Residual Maturity of Over 91 Days

All money market and debt securities, comprising floating rate securities with residual maturity of over 91 days, will be valued at the subjective average price at which they are traded on the specific valuation day. When these kinds of securities are not traded on a particular valuation day, they are supposed to be valued at benchmark measure or at the matrix of spread over risk-free benchmark yield through a company or agency assigned for the same purpose of AMFI. AMFI is the Association of Mutual Funds in India, which is the association of all possession or asset management firms of SEBI registered Mutual Funds.

Securities not under the Current Valuation Policy

In case securities acquired by mutual funds do not fall inside the current outline of the valuation of securities, then such mutual fund shall report straightaway to AMFI concerning the similarity. Further, at the time of investment, AMCs shall confirm that the total contact in such securities doesn't exceed 5% of the total AUM of the scheme. AMFI has been counselled that the valuation agencies must guarantee that the valuation of such securities gets enclosed in the valuation structure within six weeks from the date of receipt of such indication from mutual funds.

Valuation of Non-Traded Securities

Based on the latest available balance sheet, Net Worth per share = [share capital + reserves (excluding revaluation reserves) – Miscellaneous expenditure and debit balance in P&L account] divided by no. of paid-up shares. The average capitalization rate for the business based upon either BSE or NSE data shall be booked and discounted by 75%. Only 25% of the industry average P/E shall be taken as capitalization rate. Earnings per share of the latest audited annual accounts will be considered for this resolution. The value as per the net worth value per share and the capital earning value calculated above shall be averaged and further discounted by 10% for ill-liquidity so as to arrive at the fair value per share. In case the ESP is negative, the ESP value of that year shall be taken as zero for arriving at capitalized earnings. In the case where the latest balance sheet of the company is not available within nine months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero in case an individual security accounts for more than 5% of the scheme's total assets, an independent valuer or a valuation advisor shall be appointed for the valuation of the said security.

Enterslice SEBI Valuation Services

At Enterslice, we provide expert advice on valuation services as per SEBI regulations. The services that we offer are listed below-

ESOP Valuation

When a company or a firm decides to make a preferential allotment of shares for consideration other than cash, the fair value of the assets given as consideration shall be calculated by a valuation advisor. Our valuation advisors will help determine the fair value of the assets precisely.

Debt Restructuring

If the creditor decides to convert the debt into equity in the company, then two valuation advisors will help calculate the fair value to help with debt restructuring.

Equity Share Rates Fixing

Enterslice’s competent valuation advisors will help a company fix prices of shares of equity after precisely evaluating the company. They also provide guidance for the steps after this.

Security Receipt valuation

Our expert valuation advisors will assist in valuing the security receipts that are listed on a stock exchange.

AIF valuation

Enterslice's proficient valuation advisors will help provide a periodic valuation of PE funds, hedge funds, etc., according to the norms directed by SEBI.

INVIT Valuation

According to SEBI, an Infrastructure Investment Trust or INVIT has to produce a half-yearly valuation report of assets held. A valuation advisor will help in achieving that without any error.

REIT Valuation

According to SEBI, real estate investment trusts or REITs need to produce a valuation report on a half-yearly basis. A valuation advisor will help in achieving this.

Tax compilation

Enterslice’s expert valuation experts will compile all the important taxes and keep track of the upcoming or previous taxes.

Financial Reporting

Our valuation advisors will also create a detailed financial report of your company to help with finding any revenue leakage, etc.

Compliance duties

A valuation advisor will keep a check on all the legal activities and help the business stay out of any legal trouble.

Who is an Independent Valuer?

An independent valuer is an individual whom the manager of an AIF appoints to compute the valuation of the investment portfolio of an AIF. The qualification required from an independent valuer is stated here. The independent valuer must not be associated with the manager in any way. They cannot be a benefactor or a representative of the AIF. The Independent valuer should have at least three years of practice and experience in the field of valuation of unlisted securities. The person should either be listed with the Insolvency and Bankruptcy Board of India (IBBI) and be a member of the ICAI (Institute of Chartered Accountants of India), ICSI (Institute of Company Secretaries of India), Institute of Cost Accountants of India, or CFA Institute or they are from a credit rating agency or a holding company registered with SEBI. 

Role of Managers in Valuation of AIFs

The manager and the significant organization personnel must verify that the independent valuer computes and carries out the valuation of the investments of the AIFS scheme from time to time through the steps specified by the panel. The manager will also be accountable for the true and fair valuation of the AIF investments. In case the identified policies and processes do not result in a fair and suitable valuation, the manager shall diverge from the recognized policies and measures in order to value the possessions or securities at a fair value and Document the foundation for such deviation.

Significant Facets of Valuation as per SEBI

Valuation of Securities with Option

The securities with put options shall be valued at the higher of the value obtained by valuing the security to final maturity and valuing the security to put option. In case there are multiple put options, the highest value obtained by valuing the various put dates, valuing to the maturity date, is to be taken as the value of the instruments.

Valuation of Securities with ‘Call’ Option

The securities with a call option shall be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to call option. In case there are multiple call options, the lowest value obtained by valuing the various call dates and valuing the maturity date is to be taken as the value of the instrument.


These trusts need to deliver a half-yearly valuation report of possessions held. An INVIT also needs to get this valuation completed once a year as part of compliance. A REIT or real estate investment trust needs to engage valuers for real estate. The valuers must compute the value of the possession or the assets of the trust on a half-yearly basis. The trust will announce the NAV of each trust unit based on the NAV.

Other Valuation Specifics as per SEBI Rules

Valuation of Suspended Security

In the case of trading in equity shares being restrained from trading on the stock exchange for up to 30 days, then the prior traded price would be taken into account for the valuation of those shares. If an equity share is restrained from trading in the stock exchange for more than 30 days, then the valuation committee will establish the valuation process and value. 

Valuation of Partly Paid-Up Equity

If the partly paid-up equity shares are traded in the market individually, then the same must be valued at the traded price. If they are not traded individually, then partly paid equity shares must be assessed at the underlying equity shares price narrowed down by the balance call money owed with liquidity discount proposed by the valuation committee. When the fully paid equity shares aren't traded for 30 days or more, then the same must be valued according to the valuation norms provided for non-traded shares.

Valuation of Interest Rate Swap

In the case of IRS contracts, counterparties agree to interchange streams of interest payments on the presumed value on a decided date. One party consents to pay floating, and another consents to pay a determined rate of interest. Floating rates are determined on the basis of some set benchmarks. The difference between the fixed and the floating interest payable/to be received on maturity of the contract is the current value of an IRS contract. 

Regulations for Valuation of Investment Portfolios of AIFs

Regulation 23(1)

The Alternative investment funds are supposed to provide investors with a proper description of the valuation process. They are also supposed to provide information related to the valuation methodologies used for valuing assets.

Regulation 23(2)

AIFs falling under Category 1 and Category 2 must conduct a valuation of their investments at an interval of 6 months with the help of an independent valuer. Given that the period can be elaborated up to one year if only 75% of the investors agree on it according to the value of their investments.

Regulation 27(1) (b)

A manager or a sponsor must be available to maintain all the records, which contain all the valuation policies along with the valuation process.

What if the Fair Value is Not Achieved?

The chance of deviation at each asset level is more than 20% between two consecutive successful valuations and can be up to 33% in a financial year. The manager of an AIF will let the stakeholders know about the details of the same. The information must include both general as well as explicit aspects, like fluctuations in the accounting practices, valuation method used, expectations, etc. Change in the methodology used to calculate the fair value can lead to an altered valuation and will influence the respective stakeholder of the AIF to reconsider their investment. The manager will be obliged to let SEBI and the investors know about the following-

  • Change in the valuation methodology.
  • Changes in the accounting practices.
  • Details about the influence of the above-mentioned factors in the valuation process.

Enterslice’s Mission to Success

Enterslice is well known for its customer-centric services. Client satisfaction has always been our number one priority. With 10000+ happy customers and 200+ successful valuation processes done by our valuation experts, Enterslice prides itself on being a one-stop solution for all your business needs. With 50+ offices in different regions and a team of 50000+ lawyers and CA, we deliver high-quality deliverables every time.

Triple ‘E’ Success Factor of Valuation Process


Our expert valuers are well-versed with the current trends in the valuation processes. They make sure they are updated with the latest tech and tools used in the process. Our valuation experts have a proven track record of providing best-in-class services wherever required.


Our valuation experts have hands-on experience in providing valuation services to 200+ businesses of different scales and domains. They use a variety of valuation techniques suitable for the type of assets they are valuing.


Our valuation experts provide personalized services as per the business's concerns. They make sure that every detail has been meticulously calculated without leaving any scope for error. With tailor-made packages, every requirement is met accordingly. 

Advantages of Hiring Enterslice’s Expert Valuers

There are many advantages of hiring Enterslice's valuation experts, as they can help a business understand how well it is doing in its industry, leading to greater knowledge of business performance and growth. A business progresses through many stages as it goes through its own lifecycle. With proper insight into the company's sales, a business will be able to set appropriate prices in the future. Our valuation experts make sure that they highlight the significance of a company's asset in the valuation report, which the stakeholders while reinventing the business. One of the most significant benefits is access to more investors after a successful valuation has been conducted.

Risks of Not Hiring a Valuation Expert

There are many risks associated with not hiring a valuation expert to conduct the valuation process. The technique used by the valuation expert has a direct impact on the valuation figure and report. Only with the help of an expert valuer will a business be able to determine the appropriate valuation method to use. If a business valuer does not have access to comparable statistics on sales data of similar companies, then there is a higher chance that the valuation figure may not be correct. An incompetent valuer may not have the appropriate knowledge and skillset required to conduct the valuation process. Without the help of an expert valuer who is registered with the appropriate authority, valuation can be a tough job. 

Factors Affecting Valuation

From location to physical premises, assets, business liabilities, etc., have an impact on the valuation of the business. Factors like weighted prediction of growth in business revenue, weighted prediction of company margin growth, changes in business’s debt-to-equity proportions, economic conditions in the business domain, and market fluctuations in different locations are some of the factors that can highly impact the valuation figures of a business. The revenue and the margin are the most significant variables that affect the valuation.

Frequently Asked Questions

The 25% rule of SEBI is that a publicly listed company must have a minimum of 25% shares held by the public in order to stay listed.

SEBI valuation of a company helps a business determine the value of their company's stock so that the investors can decide on further actions.

The frequency of valuation prescribed by SEBI is quarterly.

Regulation 23 SIF regulation by SEBI is that an AIF has the flexibility to choose valuation techniques for investment portfolios.

The role of SEBI is to regulate the Indian stock markets in an orderly manner.

SEBI regulations are practices that are put in place to inspect the function of the intermediaries of the primary and secondary markets.

A registered valuer or an IBBI certifier valuer can perform SEBI valuation.

Fee income comprised earnings from yearly fees or subscriptions, stock exchange listing fees contributions, and registration, renewal, and application income.

SEBI was formed to safeguard the stakeholders and the investors from any fraud or unfair practices.

SEBI is one of the most important figures in the financial market as it is responsible for regulating and monitoring the activities of the market. 


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