Valuation for Fundraising in Didwana

What Is Valuation for Fundraising?

Valuation for fundraising is the valuation work done to price a specific funding round: to decide how much a company is worth before new money comes in, how much of the company the investor will receive for its investment, and what the share price will be. It also covers the statutory valuation reports the company needs in order to issue shares or other securities to investors.

The key numbers are the pre-money valuation, the value of the company before the investment, and the post-money valuation, which is pre-money plus the new money. The investor's percentage is the investment divided by the post-money value. The valuation interacts with other terms: the instrument chosen, such as equity, preference shares or convertible instruments; the size of the ESOP pool; liquidation preferences; anti-dilution rights; and the conversion terms for convertible instruments. A high headline valuation with harsh terms can be worse for founders than a lower valuation with clean terms.

This service is for the round itself. It applies to startups and growth companies at any stage that are raising from angel, venture, private equity, strategic or other investors. For methods suited to early-stage companies see Startup Valuation. Valuation, due diligence and professional opinion are different things. A valuation estimates value; due diligence investigates facts; a professional opinion is a formal view given by a qualified professional, such as a legal opinion or a certificate. An indicative valuation prepared for planning or negotiation is not a statutory valuation. Where the law requires a valuation or certificate from a registered valuer, a SEBI-registered merchant banker, a chartered accountant or a cost accountant, that report must be issued and signed by that professional, and we coordinate with the appropriate registered professional.

Who Needs Valuation for Fundraising?

• Founders and promoters preparing to raise a round
• Companies negotiating a term sheet and wanting a reasoned valuation range
• Growth and SME companies raising from private equity or strategic investors
• Companies issuing shares, CCPS or convertible instruments to investors
• Companies with non-resident investors
• Investors who want an independent basis of value
• Companies with an existing cap table that needs modelling of dilution

When Is Valuation for Fundraising Required?

A valuation is needed or highly advisable when:

• A term sheet is being negotiated and the pre-money value is open
• Shares are being issued on a preferential basis, which requires a registered valuer's report under the Companies Act
• A non-resident investor will subscribe, and FEMA pricing certification is needed
• Convertible instruments will convert at a price or cap that must be modelled
• The ESOP pool will be created or expanded in the round
• The company wants to compare alternative offers
• Board or shareholder approval for the issue requires a valuation basis

What Our Valuation for Fundraising Service Includes

• Understanding the company, stage, round size, investors and terms
• Review of financials, projections and key metrics
• Valuation using methods suitable to the stage and sector: comparable rounds and companies, DCF, VC method
• Pre-money and post-money valuation range
• Cap table modelling: dilution for each stakeholder under alternative valuations and structures
• Effect of preference rights, liquidation preferences and convertible instruments
• ESOP pool impact
• Comparison of offers and term sheet economics
• Mapping of the statutory valuation required for the issue: Companies Act, FEMA and tax
• Information pack and coordination with the registered valuer, merchant banker or chartered accountant who signs
• Valuation summary for the board and for investor discussions
• Guidance on filings and the sequence of steps in the issue

Legal and Practical Considerations

Companies Act, 2013. Issuing shares to selected investors is a preferential allotment under Section 62(1)(c) and requires a special resolution and a valuation report from a registered valuer under Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014, in addition to other conditions. Private placement of securities is governed by Section 42 and its rules. The registered valuer must be registered with IBBI under Section 247 in the relevant asset class.

FEMA. If the investor is a non-resident, the issue price of unlisted shares cannot be below the fair value determined under an internationally accepted pricing methodology on an arm's length basis, certified by a chartered accountant, SEBI-registered merchant banker or practising cost accountant as applicable. Convertible instruments carry their own pricing conditions, and reporting to the RBI must follow the issue within the prescribed time.

Income tax. The earlier angel tax provision on share premium was abolished and not re-enacted in the Income-tax Act, 2025, which applies from 1 April 2026. Other tax rules on valuation may still apply to some transactions, and the position should be confirmed with a tax professional.

Valuation is negotiated. The price in a round is agreed between company and investor. A valuation provides a reasoned range and supports negotiation, but it does not fix the price.

Validity. Valuation reports for an issue should be as of a date close to the issue and used within the period the rules allow. A material change in the business may require an update.

Shareholder agreements. The valuation economics are reflected in the subscription and shareholders agreements, which should be consistent with the Articles.

Common Mistakes in Fundraising Valuation

• Anchoring on a headline valuation and ignoring preference and anti-dilution terms
• Not modelling dilution from the ESOP pool and convertible instruments
• Issuing shares without the required registered valuer's report
• Pricing below the FEMA floor for a non-resident investor
• Using a stale valuation after performance changes
• Confusing pre-money and post-money in the term sheet
• Not reconciling the statutory valuation with the negotiated price
• Ignoring filing deadlines after the issue

Professional Fees, Government Fees and Timeline

There is no government fee for our indicative valuation work. Fees of registered valuers, merchant bankers or chartered accountants for statutory reports are separate, as are ROC and RBI filing fees and stamp duty on the issue. Our professional fees depend on the stage, size and complexity of the round and the cap table. A valuation for fundraising typically takes 5 to 12 working days after information is received.

Valuation for Fundraising vs Startup Valuation vs Equity Valuation

Valuation for fundraising focuses on pricing a particular round and the compliance of the issue. Startup valuation concentrates on methods for early-stage companies. Equity valuation looks at the value of equity after debt for investor decisions. Related services include Startup Valuation, Share Valuation and Equity Valuation.

Need Professional Assistance With Valuation for Fundraising?

A reasoned valuation and a compliant issue protect founders and investors. The Legal Bank can help you price your round and coordinate the statutory reports needed. Share your requirement to discuss the next steps.