The Hindu Business Line : Independent body of valuers mooted for corporates

Value skills
A professional valuer is a person who has skill to assess the market value of a corporate entity.
Corporate valuation involves two important tasks – to correctly assess the wealth creation, and infuse confidence in investors on the value arrived at.

Dr Amit Mitra

Our Bureau

New Delhi, July 14 India Inc may soon have a new set of Valuation Professionals to reckon with.

An Expert Group, constituted by the Government to examine and make suggestions on the draft legislative proposals for regulation of valuation Professionals, has suggested the setting up of an Institute of Valuation Professionals, an independent autonomous corporate professional body. The institute would be governed by a council.

A professional valuer assesses the market value of a corporate entity.

Corporate valuation involves two important tasks — to correctly assess the wealth creation, and to infuse confidence in investors on the value arrived at.

This profession will also help with disinvestment, which is under the active consideration of the Government.

Current parameters

At present, corporate valuation is done by different professionals such as merchant bankers, cost accountants or chartered accountants for initial public offerings, mergers and amalgamations, strategic alliances, and corporate restructuring.

Speaking to Business Line, Dr Amit Mitra, Secretary-General, FICCI, who also headed the Group, said “Development of practice of valuation as a discipline and profession in the present day context has become a necessity because of imperatives of financial markets, emerging global economy, and changing framework of accounting and financial reporting.”

The report, submitted to the Minister for Corporate Affairs, Mr Salman Khurshid, does not restrict for the time being those professionals who have been in this profession and certifying the valuation. It, however, leaves the final decision on this issue for the proposed Council of the Valuation Institute.

Dr Mitra pointed out that a suggestion has also been made for legislative measures to integrate, within the framework, experts in valuation of different kind of physical assets, which can help the business valuer in the course of this professional work to assess the correct value.

The Group delved on issues pertaining to the statutory framework for the regulation of valuation professionals, in general and the scope of the proposed Bill, in particular.

Mr Chandra Wadhwa, past President, ICWAI, and part of the Expert Group, said “the significance of valuation professionals will be felt more when the International Financial Reporting Standards (IFRS) will commence from April 1, 2011. IFRS implementation would mean an increase in number of financial instruments to be valued.” The proposed institute would function more as regulatory and technical body and play a promotional and facilitation role to ensure high quality education and examination system for the valuation profession.

The disciplinary and quality review mechanism would largely be independent of the Council generating greater public confidence and structured to enquire and decide cases of professional negligence expeditiously.

In the case of misconduct, it is not only the professional, but also the firms’ quality control that can be questioned.

Business valuation

Among other important recommendations made by the Group are that the statute should focus on business valuation since it covers key corporate actions affecting stakeholders’ interests and would, therefore, improve corporate governance.

The Group with a view to bringing professional standards to a uniform level and ensuring unbiased certification of valuers has also recommended a common certifying examination.

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