Whenever issue or transfer of Equity Shares or Compulsory convertible instruments (CCD’s / CCPS etc.) of an Indian Company is taking place between Indian Resident and Non Resident, FDI Valuation gets triggered.
Similarly when an Indian Company acquires or transfers, Equity Shares in an Overseas Company, ODI Valuation gets triggered.
Under the RBI Law, FDI and ODI valuations are required to be submitted along with relevant forms for completing the share transaction. Under the Law, FDI price stands as the Minimum Price and ODI price stands as the Maximum Price for any such transaction from an Exchange Control perspective. Thus all FDI and ODI transactions require proper planning regarding value assessment to avoid any discrepancy in contractual understanding and fair value.
As per FDI guidelines, the fair valuation of shares must be carried out in accordance with any internationally accepted pricing methodology for the valuation of shares on an arm’s length basis, duly certified by a SEBI registered Merchant Banker or chartered accountant or, where the shares of the company are not listed on any recognized stock exchange in India. However, there are no such methodologies prescribed by RBI for ODI Valuation
As per RBI guidelines, for ODI transactions exceeding USD 5 Mn $ and for transactions pertaining to Swap of Shares, only a SEBI Registered (Cat-I) Merchant Banker is authorized to do such valuations.
It has not been clarified which internationally accepted pricing methodology should be adopted so valuer has to consider suitable valuation methodology as per facts of the case. It may be noted that erstwhile FDI pricing methodology stated DFCF as the only valuation method for unlisted companies. However as on date application of DFCF is not mandatory and any valuation methodology which is acceptable internationally may be considered and applied.
We have a specialized team which comes in a league of one of the best RBI Valuation & FDI Valuation Consultants and have carried out about 200 FDI and ODI Valuations. We assist our clients in discovering the value for its shareholders after validating the financial projections and doing the sanity check by applying other Valuation methodologies. We provide well-reasoned and defensive valuation reports for commercial purposes and Valuation certificates for regulatory compliance purposes. We have a dedicated team which looks into Foreign Direct Investment (FDI) and Overseas Direct Investment (ODI) transactions. Corporate Professionals has the experience and commitment necessary to provide practical and timely services as a FEMA Valuation Advisor in India.
