Comparison
Registered Valuer vs Merchant Banker — Which Valuation Report Does Your Transaction Need?
An IBBI Registered Valuer signs valuations compelled by the Companies Act — preferential allotment under Section 62(1)(c), ESOP trust funding, sweat equity. A SEBI-registered Category I Merchant Banker signs valuations compelled by the Income-tax Act — ESOP perquisite under Rule 3, Section 50CA, Section 56(2)(x). They are not interchangeable, and the wrong one means a rejected filing.
This is the most expensive confusion in Indian startup valuation. Both professionals produce a fair market value. Only one of them satisfies any given filing, and which one is determined by the law compelling the valuation — not by the asset, not by the company, and not by who happens to be available.
Side by side
| IBBI Registered Valuer | SEBI Category I Merchant Banker | |
|---|---|---|
| Registered with | Insolvency and Bankruptcy Board of India (IBBI), in the Securities or Financial Assets asset classA Registered Valuer in the Land & Building or Plant & Machinery asset class cannot sign a share valuation. | Securities and Exchange Board of India (SEBI), Category I |
| Signs valuations compelled by | Companies Act 2013 and the Insolvency and Bankruptcy Code | Income-tax Act and Rules |
| Typical triggers | Preferential allotment (s.62(1)(c) with Rule 13(1)); company funding an ESOP trust to buy its own shares (Rule 16(1)(c)); sweat equity (Rule 8); mergers and schemes; minority squeeze-out | ESOP perquisite FMV at exercise (Rule 3); transfer of unquoted shares below FMV (s.50CA); receipt of shares below FMV (s.56(2)(x)) |
| Validity window | No fixed statutory window, but the report must be current at the date of allotment — a stale report gets queried at filingThe 180-day rule means an ESOP company needs a fresh certificate at every exercise event, not once. | The perquisite certificate must be dated within 180 days of the exercise date |
| Can a Chartered Accountant substitute? | No, unless that CA is separately registered with IBBI as a Registered Valuer | No. Rule 3 specifies a SEBI-registered merchant banker, and there is no fallback where one is unavailable |
| Recent change to eligibility | Asset class must match the asset being valued — shares require Securities or Financial AssetsThe nine-month transition for in-flight assignments runs to approximately 2 October 2026. | Since the SEBI (Merchant Bankers) (Amendment) Regulations 2025, fresh valuation engagements are restricted to merchant bankers whose registration covers valuation-related activities |
| Consequence of using the wrong one | The ROC filing is rejected. The correct report must then be obtained and the valuation paid for twice | The tax position is unsupported. A perquisite computation resting on an invalid certificate exposes the employer's TDS position |
Which one do you need?
Find your situation. The requirement follows from the law compelling the valuation, not from the asset or the company.
You are issuing new shares to an investor who is not an existing shareholder taking a proportionate share
→ IBBI Registered Valuer
Companies Act 2013, s.62(1)(c) with Rule 13(1)
You are offering shares to all existing shareholders strictly in proportion to their holdings
→ Neither — a rights issue does not require a valuation report
Companies Act 2013, s.62(1)(a)
An employee is exercising ESOP options in your unlisted company
→ SEBI Category I Merchant Banker, dated within 180 days of the exercise
Rule 3, Income-tax Rules (Rule 15, Income-tax Rules 2026 from 1 April 2026)
Your company is lending or giving money to a trust to buy the company's own shares for employees
→ IBBI Registered Valuer
Rule 16(1)(c), Companies (Share Capital and Debentures) Rules 2014
You are issuing shares to someone for their work, know-how or IP rather than for cash
→ IBBI Registered Valuer — for both the shares and the consideration
Rule 8, Companies (Share Capital and Debentures) Rules 2014
An existing shareholder is selling shares to a buyer at below fair market value
→ SEBI Category I Merchant Banker
s.50CA and s.56(2)(x), Income-tax Act
Any investor in your round is non-resident
→ A FEMA pricing certificate from a CA, Merchant Banker or Cost Accountant — in addition to whichever report above applies
Foreign Exchange Management (Non-Debt Instruments) Rules 2019
You want a valuation for investor negotiation or internal planning only
→ Neither is required. An advisory valuation is sufficient, but it cannot be filed
No statutory requirement
Questions
Can the same person be both a Registered Valuer and a Merchant Banker?
In principle a firm could hold both registrations, but it is uncommon — they are separate registrations with separate regulators, eligibility criteria and ongoing obligations. In practice you will engage two different professionals, and the two reports are separate documents produced for separate purposes.
My CA said they can do the valuation. Is that enough?
Only if that CA holds the specific registration the transaction requires. A Chartered Accountant who is not registered with IBBI as a Registered Valuer cannot sign a Companies Act valuation, and a CA who is not a SEBI-registered merchant banker cannot sign a Rule 3 perquisite valuation. Ask which registration they hold and check it against the regulator's own register.
Do I need both reports for the same funding round?
Potentially, yes — they answer different questions. A priced round issuing new shares needs a Registered Valuer report for the ROC filing. If employees exercise options in the same year, that needs a merchant banker certificate. If any investor is non-resident, a FEMA pricing certificate is required as well. Needing more than one is normal, not a sign that something has gone wrong.
What happened to the Angel Tax valuation everyone talks about?
Section 56(2)(viib) was abolished by the Finance Act 2024 with effect from 1 April 2025. The merchant banker certificate that founders obtained to protect a round from Angel Tax is no longer needed for that purpose. Much published guidance still describes it as required.
Related
Reviewed by
Written by the Lekha Advisory editorial team and checked by independent professionals against their own areas of registration.
Bhawna Piplani
Advocate-on-Record (Supreme Court of India), Company Secretary, IBBI Registered Valuer (Securities or Financial Assets)
Advocate-on-Record before the Supreme Court of India, Company Secretary, and IBBI Registered Valuer in the Securities or Financial Assets asset class, registered in December 2022. Founder of Piplani & Associates, practising in corporate and legal advisory, intellectual property, mergers and acquisitions, and valuation. NCLT practitioner and Registered Trademark Attorney.
Registered with: Supreme Court of India · ICSI · IBBI
Kaushal Arora
Chartered Accountant, MBA (Finance & Strategy)
Chartered Accountant with over 20 years across venture capital, financial advisory and fund operations. Currently CFO of a SEBI-registered Category I AIF, covering fund structuring, valuations, investor reporting, and SEBI, RBI, FEMA and taxation compliance. Has advised over 100 startups on capital raising, financial modelling and valuation using DCF, comparable transactions and scenario analysis.
Registered with: ICAI
Reviewers check factual accuracy against their own areas of registration. Lekha is not a firm of Chartered Accountants; statutory work is performed by independent registered professionals under their own engagement letters.
Primary sources
This page states the position under the following instruments. Where a figure differs from other published guidance, the instrument governs.
- Companies Act 2013 s.62(1)(c) with Rule 13(1); Rule 16(1)(c); Rule 8, Companies (Share Capital and Debentures) Rules 2014
Effective . Requires a valuation report from an IBBI Registered Valuer for preferential allotment, ESOP trust funding, and sweat equity. - SEBI (Merchant Bankers) (Amendment) Regulations 2025, notification SEBI/LAD-NRO/GN/2025/282 dated 3 December 2025
Effective . Restricted fresh valuation engagements to merchant bankers holding registration for valuation-related activities from 2 January 2026, with in-flight assignments completable within nine months (approximately 2 October 2026). - Finance Act 2024 — omission of Section 56(2)(viib)
Effective . Abolished Angel Tax for all classes of investor, resident and non-resident. The Income-tax Act 2025 did not reintroduce an equivalent. Not retrospective — earlier assessment years remain open.
Accuracy and review history
Last verified on against 4 primary instruments.
Verified against: DPIIT Notification G.S.R. 108(E) dated 4 February 2026; Finance Act 2024 — omission of Section 56(2)(viib); SEBI (Merchant Bankers) (Amendment) Regulations 2025, notification SEBI/LAD-NRO/GN/2025/282 dated 3 December 2025; Income-tax Act 2025
- DPIIT turnover ceiling corrected from ₹100 crore to ₹200 crore (₹300 crore for Deep Tech) per G.S.R. 108(E).
- Deep Tech category added — 20-year recognition window.
- Cooperative Societies added to eligible entity types.
- Angel Tax content rewritten: Section 56(2)(viib) abolished with effect from 1 April 2025, so it is no longer a reason to obtain a merchant banker valuation or DPIIT recognition.
- Registered Valuer requirement under Section 62(1)(c) added where previously only a merchant banker was described.
- Merchant banker eligibility updated for the SEBI 2025 valuation-activity restriction.
- Income-tax Act 2025 renumbering noted alongside 1961 Act citations.
- DPIIT processing times corrected to 7–14 days (straightforward) and 2–8 weeks (complex), from operational experience.