Startup Valuation in India: Methods, Law and Who Signs the Report
By CA V. Viswanathan, FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333). V Viswanathan & Associates, Chartered Accountants, FRN 013713S. Law stated as at 13 November 2026.
A startup valuation in India has two jobs: to support the price founders and investors agree, and to meet the law that applies to the event. A priced round by an unlisted company needs a registered valuer's report under Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014; a foreign investor adds a fair value certificate under FEMA Rule 21; ESOPs, sweat equity and secondary sales have rules of their own. CA V. Viswanathan, chartered accountant and IBBI Registered Valuer for securities or financial assets (IBBI/RV/03/2019/12333), signs these reports and serves clients across India from Chennai.
What is a startup valuation?
A startup valuation estimates what a young company is worth when it has little history and most of its value lies in the future. Founders need the figure to negotiate a round. The law needs it for a different reason: each time shares or options are issued, a statute fixes who must certify the value and what the price is tested against. A report that is persuasive to an investor but signed by the wrong person does not meet the legal requirement, and the reverse is also true.
Which valuation report does a startup need, and when?
| Event | Provision | Who signs | Guide |
|---|---|---|---|
| Priced equity round | Sections 42 and 62(1)(c); Rule 13 | Registered valuer | Preferential allotment |
| CCPS round | Rule 13; FEMA Rule 21 for a foreign investor | Registered valuer; chartered accountant for FEMA | CCPS valuation |
| Convertible note or CCDs | Deposit rules; Rule 13; FEMA | Registered valuer; chartered accountant for FEMA | CCD and convertible note valuation |
| Foreign investor | Rule 21, FEMA (Non-debt Instruments) Rules, 2019 | Chartered accountant, SEBI-registered merchant banker or practising cost accountant | FEMA valuation certificate |
| ESOP grant and accounts | Rule 12; Ind AS 102 | Valuer; Category I merchant banker for tax on exercise | ESOP valuation |
| Sweat equity to a founder | Section 54; Rule 8 | Registered valuer | Sweat equity valuation |
| Secondary sale by a founder or angel | Sections 79 and 92(2)(m); Rule 57 | Formula for equity shares | Share valuation for income tax |
What changes for a DPIIT-recognised startup?
- Sweat equity: up to 50% of paid-up capital for ten years from incorporation or registration, against 25% for other companies (Rule 8(4)).
- ESOPs: promoters and directors holding more than 10% may be granted options for ten years from incorporation (Rule 12).
- Convertible notes: only a start-up company may issue them, for ₹25 lakh or more in a single tranche, convertible or repayable within ten years.
- ESOP tax: employees of an eligible start-up can defer tax on exercise (section 289(3), Income-tax Act, 2025).
- Angel tax: section 56(2)(viib) of the 1961 Act does not apply to any company from assessment year 2025-26. It matters only for assessments of share issues up to 31 March 2024.
Which valuation methods suit which stage?
| Stage | Methods commonly used | What drives the value |
|---|---|---|
| Idea and pre-revenue | Scorecard, Berkus, cost to recreate; venture capital method | Team, product, market size, comparable seed rounds |
| Early revenue | Venture capital method; revenue multiples; discounted cash flow with scenarios | Growth rate, unit economics, cash runway |
| Growth | Discounted cash flow; comparable company and transaction multiples | Margins, retention, capital needs |
| Late stage | Discounted cash flow; listed-company multiples; option-pricing allocation between share classes | Profitability, liquidation preferences, exit route |
For a statutory report the valuer must be able to defend the method. Discounted cash flow is used most often because Rule 21 asks for an internationally accepted pricing methodology and a registered valuer has to explain the choice of approach. Scorecard-type methods are useful as a cross-check for very early companies; we do not rest a statutory report on them alone. The methods are compared in detail in our guide to startup valuation methods in India and in Berkus and scorecard methods compared.
Who can sign a startup valuation?
| Purpose | Registered Valuer | Merchant Banker | Chartered Accountant |
|---|---|---|---|
| Companies Act: issue of shares or convertible securities (Rule 13) | Yes. Required | Not sufficient | Not sufficient unless also a registered valuer |
| FEMA: foreign investor (Rule 21) | Not named by the rule | Yes, if SEBI-registered | Yes; a practising cost accountant also qualifies |
| Income tax: perquisite on ESOP exercise | Not accepted | Yes. SEBI-registered Category I | Not accepted |
| Investor negotiation, no statute involved | Yes | Yes | Yes |
CA V. Viswanathan is a chartered accountant and an IBBI Registered Valuer for securities or financial assets (IBBI/RV/03/2019/12333). His registration can be checked on the IBBI register of registered valuers. A round with a foreign investor therefore gets both documents from one person on one valuation date.
Worked example: venture capital method
Illustrative figures, not a real client. An investor expects that a startup could be sold for ₹1,00,00,00,000 in five years and wants a return of 40% a year for the risk. The startup is raising ₹3,00,00,000.
- Post-money valuation today: ₹1,00,00,00,000 ÷ (1.40)^5 = ₹1,00,00,00,000 ÷ 5.37824 = ₹18,59,34,432.
- Pre-money valuation: ₹18,59,34,432 − ₹3,00,00,000 = ₹15,59,34,432.
- Investor's stake: ₹3,00,00,000 ÷ ₹18,59,34,432 = 16.13%.
- This ignores dilution from later rounds. If the investor expects to be diluted by a fifth before exit, the stake needed today is higher and the pre-money valuation lower.
The same company valued by discounted cash flow for the registered valuer's report may give a different figure. The report explains the difference; the issue price cannot be below the price determined on the basis of the registered valuer's report.
What documents are needed?
- Financial statements since incorporation and management accounts to the valuation date
- Projections for five years with assumptions on revenue, margins and hiring
- Capitalisation table on a fully diluted basis
- Term sheet and draft investment agreements
- DPIIT recognition certificate, if any
- Pitch deck and key metrics: customers, retention, unit economics
What is the process and how long does it take?
- Scoping call: the event, the investor and the reports needed.
- Engagement letter with a fixed fee and document list.
- Valuation, with a cross-check by a second method.
- Draft shared with founders for factual confirmation.
- Signed report with UDIN, and the FEMA certificate where needed.
Reports are usually issued within 5–7 working days of complete information, and within 15 working days for complex cases. The clock starts when the last document is received, not on the date of engagement.
What does a startup valuation cost?
Our fee for a startup valuation starts from ₹35,000 + 18% GST. The figure depends on the number of instruments or companies to be valued, whether projections exist, and how many laws the same transaction has to satisfy. We quote a fixed fee after a first call and before any work starts. Statutory filing fees, stamp duty and any merchant banker's fee are separate.
Related tools
To see how an option pool affects founders, use our ESOP dilution calculator.
Every valuation report we issue, with the law behind it and the person who must sign it, is listed on our valuation services page.
About V Viswanathan & Associates
- Chartered Accountants, FRN 013713S— Practising since 2012 from G-131, Spencer Plaza, Anna Salai, Chennai.
- IBBI Registered Valuer— Securities or financial assets, CA V. Viswanathan (IBBI/RV/03/2019/12333), registered 30 September 2019.
- FCA, ACS, CFE— Member of ICAI since 2012 and Fellow since 2017; company law, tax and forensic accounting in one practice.
- Across India— Serves clients across India from Chennai through video consultations and digitally signed reports.
Frequently Asked Questions
Who can do a startup valuation in India?
It depends on the purpose. An issue of shares or convertible securities under the Companies Act needs a registered valuer. A foreign investment needs a chartered accountant, SEBI-registered merchant banker or practising cost accountant under FEMA. A valuation only for negotiation can be prepared by any competent valuer.
Is a valuation report mandatory for a startup funding round?
Yes, where shares or convertible securities are issued to selected investors by an unlisted company: Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 requires the price to be determined on a registered valuer's report.
Does angel tax still apply to startups?
No. Section 56(2)(viib) of the Income-tax Act, 1961 does not apply from assessment year 2025-26 (Finance (No. 2) Act, 2024). It remains relevant only for assessments and appeals on share issues up to 31 March 2024.
Which method is used to value a pre-revenue startup?
Scorecard, Berkus, cost-to-recreate and venture capital methods are common for negotiation. For a statutory report we use an approach that can be defended, usually discounted cash flow with scenarios, and use the others as a cross-check.
Can a startup issue shares above the valuation report price?
Yes. Under Rule 13 the issue price cannot be lower than the price determined on the registered valuer's report, and under FEMA fair value is a minimum for an issue to a non-resident. A higher price complies with both.
Does a foreign investor need a separate valuation?
A separate document, on the same valuation: a fair value certificate under Rule 21 of the FEMA (Non-debt Instruments) Rules, 2019, not more than 90 days old on the date of investment.
How often should a startup be valued?
At each issue of shares or convertible securities, at each ESOP grant date for the accounts, and within the time limits each law sets, such as 90 days for a FEMA certificate.
How long does a startup valuation take?
Usually 5–7 working days from complete information, and up to 15 working days for complex cases such as several classes of shares.
Related Guides
FEMA Valuation Certificate for FC-GPR and FC-TRS
The certificate a bank needs before a foreign investment is reported.
Law stated as at 13 November 2026. Official sources: Companies Act, 2013 and rules (India Code), Master Direction on Foreign Investment in India (RBI), Rule 57, Income-tax Rules, 2026 (Income Tax Department), IBBI register of registered valuers. This page is general information, not advice on a specific transaction.
Startup Valuation
Send us the term sheet and we will tell you which reports the round needs.