“VALUER” NOW MEANS ONLY SECTION 247 REGISTERED

SEBI REDEFINES VALUATION LANDSCAPE

EXCLUSIVE DOMAIN OF REGISTERED VALUERS UNDER INDIAN SECURITIES LAW

A Paradigm Shift in Takeover, Share-Based Benefits and Equity Valuations

In a decisive regulatory move with far-reaching consequences for India’s valuation and corporate advisory ecosystem, the Securities and Exchange Board of India (SEBI) has formally excluded Merchant Bankers and Chartered Accountants from conducting specified statutory valuations, mandating that such exercises be undertaken only by Registered Valuers under Section 247 of the Companies Act, 2013.

This reform—introduced through amendments to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations) and the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, as amended in December 2025—marks a structural realignment of valuation responsibilities in Indian securities regulation.

From Multi-Professional Valuation to a Single Statutory Standard

Historically, SEBI regulations permitted valuation reports to be issued by:

Independent Merchant Bankers,
Independent Chartered Accountants, or
In certain cases, jointly by the acquirer and the manager to the offer.

This pluralistic approach, while practical, often led to methodological inconsistencies, regulatory arbitrage, and valuation disputes—particularly in open offers, non-frequently traded shares, and share-swap transactions.

SEBI has now decisively resolved this ambiguity.

1. “Valuer” Now Means Only Section 247 Registered Valuer

Across amended SEBI regulations, the definition of valuer has been unequivocally aligned with Section 247 of the Companies Act, 2013, which governs the registration, eligibility, conduct and accountability of valuers.

“Valuer shall have the same meaning as assigned under Section 247 of the Companies Act, 2013.”

This alignment ensures that:

Only professionals registered with the Insolvency and Bankruptcy Board of India (IBBI),
Bound by statutory valuation standards, disciplinary mechanisms and professional codes,
Can issue valuations having regulatory consequences under SEBI laws.

This change formally ends the overlapping jurisdiction of CAs and Merchant Bankers in areas where valuation is the primary statutory function rather than an incidental advisory role.

2. Open Offer Pricing: Independent Valuation Becomes Mandatory

Non-Frequently Traded Shares

Under the amended Regulation 8 of the SAST Regulations, where shares are not frequently traded and market-based pricing parameters fail, the offer price must now be determined solely by an Independent Registered Valuer.

Earlier practices involving:

Merchant Banker valuation, or
CA certification,

have been entirely discontinued.

SEBI’s Power to Order Fresh Valuation

In a significant investor-protection measure, SEBI may:

Direct a fresh valuation by another Registered Valuer, and
Require that the entire cost be borne by the acquirer.

This provision reinforces valuation neutrality and curtails aggressive pricing strategies in takeover transactions.

3. Share-Swap Open Offers: Valuer Certification Only

In open offers where listed shares are offered as consideration, the share-exchange ratio must now be certified exclusively by a Registered Valuer.

The following have been removed from the regulatory text:

Independent Merchant Banker certification,
Chartered Accountant certification.

This amendment directly impacts Regulation 9(5)(c) of the SAST Regulations, making Registered Valuers central to complex merger-like valuation exercises embedded within takeover law.

4. SEBI Removes CA & Merchant Banker Valuations – Clause by Clause

SEBI has systematically replaced references to:

Earlier Terminology	Now Replaced With
Independent Merchant Banker	Independent Registered Valuer
Independent Chartered Accountant	Independent Registered Valuer
Acquirer + Manager to the Offer	Independent Registered Valuer

Key Affected Provisions

Regulation 8(4) – Fair value determination when pricing norms fail
Regulation 8(2)(e) – Valuation of non-frequently traded shares
Regulation 8(16) – SEBI-directed valuation
Regulation 9(5)(c) – Share-swap ratio certification

Collectively, these changes establish that all valuation-intensive determinations under the Takeover Code are now the exclusive domain of Registered Valuers.

5. Extension to ESOP & Sweat Equity Valuations

Parallel amendments have been introduced in the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, vide the Second Amendment Regulations, 2025.

What Has Changed

The term valuer has been redefined to mean only a Section 247 Registered Valuer.
Regulation 34 now mandates valuation by an Independent Registered Valuer, replacing Merchant Bankers.
Sub-regulations permitting alternative professionals have been deleted.

Transition Period

Merchant Bankers already engaged in valuation assignments prior to the amendment are permitted to complete such assignments within nine months of the regulations coming into force.

Regulatory Philosophy: Why SEBI Has Done This

This reform reflects SEBI’s intent to:

Professionalise valuation as a standalone statutory discipline,
Ensure uniform valuation standards across securities law,
Improve investor confidence in price discovery, and
Align SEBI regulations with the Companies Act and IBBI framework.

The move also recognises that valuation is no longer a subset of accounting or merchant banking, but a specialised, regulated profession.

Implications for Professionals and Aspirants

For Registered Valuers

Expanded statutory relevance and demand,
Greater regulatory responsibility and scrutiny,
Enhanced recognition in capital market transactions.

For Chartered Accountants & Merchant Bankers

Continued relevance in advisory, structuring, due diligence and compliance,
But exclusion from statutory valuation certification under SEBI regulations.

For Aspirants

Clear regulatory signal: valuation is a distinct career pathway, governed by law, standards and licensing.

A Defining Moment for India’s Valuation Profession

SEBI’s amendments represent a watershed moment in Indian capital market regulation, firmly placing valuation within a single, accountable statutory framework.

By entrusting takeover pricing, swap ratios and equity-based compensation valuations exclusively to Registered Valuers, SEBI has strengthened governance, reduced interpretational ambiguity, and elevated valuation to its rightful place as a critical pillar of investor protection.

The era of fragmented valuation authority is over.
The era of statutorily accountable valuation has begun.

— For Engineering, Valuation & Corporate Finance Professionals