By Mr. Vinay Goel, Hony Gen Secretary, Institution of Valuers | MD & CEO, IOV Registered Valuers Foundation
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 statutes 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 valuation services from the valuers. To begin with a coherent structure regarding the requirement of valuation, a uniform definition of valuers may be adopted that fits under all such statutes and laws. It also becomes pertinent that the profession comes under the regulatory purview and the valuers are bound by a uniform rule, 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 the 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 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 the regulatory framework and required education and training at the entry-level. However, these challenges bring opportunities along, whereas, the measure of success depends upon resilience and the will to respond. Thereby, the creation of this regulated valuation ecosystem is gaining preference amongst regulators, institutions, and Authorities like SEBI, etc.
Considering the importance of valuation and developing and regulating 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 NirmalaSitharaman during its 26th meeting held on 15th September 2022recognised 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, the valuation profession will surely move a step ahead toward the regulated profession and start attaining the confidence of the stakeholders.
Let’s hope that this ecosystem comprehends the mantra i.e. ‘’SabkaSaath, 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 the way forward.