Why Valuation Matters
Business valuation is needed for fundraising, M&A, ESOP exercise, share transfers, and regulatory compliance.
Three Main Valuation Approaches
1. Income Approach (DCF)
2. Market Approach (Comparable)
3. Asset Approach (NAV)
DCF (Discounted Cash Flow)
Best for companies with:
- Predictable cash flows
- Growth trajectory
- Operating history
How It Works:
Formula:
Value = Sum of (Cash Flow / (1+r)^n) + Terminal ValueComparable Company Analysis
Best for companies with:
- Similar listed peers
- Industry benchmarks
- Revenue/profit track record
Common Multiples:
| Multiple | Used For |
|---|---|
| EV/Revenue | High-growth companies |
| EV/EBITDA | Profitable companies |
| P/E Ratio | Mature companies |
| P/S Ratio | Tech/SaaS companies |
Asset-Based Valuation
Best for companies with:
- Significant tangible assets
- Real estate holdings
- Investment companies
Methods:
- Book Value (as per balance sheet)
- Adjusted Book Value (market value of assets)
- Liquidation Value (distressed sale)
When to Use Which Method?
| Company Type | Recommended Method |
|---|---|
| Startup (pre-revenue) | Comparable + DCF scenarios |
| Growth company | DCF + Comparable |
| Mature/profitable | DCF + Comparable |
| Asset-heavy | Asset-based + Income |
| Real estate | Asset-based |
Valuation for Regulatory Purposes
When Required:
- Share transfer above fair value (Income Tax)
- ESOP exercise price setting
- M&A transactions
- Preferential allotment
Who Can Value:
- Registered Valuer (IBBI registered)
- Merchant Banker (Category I)
HCS Valuation Services
HCS Business Solutions provides:
- IBBI registered valuer network
- DCF and comparable analysis
- Regulatory-compliant reports
- ESOP exercise price setting