Valuers in India SK AGRAWAL What is Valuation

Valuers in India SK AGRAWAL

What is Valuation An OPINION, by an expert, about an asset. Asset Land Building Machines Money Jewellery / Diamonds. In Tangible like brands, Intellectual Property And more. 2

A close look Diamond – social desirability Arts – Unique asset. Land – just 5 tract of land at a site. IP – patents ? Brands. One machine in the country? Can these be valued? How to do it? Legal mandates on these and more. 3

History 4 There are records that are over 100 years old for land valuation. Diamonds / pearls – are still valued the old way. This was un regulated. No legal mandate Valuers were not penalised for a wrong valuation. Was considered a reason of bad debts. A farm property was purchased at Rs 6 lakh per acre. The conveyance deed was done at Rs 40 lakh per acre. It was valued at Rs 40 lakh per acre. Valuer did not go there to check. Bank sanctioned a loan of Rs 20 lakh per acre. The company did not survive. Promoters made their “money”

Why Valuation is needed Merger/ Acquisition s/ Demerger Buy-back Ind AS RBI / FEMA IPO/Issue of Securitie s ESOP Compani es Act / NCLT Income Tax Preferential / QIP / IPP Issue IPR Valuations Variou s Court s SARFAESI 5 Conversion of Securities Tangible s/ Intangibl es Arbitration / Mediation Equity Resear ch Takeover Capital Reducti on Other Corporate Restructuri ng Financi ng Needs SEBI IBC Dispute / Litigation Resolutio ns Dissolution

Government decides to regulate valuers 6 Applicable Laws / Rules Section 247 of Companies Act, 2013 (effective from 18 -October-2017) Companies (Registered Valuers and Valuation) Rules, 2017 (effective from 18 -Oct-2017) Valuation Standards (Yet to be announced)

IBBI was given the task …. . IBBI – took the task to form rules and other policies They developed the various sections etc of valuers. IBBI RVO 7 Policy, Monitoring, Governance Classes, Manage, Update VALUERS Do Valuation

More Rules 8 Minimum Qualifications Engineer with 5 year experience. Master of Valuation Apply to RVO They check and verify all qualifications Get a 50 hours mandator course. Appear in the IBBI Exam 100 questions in 120 mins Multiple Choice Questions +1 /-0. 25 marks PC based. Can appear as many times. Fill Form A through RVO Get the IBBI number …. IBBI/RV/04/2020/12345 Do a COP – Certificate of Practice. START PRACTICING VALUATION

Important Acts Companies Act 2013 / 2016 Section 247 Valuers Rules 2017 There are other acts rules that will be used, Income Tax. Companies Act, Law of contracts, Leasing and more. 9

Three Specialist Segments 10 Land & Buildings Land, Buildings Agricultural Land, Shopping malls, Factories, Plant & Machinery All plant, Cars, AC, laptops ETP, Ships, Mobile towers Financial & Securities Intangible assets. Share prices Loans & liabilities STRICT RULES ONE VALUER CANNOT VALUE FOR OTHER

Market Size 11 66% work is of L&B Smaller towns is also possible. Variety is low. Legal title is important. 22 % work to F&S Mainly large towns Variety is low. Intangible assets are not easy 12% P&M Industrial Towns and locations Large variety Not much legal issues Estimated requirement of 4 lakh valuers. Present there approx. 3900 only (31 -Mar-2021) There is NOT much work as of now with the valuers Several reasons.

Fees of Valuation Rs 500/- for a small plot of land. Rs 25 lakh – for a large factory. 12

Important Points Has the valuer – seen the asset? Has the valuer verified the asset? Has the valuer done the valuation without Pressure Bribes Logic No Conflict of interest. Has the valuer kept the interest of country / society above his interest. 13

Upgrades 14 Every year – there will be a 16 point CONTINUED EDUCATION PROGRAM. RVO organize there. Not completion will lead to cancel of COP === No valuation can be done.

Monitoring RVO’s will be Issuing a VRN for every report. Six monthly reports to be filed. Annual returns to be filed. RVO Can Ask you for the detailed report Can do an inspection of your records Can cancel your COP 15

This is so far…… ……. The new regulation IBBI is a temporary regulator Final regulator with a new Act will be formed. This profession has to be treated at par with CA /CS others. The entry to Valuer profession will change. Transition IBBI cleared valuer – automatic transfer. 5 Year experience, have to do a 400 hour course + exam. Universities to run a full Master of Valuer program of 4 year. 16

What to Expect Will take several years to establish oneself. Main business is from Banks Company Law Insurance Data may be incomplete. 17 Have to check the level of error. Customer demands Speed of valuation – do it in one day. Will hint at a value Payment delays are frequent. However what is exciting • New industry • New learning • New processes

18 Welcome to the Valuer Profession SK Agrawal; ska@agrawalnassociates. com