Securities & Financial Assets Valuation Under IBC: Complete Guide for 2026
Securities and Financial Assets (SFA) is one of three asset classes recognised by IBBI for registered valuer certification. This guide covers when SFA valuation is required, the regulatory framework governing it, accepted methodologies, and practical insights for entrepreneurs, investors, and corporate professionals navigating Indian insolvency and corporate law.
What Are Securities & Financial Assets Under IBBI?
The Companies (Registered Valuers and Valuation) Rules, 2017 define three asset classes for registered valuers. Securities and Financial Assets encompass all financial instruments that derive value from an underlying entity, contract, or asset pool. This includes equity and preference shares, debentures and bonds, mutual fund units, derivatives and options, insurance policies, bank deposits, pension funds, and intangible financial rights such as royalty streams and licensing agreements.
An IBBI registered valuer for SFA is qualified to value these instruments across multiple legal contexts — from IBC proceedings to Companies Act compliance, FEMA regulations, and SEBI-governed transactions.
When Is SFA Valuation Mandatory?
| Scenario | Legal Provision | Purpose |
|---|---|---|
| CIRP — Resolution plan evaluation | Regulation 35, IBBI (CIRP) Regulations | Fair value & liquidation value for CoC |
| Preferential transactions review | Section 43, IBC 2016 | Determine if transaction was at undervalue |
| Undervalued transactions | Section 45, IBC 2016 | Assess whether assets transferred below fair value |
| Fraudulent trading | Section 66, IBC 2016 | Value assessment for clawback proceedings |
| Share valuation for allotment | Section 247, Companies Act 2013 | Fair value of shares for private placements |
| ESOP valuation | SEBI (Share Based Employee Benefits) Regulations | Exercise price and fair value for stock options |
| Foreign investment pricing | FEMA (Non-Debt Instruments) Rules, 2019 | Minimum pricing for FDI inbound transactions |
| Angel tax compliance | Section 56(2)(viib), Income Tax Act | Fair market value for share premium justification |
SFA Valuation Methodologies
📈 Income Approach
Discounted Cash Flow (DCF): Projects future cash flows and discounts to present value. Most commonly used for operating businesses.
Dividend Discount Model: Values equity based on expected future dividend payments. Suitable for mature, dividend-paying companies.
Excess Earnings Method: Isolates earnings attributable to intangible assets above normal returns on tangible assets.
🏢 Market Approach
Comparable Company Analysis: Applies multiples from publicly traded peers — EV/EBITDA, P/E, EV/Revenue — adjusted for size, liquidity, and growth differentials.
Comparable Transaction Method: Uses acquisition multiples from recent M&A deals in similar industries and geographies.
Prior Transaction Method: References the entity's own prior funding rounds or share transfers as valuation anchors.
Cost Approach / Net Asset Value
Values the entity by summing individual asset values (adjusted to fair market value) and subtracting liabilities. Most appropriate for holding companies, investment vehicles, and asset-heavy entities. Under IBC, this approach is critical for determining liquidation value where going-concern assumptions are not applicable.
SFA Valuation in CIRP: Practical Workflow
When appointed by the Resolution Professional during CIRP, an SFA valuer typically follows this structured workflow:
- Scope determination: Identify all securities and financial assets on the corporate debtor's balance sheet — investments in subsidiaries, associates, JVs, marketable securities, receivables, and financial guarantees.
- Data gathering: Obtain audited financials, investment schedules, subsidiary financials, security agreements, and market data for comparable instruments.
- Individual asset valuation: Value each security/financial asset using the most appropriate methodology. Listed securities use market price with adjustments for block size and liquidity. Unlisted investments require full DCF or comparable analysis.
- Portfolio-level adjustments: Apply portfolio concentration risk, cross-holding adjustments, and holding company discounts where applicable.
- Fair value and liquidation value estimates: Present both values with clear methodology documentation and reconciliation between approaches.
Key Challenges Specific to SFA Valuation
Challenges SFA Valuers Face
- Valuing unlisted subsidiaries: Most corporate debtors hold investments in unlisted entities with limited financial transparency, requiring detailed bottom-up analysis.
- Contingent financial assets: Insurance claims, tax refunds, and litigation settlements require probability-weighted valuation approaches.
- Cross-border securities: Foreign currency denominated instruments need exchange rate considerations, repatriation restrictions, and jurisdictional legal analysis.
- Derivative positions: Open derivatives positions require mark-to-market valuation with counterparty credit risk adjustments.
- Inter-corporate deposits and guarantees: Financial guarantees and ICDs in distressed group structures often have severely impaired recovery values.
IBBI Registration Requirements for SFA Valuers
Eligibility & Registration Process
- Must be a member of a Registered Valuers Organisation (RVO)
- Educational qualifications: CA, CMA, CS, MBA (Finance), CFA, or equivalent
- Minimum 3 years relevant experience in valuation of financial assets
- Pass the IBBI Valuation Examination for SFA asset class
- Complete 50 hours of educational coursework from recognised RVO
- Maintain Continuing Professional Education: 20 hours annually
- Carry professional indemnity insurance
- Annual renewal with compliance certificate
Frequently Asked Questions
SFA under IBBI includes equity shares, preference shares, debentures, bonds, mutual fund units, derivatives, insurance policies, bank deposits, pension funds, and any financial instrument deriving value from an underlying asset or entity. The asset class is defined under the Companies (Registered Valuers and Valuation) Rules, 2017.
SFA valuation by IBBI registered valuer is mandatory for CIRP proceedings under IBC, preferential and undervalued transaction review under Sections 43–45 of IBC, share valuation under Section 247 of Companies Act 2013, ESOP valuations, mergers and acquisitions requiring fairness opinions, and FEMA compliance for foreign investment pricing.
SFA valuation fees depend on asset complexity, entity size, and purpose. CIRP valuations typically range from ₹1 lakh to ₹10 lakh. Standalone share valuations start from ₹25,000 for simple cases. Complex valuations involving multiple asset classes or cross-border elements command higher fees. Contact us for a customised quote.
SFA valuers value financial instruments — shares, debentures, derivatives, and intangible financial assets. Land & Building valuers handle real estate and immovable property. Plant & Machinery valuers cover industrial equipment. Each asset class requires separate IBBI registration with specific qualifications and examinations.
Need SFA Valuation by IBBI Registered Valuer?
Registration No: IBBI/RV/03/2019/12333 — Specialising in Securities & Financial Assets valuation for CIRP, Companies Act, FEMA, and tax compliance.