RBI valuation for FDI is required when issue or transfer of Equity Shares or Compulsory convertible instruments (CCDs/ CCPS, etc.) of an Indian company takes place between an Indian resident and Non-resident.
On the other hand, RBI valuation for Overseas Direct Investment (ODI) is required when an Indian company acquires or transfers, Equity Shares in an Overseas Company.
Obtaining RBI valuation is a legal obligation. As per the RBI law, FDI and ODI valuations must be submitted along with the necessary forms in order to complete the share transaction.
As per the law, FDI price refers to the Minimum Price, and ODI stands as the Maximum Price for any of these types of transactions from the viewpoint of Exchange Control.
Hence, it is imperative to plan the value assessment of FDI and ODI transactions in order to avoid shortcomings in the contractual understanding and fair value.
Approaches and Methodologies
According to FDI guidelines, shares must be fairly valued as per any of the internationally accepted pricing methodology.
The valuation must be certified by a SEBI registered merchant banker or chartered accountant, or wherein the shares of the company aren’t listed on any of the recognized stock exchanges of the country. Nevertheless, RBI doesn’t prescribe any such methodologies.
RBI valuations are required for ODI transactions above 5 million USD, and transactions associated with the Swap of Shares. SEBI Registered (Cat-I) Merchant Banker only is authorized to do such valuations.
At Valuation India, we are authorized to conduct FDI valuations. For more information on FDI valuations, get in touch with today!