Investing in business in India offers exciting opportunities due to its vibrant startup environment. There is also a risk involved when evaluating companies or businesses. The investors must prioritise risk mitigation and transparency to navigate these challenges and protect their capital.
It is crucial that investors should demand third party valuations before making any commitments in order to safeguard cash and make better judgments. Let’s dive into the blog to learn more about the reasons why investors should demand third-party valuations before committing to a business in India.
What is Third-party Valuation?
Third-party valuation means asking someone who is not part of your business or family to determine the actual value of your business. There are a lot of third-party companies available today and they check things like land or a company to determine the true price.
For example, if you want to buy land, but don’t know if it is worth the investment, you can ask real estate experts who know well about the land and its surrounding area. They help you decide if it is worth the investment. Similarly, large companies use third-party valuations before buying or selling assets in business.
Why Should Investors Demand Third-party Valuation before Committing Capital?
Here are the list of things that show why investors should make use of the third-party valuation.
- Risk Mitigation
India is a growing market, but it also has many small and medium businesses with poor record-keeping. Some startups exaggerate their value to attract investors. Investors should always request a third-party valuation before investing in any business in India. A third-party valuation means that an expert, who is not part of the company, assesses the business’s actual worth.
This helps investors to avoid risk when committing capital in India. Sometimes, businesses claim to be worth more than they are. But a third-party expert gives a fair and honest report. This helps investors know if it is safe to invest or not. Opting for third-party valuation before committing is a smart way to save money and to avoid losses.
- Transparency
A third-party valuation can provide you with the right information. This helps in keeping things clear and honest. A third party is someone who is not affiliated with the company or the investor. They assess the company’s true value and provide a fair report.
This ensures that no one is hiding anything or providing incorrect information. It also helps the investor know if they are paying the right price. It is just like checking reviews before making a purchase. Before investing in a significant undertaking, you should be more confident that you are on the right path. Third-party valuation plays a substantial role in making informed decisions.
- Fair Market Value
Investors should always seek third-party valuations before committing a business in India. This means they hire an outside expert to assess the company’s actual value. It helps them to find the fair market value and the exact price you can pay for it.
If investors don’t do this, they might pay too much or invest in a company that is not doing well. A third-party valuation is fair and they help the investors make better decisions. It also helps the investors to have trust in the company they are investing in.
- Strengthening the Due Diligence Process For Investors
Due diligence plays a major role in smart investing. It includes examining financial records and risk factors. A third-party valuation becomes an integral part of this process by offering an expert view on whether the asking price aligns with fundamentals. In India, many investors enter into deals through word of mouth or informal references.
This approach can lead to insufficient due diligence. Independent valuations bring professionalism and credibility to the process. These valuations help meet compliance and documentation requirements in their home countries or under SEBI and FEMA guidelines for foreign investors.
Who Can Do a Third-Party Valuation in India?
Registered Valuers – People approved by the government to check the value of things.
Chartered Accountants – Experts in money and business who are allowed to do valuations.
Certified Valuation Firms – Companies that are trained and licensed to find the right value of a business or property.
Independent Experts – People who are not connected to buyers or sellers and give fair value reports.
SEBI-registered Analytics- Approved by SEBI (a government body) to give an honest value of investments.
These professionals act as third-party valuers and provide trusted reports to ensure your investment is worthwhile.
Summing It Up
In a rapidly evolving market like India, smart investors don’t rely on luck. They demand data, transparency, and objectivity. Third-party valuations offer all of these, and more. They help you by providing the exact value of the property before you are committing to it.
The third-party valuators are necessary for protecting capital and maximising returns. They are your shield against uncertainty and your path to make better investment outcomes. Trust them and make your process easier!