Merchant Banker Valuation and Certification — When a Registered Valuer Is Not Enough

A company completes a valuation for a share issue, files the report, and the filing is rejected. The valuation was competent, the methodology sound and the valuer properly registered. It was simply the wrong professional. Where a non-resident subscribes, the foreign exchange framework requires certification by a specified category of professional, and a registered valuer report does not satisfy it.

This is the single most common structural error in Indian transaction compliance. Two parallel regimes require valuation — company law through registered valuers, and the securities and foreign exchange framework through merchant bankers and specified certifiers — and they do not recognise each other's outputs. A transaction that engages both needs both, obtained in the right sequence.

N D Savla & Associates advises on which certification a transaction actually requires, prepares the underlying analysis, coordinates with merchant bankers where their certificate is mandatory, and handles the reporting filings that follow. We work with companies across Mumbai, Navi Mumbai, Thane and Goa on transactions that cross both regimes.

Who Is a Merchant Banker and What Do They Certify?

A merchant banker is an intermediary registered with the Securities and Exchange Board of India under the regulations governing merchant bankers, carrying out issue management, underwriting, advisory and certification functions in the securities market. Registration is by category, with the highest category permitted to act as lead manager to an issue. For valuation purposes, the merchant banker's role arises where a regulation specifically requires their certificate rather than a general valuation. The recurring situations are:

• Pricing of issues and transfers of equity instruments involving persons resident outside India, where the price must meet a floor or ceiling on an internationally accepted pricing methodology
• Preferential allotment pricing for listed companies under the securities issue regulations, and the certification accompanying it
• Buyback of securities — offer price justification and the accompanying certifications
• Open offers under the takeover regulations, where the merchant banker acts as manager to the offer and certifies the offer price computation
• Delisting, where the floor price and the reverse book building process require certification
• Fairness opinions on the share exchange ratio in schemes involving listed companies
• Valuation and certification requirements in initial public offer documentation

Which Certificate Does a Transaction Need?

What Does the Foreign Exchange Pricing Requirement Actually Mean?

This is where most of the practical difficulty sits, and it is worth stating carefully. Where equity instruments of an Indian company are issued to a person resident outside India, the price may not be below a floor. Where they are transferred from a resident to a non-resident, the same floor applies; where transferred from a non-resident to a resident, a ceiling applies instead. The purpose is symmetrical — to prevent value leaving India cheaply and to prevent value being brought in at an inflated price.

For a listed company the floor is derived from market price under the applicable formula. For an unlisted company it is the fair value determined on an internationally accepted pricing methodology, valued on an arm's length basis, and certified by the professional the rules specify for that transaction. The phrase carries real weight: it is not satisfied by book value or by a formula, and it requires a defensible methodology of the kind used in commercial valuation.

The certificate is filed with the reporting form for the issue or transfer, and it is examined. A certificate from the wrong category of professional, or one whose methodology is not evident from the report, causes the FC-TRS or FCGPR filing to be queried or rejected — which matters because those filings run to statutory timelines and delay carries consequences.

How Did This Two-Track System Arise?

India ended up with two parallel valuation certification regimes because they were built at different times, by different regulators, for different purposes — and neither was designed with the other in mind.

The merchant banking track is older. Until 1992, the price at which an Indian company could issue shares was determined by the Controller of Capital Issues under the Capital Issues (Control) Act, 1947, applying prescribed formulae. When that office was abolished and the Securities and Exchange Board of India took over the public issue market on a disclosure basis, the responsibility for ensuring that pricing was defensible shifted to intermediaries. Merchant bankers were registered and regulated, and successive regulations — on issue of capital, on takeovers, on buybacks, on delisting — each built certification duties around them. The logic was that a regulated intermediary with reputational capital at stake is a more practical gatekeeper than a regulator reviewing every transaction.

The foreign exchange track developed alongside. Liberalisation opened investment routes but retained pricing discipline, initially through formula-based methods prescribed by the Controller of Capital Issues and carried forward after its abolition. Those formulae were replaced in 2010 by the requirement of a discounted cash flow valuation, and subsequently by the broader standard of an internationally accepted pricing methodology on an arm's length basis — a shift from prescribed arithmetic to reasoned judgement, accompanied by a requirement that the judgement be certified by a specified professional.

The company law track came last and from a different direction entirely. Section 247 of the Companies Act, 2013 was a response to the absence of any regulated valuation profession in India, not to a securities market problem. The registered valuer framework notified in 2017, with the insolvency regulator as the administering authority, was designed around asset classes, examinations and a code of conduct. Its concern was competence and accountability of valuers generally, and it made no attempt to displace the certification requirements already embedded in the securities and exchange control regimes.

The result is overlap without integration. A single cross-border transaction in a listed group can require a registered valuer for the company law element, a specified certifier for the exchange control element, and a merchant banker for the securities element — three professionals, three reports, three methodologies that must not contradict one another. Recent changes have sharpened rather than simplified the allocation: the takeover regulations were amended from December 2025 to require an independent registered valuer for open offer pricing of infrequently traded shares, bringing the registered valuer into a space that had been purely merchant banker territory.

We map the full certification requirement first. Most problems in this area are not valuation problems. They are the discovery, at filing stage, that a required certificate was never obtained or was obtained from the wrong professional. We produce the complete list before the transaction is structured.

The underlying analysis supports every certificate. A single well-documented valuation, prepared to the internationally accepted pricing standard, can underpin more than one certification. Building it once properly is cheaper than commissioning three inconsistent reports.

Sequencing against the reporting deadlines. Certificates must precede transactions and filings run to statutory clocks. We work the timetable backwards from the reporting deadline rather than forwards from the commercial agreement.

We say plainly when a merchant banker is required and we are not it. Where a regulation requires a SEBI-registered merchant banker, no accountant's report substitutes for it. We coordinate with merchant bankers and prepare the analysis they rely on, rather than issuing a certificate that will not be accepted.

Six offices across Maharashtra and Goa. Andheri, Charni Road, Vashi, Thane, New Panvel and Panaji. Cross-border transactions run to tight reporting deadlines, and having the tax, valuation and exchange control work in one team removes the coordination lag that causes most of the delay.