Merchant Banker Valuation Report

While a Registered Valuer report satisfies the Companies Act, a Merchant Banker Valuation Report is a specific requirement under the Income Tax Act. If you are issuing shares at a premium or dealing with specific share transfers, this report ensures your valuation is protected from “Angel Tax” scrutiny.

At KRPR, we coordinate the Merchant Banker report alongside our secretarial and tax services so your funding remains compliant across all regulatory bodies.

Service: Merchant Banker Valuation Report

When is a Merchant Banker Report mandatory?

Unlike a Registered Valuer who handles the “Corporate” side, a SEBI-registered Category-I Merchant Banker is required specifically for Income Tax compliance.

Key Reasons to Obtain This Report

• Avoid “Angel Tax” (Section 56(2)(viib)): If you issue shares to investors at a price higher than the Fair Market Value (FMV), the excess can be taxed as income. A Merchant Banker’s Discounted Cash Flow (DCF) valuation is a primary legally recognized shield against this.

• Share Transfers (Section 50CA): When unlisted shares are transferred, the Income Tax Act requires the transaction to happen at FMV. A Merchant Banker report provides the benchmark to ensure neither the buyer nor the seller faces tax penalties.

• Rule 11UA Compliance: This specific rule under the Income Tax Act prescribes exactly how shares must be valued for various tax purposes, often requiring a Merchant Banker’s certification for the DCF method.

What is required to start?

To ensure the DCF model is robust and defensible during a tax audit, we need:

1. 5-Year Financial Projections: Detailed revenue and expense forecasts.

2. Basis of Assumptions: A note on how you arrived at your growth rates, margins, and discount rates.

3. Latest Audited Financials: Balance sheet and P&L for the previous financial year.

4. Transaction Details: To understand the price at which you intend to issue or transfer the shares.

Our 5-Step Unified Process

We manage the “Double Valuation” headache by aligning the RV and MB reports under one roof.

1. Structure Review: We determine if you need only an RV report or both RV and Merchant Banker reports based on your transaction type.

2. Financial Modeling (CA Team): Our CAs help refine your 5-year DCF model to ensure the assumptions are realistic and defensible before tax authorities.

3. Merchant Banker Engagement: We coordinate with our SEBI-registered partners to review the model and industry trends.

4. Report Drafting: The Merchant Banker prepares the formal report focusing on Rule 11UA requirements.

5. Final Issuance: You receive a certified report that is valid for your tax filings and share issuance.

How long does it take?

• Review & Modeling: 5–7 days.

• Certification & Final Report: 3–5 days.

• Total Time: Usually 10 to 12 business days.