Everything that anyone knew about fair value, valuer, and valuation went for a toss in the last two-three years. In general, we’ve seen a couple of head-scratching years as bizarre startup valuations hit the headlines with a regularity, almost like OTT releases. How could the fair value of a tiny company’s share zoom 8,000% in 17 months—from Rs 13,000 in February 2021 to Rs 11 lakh in July 2022? Or e-commerce platform DealShare’s share value rise 1,300% in 13 months? Or how did corporate-debt platform Yubi see an appreciation of 150% in just three months? More valuation magic: A projected profit of Rs 58 lakh in 2024-25 changes to a projected profit of Rs 423 crore, which then triples to Rs 1,349 crore. All in a matter of 17 months. Tra la la la... Granted, valuation is not an exact science, and a good dose of the inherent subjectivity is what pushes the boundaries of entrepreneurial innovation and human creativity. But what if greed overrides it all? This is true all over the world. “Appraisers, for the most part, don’t value companies. They do kabuki valuations, where the endgame is pre-determined, and they find ways to get there.” Now, if this endgame is pre-determined between investors and startup founders, why need a valuer to agree on those numbers? Because it’s a regulatory requirement. Fair to say, many of the 5,131 individuals and 77 entities registered as valuers as of 3 December, have had a bull run valuing businesses in India. I think it would be harder for them to obtain a registration than to build a valuation model based on projected financials which are—gulp—provided by the startups. And if you have a government that basks in the glory (and financial returns) of overvalued startups, why even bother about inflated valuations? The MMS tells a riveting tale of the little-known entities called valuers.
