Valuation practices under regulatory lens as sebi flags concerns

The Whole-Time Member of the Securities and Exchange Board of India, Ananth Narayan, on Friday Raised a Red Flag Around Valuation PRACTICES, Urging India’s CHIFOS) to help Transparent and Accountable Regulatory Framework.

Addressing cfos at the etcfo conference, Narayan Emphahsized The Need For Greater Transparency, Accountability, and Disclosure Standards in the Valuation of Company Assets and Investments.

“Let me Flag One Area That Needs Your Attention – Valuations,” Narayan said in his keysnote address at the conference. “There are some perceived challenges Around Valuations like that due earlier with credit ratings.”

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Concerns

He cited key Concerns, Including a Perceived Conflict of Interest – Valuers are hired and paid by the very entities who assets they value and the risk of valuation shopping Due to different with minimal disclosure and Lack of Accountability – Compecially when Valuations Change Sharply Over Time.

“Just as Credit Rating Agency (CRAS) Now Disclose Rating Histories and Are Held to Standards, it may be time for valuers to disclose assumptions, Sensitivity Ranges and Track Records, and Be Helde Accountable for Egregious Deviations, “Narayan Added.

The Warning Comes as India’s Capital Formation Landscape Scales New Highs. Narayan mentioned that in FY25, Listed Companies Raised A Record 4.3 trillion in equity capital, while mutual funds mobilized over 6 trillion into equity-oriented funds. Alternative Investment Funds (AIFS) Reached 13.5 Trillion in Commitments, Deploying 1.3 trillion in the year alone.

“Our Securities Market ecosystem has grown dramatically- Forrom 4.2 Crore Unique Investors in March 2020 to 13 Crore Today,” Narayan said.

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Still, He Cautioned Against Complacency, Stressing The Need to Guard Against Two Types of Regulatory Failures – Governance Failures, Tech Breakdowns, Fraud, Manipulation (Type I ERORORORROT) And -Excessive Regulation Stifling Innovation or Growth (Type II Errors).

Narayan Called on Cfos to Embrace their Evolving Roles as Value Architects. When they sign off on Financial Statements, IT’s Not a Routine Formality but a Solemn Promise That What’s Presented is a True and Fair View of the Enterprise’s Financial Health.

He Also Flagged Prior Breaches of Trust Involving Funds Siphoned Off from Listed Entities, Sharp Accounting PRACTICES – SEPEINLY AROUND VALUANS, and Insider of Insider Trading, Which Prompted SEBI Tighten disclosure norms and rules Around related party transactions and rumor verification.

“Regulation cannot be a one-way street,” he stressed. “Over-Regulation can Hamper Genuine Capital Formation with Type II Errors. We need you- CFOS (And Auditors)-To be activated partners in co-crediting faai, balanced rules.”

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He encouraged Cfos to Organise for Formal Participation in Sebi’s Public Consultations and Regulatory Forums and Offred Two PRACTICAL TRUST-MULULINing Suggestions-Shorten the time Lag BetWen Annual Results and Full Reports, and ENSURE Deeper, Year-Round Engagement with Audit Committees and Auditors.

“Our shared goal is clear: to co-credit a regulatory framework that is optimum, robust, responsive, and enabling,” Narayan concluded. “Trust is the foundation. Capital formation is the engine. Regulation is the guardrail. And you, the cfos, are at the wheel.”