Valuation Examination - Hitting The Jackpot !!: (How To Be An Ace Registered Valuer)

VALUATION EXAMINATION -
HITTING THE JACKPOT !!

[HOW TO BE AN ACE REGISTERED
VALUER]
Asset Class: Securities or Financial Assets

Dr. Rajkumar S. Adukia
Author of 200 plus books
B. Com. (Hons.),FCA, FCS, FCMA, LL.B., MBA
Dip. IFRS (UK), DLL&LW, DIPR, Dip. in Criminology, Ph.D.
Mobile: 098200 61049
Email Id: rajkumar@competentvaluation.com
July 23, 2019 rajkumar@competentvaluation.co
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Profile of Dr. Rajkumar S. Adukia
• He is an eminent International Insolvency Expert, International Forensic Expert, Business Advisor, Author,
Speaker and an authority on, Indian GAAP, IFRS and Ind AS.
• Chairman of Competent Insolvency Professionals Pvt. Ltd (website: insolvency. services)
• Member of Insol India National Committee for Regional Affairs.
• Vice President of All India Insolvency Professional Association (AIIPA)
• He has helped more than 700 professionals to pass insolvency examinations
• Handled insolvency cases outside India and in India
• Active Member of INSOL International for more than 25 years and having International practice on
insolvency
• Only insolvency professional in India who has written 5 books on Insolvency
• Books authored by Dr. Adukia on Insolvency and Bankruptcy Laws
1. What an Entrepreneur/ Creditor Should Know About the Insolvency and Bankruptcy Code,
2016 and the FRDI Bill, 2017
2. A Practical guide to Corporate Insolvency
3. How to pass Limited Insolvency Examination-2 editions, 3rd will be coming soon
4. In-depth Analysis of the Insolvency and Bankruptcy Code, 2016
• President of GST Research foundation, a society registered under Societies Registration Act, 1860.
• Chairman of Association of Indian Investors, a Section 8 Company
July 23, 2019 rajkumar@insolvency.services

Take Home
• Training from world class Valuation, Insolvency Expert.
• Connect with live knowledge factory Dr. Rajkumar S
Adukia
• Motivation to become Expert Valuer
• Motivation to pass registered valuation exam
• Motivation to become a trainer/ speaker
• Mentorship in personal and business growth
• Opportunity to become mastermind of Dr Rajkumar S
Adukia (Partner, Joint Venture, Co-Author, Associate)
• Professional opportunity as valuer
• Professional opportunity as insolvency professional
July 23, 2019 rajkumar@competentvaluation.com 3
Origin of Valuation
•There are many incidents in the history which make

reference to valuation.
•The first great landmark in the riddle of ‘value’ was
laid by the philosophers of the Athenian Academy in
the 4th century BC.
•Source of value is based on need, without which
exchange would not take place. Aristotle (384-322)
•He distinguished between value in use and value in
exchange- 'of everything which we possess. For
example, a shoe is used to wear and it is used for
July 23, 2019 exchange. rajkumar@competentvaluation.com 5
Valuation – opinion? Art? Science?
The word “valuation” is basically an opinion. So, from any incident we can say there is an opinion of the
question i.e. “Whether pursue particular matter or not”. Valuation in terms of business transaction may
be understood as concluding at some numbers and then taking decisions based on it. But in personal
area, it is involved in almost everything. It contemplates a monetary sum associated with a transaction.
Valuation is not an exact science and is driven, inter alia, by the purpose of valuation, statutory
requirements, business factors, etc.
The prominent Dictionaries define the term value in the following manner:
Cambridge
• the amount of money that can be received for something
• the importance or worth of something for someone
• how useful or important something is
• to give a judgment about how much money something might be sold for
Collins
• The value of something is how much money it is worth
• When experts value something, they decide how much money it is worth
• You use value in certain expressions to say whether something is worth the money that it costs.

Meaning of Valuation
Oxford
• The material or monetary worth of something
• The worth of something compared to the price paid or asked for
it
Merriam-Webster
• the monetary worth of something
• a fair return or equivalent in goods, services, or money for
something exchanged
• relative worth, utility, or importance
Meaning of Value
While Value has some other meaning as well, but in our
context value may be understood as worth associated
with anything.
Value may be of different kinds namely Book value
Depreciated value, Going concern value, Liquidation or
break up value, Intrinsic value, Fair value etc.
Prominent Dictionaries has defined the term “value” as:
• As per Oxford Dictionary - The material or monetary
worth of something.
• As per Cambridge Dictionary - the amount of money that
can be received for something

Overview of Valuation – Types of Value
Assessed
Value
Investment Book
Value Value
• The value of
any product or
service for a
individual
refers
perceived
Liquidation Fair market utility or use of
Value value the product or
service for that
particular
individual.
Scrap
Intrinsic value
Value
Valuation - Purpose
• Portfolio Management
• Valuation in Acquisition Analysis
• Valuation in Corporate Finance
• Valuation for Legal and Tax Purposes
• Property Valuation
• Valuation of Shares of Company
• Stock Valuation

Overview of Valuation – Premise
PREMISE OF VALUATION:
Highest and best use

Current/existing use
Orderly liquidation
Forced Sale
Overview of Valuation – Valuation Procedure
Determination of
Data cleansing and
Developing the valuation appropriate valuation
validation to create an
framework techniques and
Asset Listing
strategies
Applying appropriate Analysis and review

Data capture and calculations and of initial results and
validation professional completion of
judgement validation checks
Management review
Production of
of results and
valuation reports
assumptions

Valuation Approaches and Methodologies
Market Income Cost

Approach Approach Approach
Comparable Discounted
Replacement
transactions Cash flows
Cost Method
method Method
With-or-
Reproduction
without
Cost Method
Method
Greenfield Summation
Method Method

Valuation Application – Situation Specific Valuation
1. Business Combination – Amalgamation,

Merger, Demerger, Arrangement &
Restructuring
2. Distressed Asset Valuation
3. Start-up Entities Valuation
4. Valuation of Small and Medium Enterprises
5. Valuation of Cyclical Firms
6. Valuation of Investment Entities
7. Valuation of Insurance Coverage
Approaches of Valuation

Approaches of Valuation: Defined
• The market approach, as the name implies, relies on
signs from the real market place to determine what a
business is worth. Here, economic principle of
competition applies.
• The asset approach views the business as a set of assets
and liabilities that are used as building blocks to
construct the picture of business value. Asset and
Liabilities are valued individually. It is based on the
economic principle of substitution.
• The income approach takes a look at the core reason for
running a business - making money. Here the economic
principle of expectation applies.

Financial Statement Analysis
• SOME OF THE TOOLS OF FINANCIAL
STATEMENTS ANALYSIS
1. Trend Analysis
2. Comparative Statement Analysis
3. Common Size Analysis
4. Fund Flow Analysis
5. Cash Flow Analysis
6. Du-Pont Analysis
7. Graphical Analysis
8. Regression Analysis
9. Ratio Analysis

Legal Framework: Section 247 of the Companies
Act, 2013
• The Companies (Registered Valuers and Valuation) Rules, 2017.

• Effective from October 18, 2017
• Vide Amendment dated February 09, 2018, transitional period up to
September 30, 2018
• Vide notification dated October 23, 2017, Central Government
delegated the powers and functions vested in it under section 247 of the
said Act to the Insolvency and Bankruptcy Board of India.
Where a valuation is required to be made in respect of any property, stocks,
shares, debentures, securities or goodwill or any other assets (herein
referred to as the assets) or net worth of a company or its liabilities under
the provision of this Act, it shall be valued by a person having such
qualifications and experience and registered as a valuer in such manner, on
such terms and conditions as may be prescribed and appointed by the
audit committee or in its absence by the Board of Directors of that
company.
Legal Framework: Section 247 of the Companies
Act, 2013 Cont.…
The valuer appointed shall,-
(a) make an impartial, true and fair valuation of any assets which may be required to be valued;
(b) exercise due diligence while performing the functions as valuer;
(c) make the valuation in accordance with such rules as may be prescribed; and
(d) not undertake valuation of any assets in which he has a direct or indirect interest or
becomes so interested at any time during a period of three years prior to his appointment as
valuer or three years after the valuation of assets was conducted by him.
If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer
shall be punishable with fine which shall not be less than twenty-five thousand rupees but
which may extend to one lakh rupees:
Provided that if the valuer has contravened such provisions with the intention to defraud the
company or its members, he shall be punishable with imprisonment for a term which may
extend to one year and with fine which shall not be less than one lakh rupees but which may
extend to five lakh rupees.
Where a valuer has been convicted, he shall be liable to-

(i) refund the remuneration received by him to the company; and
July 23, 2019 (ii) pay for damages to the company or to any other person for loss arising out of incorrect or
rajkumar@competentvaluation.com 19
misleading statements of particulars made in his report.
The Companies (Registered Valuers and Valuation)
Rules, 2017
• 21 Rules
• 4 Annexures
• 5 Forms
• W.e.f October 18, 2017
• Central Government shall notify and may modify (from time
to time) the valuation standards on the recommendations of
the Committee constituted under the rules.
• Transitional Period under Rule 11 has been extended upto
September 30, 2018.(amendment made on 9th feb 2018)

The Companies (Registered Valuers and
Valuation) Rules, 2017 Eligibility criteria (Rule 3)
A person shall be eligible to be a registered valuer if he-
(a)is a valuer member of a registered valuers organisation;
"a valuer member" is a member of a registered valuers organisation who
possesses the requisite educational qualifications and experience for
being registered as a valuer;
(b)Is recommended by the registered valuers organisation of which he is a
valuer member for registration as a valuer;
(c)Has passed the valuation examination within three years preceding the
date of making an application for registration;
(d)Possesses the qualifications and experience ;
(e)Is not a minor
(f)Has not been declared to be of unsound mind;

The Companies (Registered Valuers and Valuation) Rules, 2017 Eligibility
criteria (Rule 3) Cont....
(g) Is not an undischarged bankrupt, or has not applied to be adjudicated as a bankrupt;

(h)Is a person resident in India;
'person resident in India' shall have the same meaning as defined in clause (v) of section 2 of the
Foreign Exchange Management Act, 1999 (42 of 1999) as far as it is applicable to an individual;
(i)Has not been convicted by any competent court for an offence punishable with imprisonment
for a term exceeding six months or for an offence involving moral turpitude, and a period of five
years has not elapsed from the date of expiry of the sentence:
Provided that if a person has been convicted of any offence and sentenced in respect thereof to
imprisonment for a period of seven years or more, he shall not be eligible to be registered;
(j)Has not been levied a penalty under section 271J of Income-tax Act, 1961 and time limit for
filing appeal before Commissioner of Income-tax (Appeals) or Income-tax Appellate Tribunal, as
the case may be has expired, or such penalty has been confirmed by Income-tax Appellate
Tribunal, and five years have not elapsed after levy of such penalty; and
(k) s a fit and proper person.

The Companies (Registered Valuers and Valuation) Rules,
2017:Fit and Proper Person
For determining whether an individual is a fit and

proper person, the IBBI may take account of any
relevant consideration, including but not limited
to the following criteria-
i. Integrity, reputation and character,
ii. Absence of convictions and restraint orders,
and
iii. Competence and financial solvency.
The Companies (Registered Valuers and Valuation) Rules, 2017.
Qualification and Experience (Rule 4)
a) post-graduate degree or post-graduate diploma, in the specified discipline, from a University or

Institute established, recognised or incorporated by law in India and at least three years of
experience in the specified discipline thereafter; or
b) a Bachelor's degree or equivalent, in the specified discipline, from a University or Institute

established, recognised or incorporated by law in India and at least five years of experience in
the specified discipline thereafter; or
c) membership of a professional institute established by an Act of Parliament enacted for the

purpose of regulation of a profession with at least three years' experience after such membership
and having qualification mentioned at clause (a) or (b).
• 'specified discipline' shall mean the specific discipline which is relevant for valuation of an asset
class for which the registration as a valuer or recognition as a registered valuers organisation is
sought under these rules.
• Qualifying education and experience and examination or training for various asset classes, is given
in an indicative manner in Annexure-IV of the rules.

Committee to advise on valuation matters (Rule 19)
Central Government may constitute Committee to advise on valuation matters" to make
recommendations on formulation and laying down of valuation standards and policies for compliance
by companies and registered valuers.
Composition of Committee
• a Chairperson who shall be a person of eminence and well versed in valuation, accountancy,
finance, business administration, business law, corporate law, economics;
• one member nominated by the Ministry of Corporate Affairs;
• one member nominated by the Insolvency and Bankruptcy Board of India;
• one member nominated by the Legislative Department;
• upto four members nominated by Central Government representing authorities which are allowing
valuations by registered valuers;
• upto four members who are representatives of registered valuers organisations, nominated by
Central Government.
• upto two members to represent industry and other stakeholder nominated by the Central
Government in consultation with the authority;
The Chairperson and Members of the Committee shall have a tenure of three years and they shall not
have more than two tenures.

Conduct of Valuation: Rule 8
The registered valuer shall, while conducting a valuation, comply with
the valuation standards as notified or modified under rules. Until
the valuation standards are notified or modified by the Central
Government, a valuer shall make valuations as per-
a) internationally accepted valuation standards;
b) valuation standards adopted by any registered valuers
organisation.
The registered valuer may obtain inputs for his valuation report or get
a separate valuation for an asset class conducted from another
registered valuer, in which case he shall fully disclose the details of the
inputs and the particulars etc. of the other registered valuer in his
report and the liabilities against the resultant valuation, irrespective of
the nature of inputs or valuation by the other registered valuer, shall
remain of the first mentioned registered valuer.

Contents of Valuation Report : Rule 8
The valuer shall, in his report, state the following:-
(a)background information of the asset being valued;
(b)purpose of valuation and appointing authority;
(c)identity of the valuer and any other experts involved in the valuation;
(d)disclosure of valuer interest or conflict, if any;
(e)date of appointment, valuation date and date of report;
(f)inspections and/or investigations undertaken;
(g)nature and sources of the information used or relied upon;
(h)procedures adopted in carrying out the valuation and valuation standards
followed;
(i)restrictions on use of the report, if any;
(j)major factors that were taken into account during the valuation;
(k)conclusion; and
(l)caveats, limitations and disclaimers to the extent they explain or elucidate the
limitations faced by valuer, which shall not be for the purpose of limiting his
responsibility for the valuation report.

Requirement of Valuation under Various Laws
The Companies Act, 2013
• Section 62(1)(c): Valuation Report for Further Issue of Shares
• Section 192(2): Valuation of Assets involved in Arrangement of Non-Cash
Transactions with Directors
• Section 230(2): Valuation of shares, property and assets of Company under a
scheme of Corporate Debt Restructuring
• Section 230(3): Valuation Report along with Notice of creditors/shareholders
meeting- Under scheme of Compromise/ Arrangement
• Section 232(3) The Valuation report made by Tribunal for exit option of transferor
company under scheme of Compromise/ Arrangement in case where transferor is
Listed and transferee is unlisted company.
• Section 236(2): Valuation of equity shares held by Minority Share Holders.
• Section 260(2): Valuation Report in respect of shares and assets to arrive at the
reserve price for company Administrator
• Section 281(1): Valuing assets for submission of report by liquidator

Valuation Standards issued by Various International
Institutions
• International Valuation Standards Council

(IVSC), UK
• Royal Institute of Chartered Surveyors (RICS),
UK
• American Society of Appraisers, USA
• The 'European Group of Valuers' Associations'
(TEGoVA), Belgium
Asset Classes notified by IBBI
• Asset Class- Land & Building
• Asset Class- Plant & Machinery
• Asset Class- Securities or Financial Assets

Syllabus of Valuation Examination- Asset Class- Securities Or
Financial Assets
Sl. Coverage Weight (%)
No.
a. Macro Economics- 4
 National Income Accounting
 Basics of Fiscal Policy
 Basics of Monetary Policy
 Understanding Business cycles
b. Finance 3
 Basic Concepts of Finance
 Decisions in Finance
 Financial Markets and Securities Markets
c. Professional Ethics and Standards 5
 Model Code of Conduct as notified by MCA
 Other Engagement Considerations
d. Financial Statement Analysis 3
 Assets, Liabilities, Income and Expenses
 Performance Analysis, Capital Structure Analysis
 Credit Analysis
 Cash Flow Analysis

Financial Assets Cont….

No.
e. General laws and Judicial Pronouncements 18

 Registered Valuers and Valuation Rules, 2017
 Valuation Standards
 Registered Valuers Organisation
 Registration of Valuers
 Asset Classes
 Indian Contract Act, 1872
 Offer, Acceptance and Revocation
 Legal Contract, Void and Voidable Contracts
 Contingent Contracts
 Performance of Contracts
 Consequences of Breach of Contract
 Agency Agreements
 The Sale of Goods Act, 1930
 Contract of Sale
 Definition of Goods
 Price of Goods
 Conditions and Warranties
 Unpaid Seller

Sl. Coverage Weight
No. (%)
e.  The Transfer of Property Act, 1882

 Definition of Immovable Property
 Transfer and Sale of Property
 Rights and Liabilities of Buyer and Seller
 Mortgage of Property
 Rights and Liabilities of Mortgager and Mortgagee
 Gift of Immovable Property
 Lease
 Indian Stamps Act, 1899
 Basics of Indian Stamp Act
 Valuation for Duty
 Instruments on which duty is levied
 Income Tax Act, 1961
 Taxes on Individuals
 Taxes on Companies and other entities
 Heads of Income- Salary, House Property, Business
 Income, Capital gain and Income from other
sources
 Clubbing and Set off provisions
 Insolvency and Bankruptcy Code, 2016
 Corporate Insolvency Resolution
 Corporate Liquidation
 Judicial Pronouncements
 Important Judicial Precedents of Valuation

No.
f Overview of Valuation 5
 Meaning of Value
 Premise of Valuation
 Purpose of Valuation
 Valuation Engagements
 Valuation Process
 Valuation Report
 - Documentation
g Valuation Approaches and Methodologies 5

 Income Approach
 Market Approach
 Cost Approach

No.
h Valuation Application 33
• Equity / Business Valuation
 Analysis of Business Environment
 Entity’s Business Strategy Analysis
 Business Combination- Amalgamation, Merger,
Demerger, Arrangement & Restructuring
 Forecasting
 Cash flow Analysis
 Appropriate Cost of Capital / Rate of Return
 Valuation Adjustments
• Fixed Income Securities
 Types of Fixed Income Securities
 Types of Different Debt Instruments
 Terms used in Fixed Income Securities
 Credit Rating of Bonds
 Embedded Options
 Interest Rate Derivative Products
 Related FIMMDA Circulars

No.
h • Option Valuation
 General Principles
 Option Valuation Models – Black and Scholes
Valuation Methodology, Black and Scholes
Merton Option Pricing Method
 Binomial Tree Method, Monte Carlo Simulation
• Valuation of other Financial Assets and
Liabilities
• Intangible Assets
 Nature and Classification of Intangibles
 Identification of Nature of Intangible Assets
 Purpose of Intangibles Valuation
 Valuation Approaches
• Valuation Application: Situation Specific
Valuation
 Business Combination – Amalgamation,
Merger,
 Demerger, Arrangement & Restructuring
 Distressed Asset Valuation
 Start-up Entities Valuation
 Valuation of Small and Medium Enterprises
 Valuation of Cyclical Firms
 Valuation of Investment Entities
 Valuation for Insurance Coverage

No.
i. Laws and Regulations relevant to Financial Assets Valuation 10

 Financial Reporting
 Financial Reporting (Indian Accounting Standards), Ind AS 113
 The Companies Act, 2013
 Chapter IV - Share Capital and Debenture
 Chapter XV - Compromise Arrangements and Amalgamation and
Relevant Rules
 Chapter XX - Winding Up
 SEBI Regulations
 SEBI (ICDR), 2009
 SEBI (LODR), 2015
 SEBI (Mutual Fund) Regulations, 1996
 SEBI (Share based Employee Benefits) Regulation,
 2014
 SEBI (SAST) Regulations, 2011,
 SEBI(Delisting) Regulations
 ESOP Valuation


No.
i. RBI and FEMA Regulations

 FEMA (Transfer or Issue of Security by a Person Resident Outside India),
Regulations, 2017
 Foreign Direct Investment (Pricing Guidelines)
 Direct Investment by Residents in Joint Venture/ Wholly Owned
Subsidiary abroad.
 Prudential Norms for Classification, Valuation and
 Operation of Investment Portfolio by Banks.
 Guidelines on Sale of Stressed Assets by Banks
 SARFESI Act, 2002
 Income Tax and Other Statues
 Capital Gain on Transfer of Assets
 Taxation on Income of Corporate Entities, Partnership
 Carry Forward of Losses
 - Compliance of DTAA Agreements


No.
j. Case Studies (This section will have 2 case studies for application of 14
valuation techniques. There will be two comprehensions narrating the
transaction based on which questions will be asked from each case.)
Total 100

Scheme of Examination
• Examination is conducted online (computer-

based in a proctored environment) with
objective multiple-choice questions.
• The duration of the examination is 2 hours,
60% is Passing %
• All Questions will be compulsory with 25%
negative marking.

Macro Economics – National Income Accounting
• GDP = C + I + G + NX (nx= net exports, g =

government spending, I= Investments and C=
consumption)
• GNP = C + I + G + NX + Z (where, z = NI earned

by domestic residents from overseas
investment – NI earned by foreign nationals
from domestic investments)
• NNP = GNP – Depreciation
• NDP = GDP – Depreciation
Macro Economics - Basics of Fiscal Policy
Basic equation for GDP = C + I + G + NX

Where, C = Consumption, I = Investment
G = Government Spending and NX = Net Exports
Modifying it to become,
AD = GDP = C(Y-T) + I(r) +G + NX
Where, AD= Aggregate Demand, Y= Income, T =
Taxes paid, Y-T = Disposable (after tax) income
and r=rate of interest.
In the equation, Investment (I), is the function of
rate of interest (r) and not (I*r).
Macro Economics – Basics of Monetary Policy
• Equation of Exchange = MV = PT
Where, M= the amount of money
V = Velocity
P = Price
T = Transactions
When M, V, P and T are changing, then,
%∆𝑀 + %∆𝑉 = %∆𝑃 + %∆𝑇
Where, Δ means “change in”

Macro Economics – Understanding Stages of
Business Cycle

Finance
• Basics: Types, Sources and Importance

of Finance to Business.
Principles of Corporate Finance
The Investment Principle
The Financing Principle
The Dividend Principle

Finance - Concepts
1. Capital Budgeting
1. Payback period method
2. Accounting rate of return method
3. Net present value method
4. Internal rate of return
5. Profitability Index
2. Time value of money
3. Cost of capital
4. Working Capital Management
Finance – Financial & Securities/Capital Markets
FMC is merged with SEBI on 28th sept 2015

Professional Ethics and Standards
• Model Code of Conduct for Registered
Valuers’ deals with:
• Integrity and Fairness
• Professional Competence and Due Care
• Independence and Disclosure of Interest
• Confidentiality
• Information Management
• Gifts and Hospitality
• Remuneration and Costs
• Occupation, Employability and Restrictions

Indian Contract Act, 1872
• As per Section 2 (g) An agreement not enforceable by law is
said to be void;
• As per Section 2(i) An agreement which is enforceable by law
at the option of one or more of the parties thereto, but not at the
option of the other or others, is a voidable contract;
• As per Section 31 A "contingent contract" is a contract to do or
not to do something, if some event, collateral to such contract,
does or does not happen. Eg. A contracts to pay to B Rs. 10,000 if
B's house is burnt. This is a contingent contract.
contd…..
Illustrations on Voidablity:
• A, intending to deceive B, falsely represents that five hundred maunds of indigo are made annually at A's
factory, and thereby induces B to buy the factory. The contract is voidable at the option of B.
• A, by a misrepresentation, leads B erroneously to believe that five hundred maunds of indigo are made
annually at A's factory. B examines the accounts of the factory, which show that only four hundred maunds
of indigo have been made. After this B buys the factory. The contract is not voidable on account of A's
misrepresentation.
• A fraudulently informs B that A's estate is free from encumbrance. B thereupon buys the estate. The estate
is subject to a mortgage. B may either avoid the contract, or may insist on its being carried out and the
mortgage-debt redeemed.
• B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the
existence of the ore from A. Though A's ignorance B is enabled to buy the estate at an undervalue. The
contract is voidable at the option of A.
• A is entitled to succeed to an estate at the death of B; B dies; C, having received intelligence of B's death,
prevents the intelligence reaching A, and thus induces A to sell him his interest in the estate. The sale
is voidable at the option of A.

contd…..
• Power to set aside contract induced by undue influence
• A's son has forged B's name to a promissory note. B under threat
of persecuting A's son, obtains a bond from A for the amount of
the forged note. If B sues on this bond, the Court may set the
bond aside.
• A, a money lender, advances Rs. 100 to B, an agriculturist, and,
by undue influence induces B to execute a bond for Rs. 200 with
interest at 6 per cent per month. The court may set the bond
aside, ordering B to repay Rs. 100 with such interest as may
seem just.
contd…..
• Agreement void where both parties are under mistake as to
matter of fact
• A agrees to sell to B a specific cargo of goods supposed to be on its way
from England to Bombay. It turns out that, before the day of the
bargain, the ship conveying the cargo had been cast away and the goods
lost. Neither party was aware of the facts. The agreement is void.
• A agrees to buy from B a certain horse. It turns out that the horse was
dead at the time of the bargain, though neither party was aware of the
fact. The agreement is void.
• A, being entitled to an estate of the life of B, agrees to sell it to C. B was
dead at the time of the agreement, but both parties were ignorant of
the fact. The agreement is void.

The Transfer of Property Act, 1882
This Act regulates the transfer of property in India. It contains specific provisions
regarding what constitutes transfer and the conditions attached to it. This Act came into
force on July 1, 1882. The Act is divided into 8 Chapters, 137 Sections and 1 Schedule. This
Act, covers the transfer of both movable and immovable properties transferred in India.
The Acts deals with the following types of transfers.
• Transfer of property by act of parties (movable / immovable)

• Mortgages of Immovable Property and Charges
• Leases of Immovable Property
• Exchanges
• Gifts
• Transfers of Actionable Claims

Properties which can not be transferred?
Property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force. Except:
• The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman, or any
other mere possibility of a like nature, cannot be transferred.
• A mere right of re-entry for breach of a condition subsequent cannot be transferred to anyone except the owner of the property
affected thereby.
• An easement cannot be transferred apart from the dominant heritage.
• An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him.
• A right to future maintenance, in whatsoever manner arising, secured or determined, cannot be transferred.
• A mere right to sue cannot be transferred.
• A public office cannot be transferred, nor can the salary of a public officer, whether before or after it has become payable.
• Stipends allowed to military, naval, air-force and civil pensioners of the government and political pensions cannot be transferred.
• No transfer can be made (1) insofar as it is opposed to the nature of the interest affected thereby, or (2) for an unlawful object or
consideration within the meaning of section 23 of the Indian Contract Act, 1872 (9 of 1872), or (3) to a person legally disqualified to
be transferee.
• Nothing in this section shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in
respect of which default has been made in paying revenue, or the lessee of an estate, under the management of a Court of Wards, to
assign his interest as such tenant, farmer or lessee.

The Sale of Goods Act, 1930
• Until the July 1, 1930, the law of Sale of Goods in India was governed by
Chapter VII (Section 76 to Section 123) of the Indian Contract Act, 1872. The
Indian Contract Act being based on the English Common Law, the law
relating to the Sale of Goods in India, followed the principles of the English
Common Law, including the Law Merchant. The English Law of Sale of Goods
was codified in 1893 by the enactment of the Sale of Goods Act, which
embodied the basic common law principles after adapting them to meet the
needs of a growing society.
• This act was enacted to govern and the amend all the laws relating to the Sale
of Goods in India. It is a kind of contract act which came into existence on 1st
July, 1930. It is a contract whereby the seller transfers or agrees to transfer
the property in the goods to the buyer for price.
• The Act is divided into Seven Chapters and Sixty-Six Sections.

The Indian Stamp Act, 1899
The Indian Stamp Act, 1899 is a fiscal statute laying down the law relating to tax levied in the form of stamps on instruments
recording transactions. Briefly, the scheme relating to stamp duties, provided for in the Constitution is as follows:
• Stamp duties on documents specified in Entry 91 of the Union List (viz. Bills of Exchange, cheques, promissory notes, bills of
lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts) are levied by the Union. Under
Article 268, State, in which the Stamp duty is collected, retains the proceeds except in the case of Union Territories in which case
the proceeds form part of the Consolidated Fund of India. At present duty is levied on all these documents except cheques.
• Stamp duties on documents other than those mentioned above are levied and collected by the States by virtue of the legislative
entry 63 in the State List in the 7th Schedule of the Constitution;
• Provisions other than those relating to rates of duty (which fall within the scope of Entry 91 of the Union List and entry 63 of the
State List mentioned above) fall within the legislative power of both the Union and the States under Entry 44 of the Concurrent
List in the 7th Schedule which reads as under - "44 Stamp duties other than duties or fees collected by means of judicial stamps,
but not including rates of stamp duty"
The Indian Stamp Act, 1899 prevailing as on date is the Stamp Act at Union Level which came into force on January 27, 1899. For
State Matters, every state has different stamp laws in the country.
The Legislation is divided into 8 chapters, 78 Sections (Section 79 stands repealed) and 2 Schedules (where second schedule Stands
repealed).

Equity/ Business Valuation : Process of Analysis of
Business Environment
Assessing
Observing
the
Forecasting Environment
the
Scanning & conditions
Searching
Collection of Information
necessary
information

Equity/Business Valuation: Entity’s Business Strategy
• A Business strategy is
Business Strategies
– An entity’s working plan
– For achieving its vision Growth
– Prioritising its objectives
– Competing successfully
– Optimising financial performance Competition
– With its current business model
Sustainability

Valuation Application: Options Valuation
• What is an “OPTION”?
• An option is a financial derivative that represents a contract
sold by one party (the option writer) to another party (the
option holder). The contract offers the buyer the right, but
not the obligation, to buy (call) or sell (put) a security or other
financial asset at an agreed-upon price (the strike price) during
a certain period of time or on a specific date (exercise date).
• DERIVATIVE
A derivative is a financial security with a value that is reliant
upon or derived from an underlying asset or group of assets,
like stocks, bonds, commodities, currencies, interest rates, etc.

Valuation Application: Options Valuation
• General Principles:
1. Current value of the underlying asset
2. Expected volatility in the value of the underlying assets
3. Strike price of the option
4. Expiration time of option
5. Rate of interest
6. Income from underlying asset

Valuation Application: Option Valuation Models
• Black and Scholes Valuation Methodology
• Black and Scholes Merton Option Pricing Method
• Binomial tree method
• Monte Carlo simulation

Valuation Application: Intangible Asset Valuation
Market • Broadcast spectrum

• Internet domain names
Approach • Taxi medallions
Income • Technology
• Customer related intangibles
Approach • Tradenames/Brands
• Non-competition agreements
Cost • Acquired third party software
Approach • Assembled workforce

Valuation Application: Intangible Asset Valuation
• Methods under Income approach:

1. Excess earnings method
2. Relief from Royalty method
3. Premium Profit method or with-or-without method
4. Greenfield method
5. Distributor method

Valuation Application: Distressed Asset Valuation
• Valuation with either of the following assumption:

1. Business being closed down
2. Valued as going concern
Before making assumptions, following points to be pondered upon:
• Usefulness of historical data
• Unbiasness of the future projections
• Real reasons for financial distress
• Adequate projections of expenses and incomes
• Underlying assumptions in each of the projections
• Possibility of recovery
Valuation Application: Start-up Entities Valuation
• The factors that determine the valuation of start-up are:

1. Leverage
2. Track record of promoters
3. Revenues
4. Investors willingness to invest
5. Medium or channel of sale
6. Industry
7. Level of competition

Start-up Entities Valuation: Valuation Methods
• Venture Capital Method

• Scorecard Valuation Method
• Risk Factor Summation Method
• Cost to Duplicate Method
• Discounted Cashflow Method
• Comparable Method

Valuation Application: Valuation of Cyclical Firms
• A cyclical firm or industry can be defined as a type of

industry that is sensitive to the business cycle, such that
the revenues are generally higher in the periods of
economic prosperity and lower in times of economic
downturn and contraction.
• The Discounted Cash Flow method is the most preferred
method, used in the valuation of the cyclical firms.

Case Study
Wizard Inc. has developed a software for business, which can be termed as a one stop
solution for all the business record keeping needs. It includes everything from daily
employee logs to book keeping to reminders for vendor payments and order placements,
with minimum human intervention.
This software is termed to be one of its kind, and at least 3 levels advance to the other
software available in the market. Predictions have been made that this software will
reign the markets and will be the most used software, when it will be launched.
The company had planned to launch the software under its name, after spending next 2
months in publicity and advertisements, but due to some unfavourable circumstances, it
cannot mass produce the software and hence, it has decided to sell the software design
and the rights of development.
Wizard Inc, has quoted Rs. 10 crores as the sale price for the design and rights of
development of the software.
Wincom Ltd is the rival of Wizard Inc, and it is willing to purchase the software in
question. It feels that before deciding to purchase, it should try and evaluate the probable
profits that may arise in future, and for the purpose, it has appointed you as the valuer.

Case Study: Questions
• Which is the most appropriate valuation approach for this
case?
a. Income approach
b. Cost approach
c. Market approach
d. Both a. and b.

Case Study: Answer
• A. Income approach is most appropriate as the asset to be
valued is an intangible asset, software, which has no
comparable market value and the cost of development of
which is unknown to the purchaser.

• Wincom Ltd. had a plan to develop a similar software, but it
did not materialise. It still wants to revive its plan, instead
of purchasing from wizard Inc. what would be your advice?
a. Wincom should purchase from Wizard as the time required for development
could be turned into earning opportunity by immediately starting the sale of
Wizard’s software.
b. Wincom should go ahead with the plan of development, because since
Wizard cannot mass produce its software, it won’t be a threat of competition.
c. Wincom should neither purchase, nor develop that particular software and
venture into some different field.
d. None of the above.

Case Study: Answer
• Ans. A. though wizard cannot mass produce, it will surely
sell the software to someone.

• As a valuer, you have completed the assignment and given the

report for the same.
a. You will do away with all the working papers by putting them
through the shredder.
b. You will file all the working papers in an appropriate manner
for future reference and preserve them for a reasonable period.
c. You will give all your working papers to the client along with
your valuation report.
d. Preservation of working papers differs for each case and it is
not necessary in this particular case of valuation, as it was the
review assignment

Case Study: Answer
• Ans. B. you will file all the working papers in an appropriate
manner for future reference and preserve them for a
reasonable period.

• Wincom ltd has estimated the possible cash inflows due to
the sale of the software of Wizard Inc. and it estimates that
the useful life of the asset, before it needs any upgradation is
3 years. Which of the following is correct.
a. It is appropriate to use Excess earnings method to value the asset.
b. Premium profit method should be used
c. Both a. and b. can be used.
d. None of the above.

Case Study: Answer
• Ans. C. Both a. and b. can be used.

Partners/joint ventures/CEOs
invited
• We are looking for full time partner / joint Venturer / CEO in
one of the following areas
1 Insolvency
2 Arbitration
3 CSR & charitable trusts and other NPOs
4 Drafting , Real Estate & RERA
5 GAAP & Ind As and other countries GAAPs
6 Forensic & Cyber
7 Corporate Governance
8 Personal Laws - Succession , Will etc
9 Mergers & Amalgamations
10 Corporate laws with special reference to the Companies act
2013
Those interested may WhatsApp to Dr. Rajkumar Adukia-
9820061049
TWO EXPECTED THINGS SHORTLY
A –APPLICABILTY of IBC TO INDIVIDUALS & PARTNERSHIPS

B –ENACTMENT OF FRDI ACT – financial resolution and
deposit insurance bill
How to master the subject???
• Buy all books available in market
• Read the act , rules, regulations, reports, websites,
judgements
• Repealed laws, allied laws
• Be positive, have time bound goal
• Increase rapport with authors, speakers and
regulators
• Give observations on draft regulations
• Attend conferences & seminars
• Visit tribunals and DRTs
• Discuss with peers
• Address programs
• Be a life time student
How to develop practice and earn money
1. Make your presence felt
2. Participate in seminars / programme as speakers,
panelists, querists
3. Exchange visiting cards
4. Make website / use social media
5. Write article, books
6. Give suggestions to ministry, regulator, trade bodies
7. Make network / joint venture in different areas
8. Provide quality services to clients
9. Develop a niche area of your expertise
10. Understand team requirement
11. Invest for long term
Napoleon Hill's 17 Principles of Success
• MASTER MIND
• DEFINITE CHIEF AIM
• SELF CONFIDENCE
• HABIT OF SAVING
• INITIATIVE AND LEADERSHIP
• IMAGINATION
• ENTHUSIASM
• SELF CONTROL
Cont…
• THE HABIT OF DOING MORE THAN YOU ARE PAID FOR

• PLEASING PERSONALITY
• ACCURATE THINKING
• CONCENTRATION
• COOPERATION
• PROFITING BY FAILURE
• TOLERANCE
• PRACTICING THE GOLDEN RULE
• THE HABIT OF HEALTH
Magic Formula for Clearing Exams
1. Magic formula of Approach
2. Magic formula of Subconscious Mind
3. Magic formula of Diminishing Marginal Utility
4. Magic formula of Bare Acts
5. Magic formula of Short Notes and Two pages
6. Magic formula of Discussion
7. Magic formula of Studying 16 hours and utilising every
second
8. Magic formula of entertainment
9. Magic formula of Presentation and Assumptions
10. Magic formula of Time Management
11. Magic formula of Mind Mapping

Time management by Alex czarto - four
quadrants

Valuation Examination - Hitting The Jackpot !!: (How To Be An Ace Registered Valuer)

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VALUATION EXAMINATION -

HITTING THE JACKPOT !!

Asset Class: Securities or Financial Assets

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•There are many incidents in the history which make

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Highest and best use

Applying appropriate Analysis and review

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Market Income Cost

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1. Business Combination – Amalgamation,

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• The Companies (Registered Valuers and Valuation) Rules, 2017.

Where a valuer has been convicted, he shall be liable to-

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(g) Is not an undischarged bankrupt, or has not applied to be adjudicated as a bankrupt;

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For determining whether an individual is a fit and

a) post-graduate degree or post-graduate diploma, in the specified discipline, from a University or

b) a Bachelor's degree or equivalent, in the specified discipline, from a University or Institute

c) membership of a professional institute established by an Act of Parliament enacted for the

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• International Valuation Standards Council

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Sl. Coverage Weight (%)

e. General laws and Judicial Pronouncements 18

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e.  The Transfer of Property Act, 1882

Sl. Coverage Weight (%)

g Valuation Approaches and Methodologies 5

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Sl. Coverage Weight (%)

i. Laws and Regulations relevant to Financial Assets Valuation 10

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Sl. Coverage Weight (%)

i. RBI and FEMA Regulations

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Sl. Coverage Weight (%)

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• Examination is conducted online (computer-

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• GDP = C + I + G + NX (nx= net exports, g =

• GNP = C + I + G + NX + Z (where, z = NI earned

Basic equation for GDP = C + I + G + NX

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• Basics: Types, Sources and Importance

The Investment Principle

The Financing Principle

The Dividend Principle

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