STUDY MATERIAL

PROFESSIONAL PROGRAMME

VALUATIONS & BUSINESS

MODELLING
MODULE 3
PAPER 9.7

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 PROFESSIONAL PROGRAMME
VALUATIONS & BUSINESS MODELLING

A business valuation provides the management of business with numerous facts and figures pertaining to the
actual worth or value of the company in terms of market competition, asset values and income values. The key
benefits of business valuation are: Better Knowledge of Company Assets; Understanding of Company Resale
Value; Assistance during Merger & Acquisitions; Obtain a True Company Value and Access to More Investors.

With the surge in business activities, valuations have occupied the centre stage. Whether it is a start-up or a big
corporate house, valuations is pervasive. Right from the setting up of the business entity, during its merger and
acquisitions, for obtaining long-term finance from banks / financial institutions, winding-up and for various other
business purposes, valuation is an integral component. There are various vital dimensions associated with the
valuation- International Valuation Standards; Guidance to Valuation; Methods used in Valuation; Valuation of
Tangibles and Intangibles; Valuation during Mergers & Acquisitions etc. In order to have a holistic approach on
valuation and to surmount over valuation related matters, it is extremely essential that a professional needs to
be conversant with the aforesaid elements of valuation.

Merely possessing the theoretical knowledge on the subject will not suffice as it is like a applied research
wherein every element of valuation has a practical relevance. Moreover, depending on the magnitude, nature
and scale of the business different valuation approaches needs to be embraced.

Another concept that has gained steam is Business Modelling. Despite presence of various resources, i.e.
finance, human, material, technology etc. in abundance if the business organisation is devoid of a robust
business model then either it may not attain the desired level of performance or collapse during turbulence.
Perhaps financial giants like Lehman Brothers and other investment banks would not have collapsed due to the
onslaught of global economic crisis had they were having sound business models.

Business models to be sustainable needs to be revised in light of the changing legal, business and economic
environment. It needs to be developed by using scientific approach rather than rule of thumb. Approaches like,
spreadsheet techniques, future projections, analysis of key financial ratios, cash flow analysis, estimation of
maximum finance required, working capital management etc. may assist immensely in building a robust and
sustainable business model.

Company Secretary Profession have witnessed a drastic metamorphosis. From a ‘Glorified Clerk’, they have
attained the status of ‘Governance Professionals’. In other words, the trajectory of the Company Secretary
Profession have moved upward when one compares his / her role under Indian Companies Act, 1956 and
Indian Companies Act, 2013. Without an iota of doubt it can be opined that Indian Companies Act, 2013 have
been a game changer for the Company Secretaries.

Since the role of a Company Secretary in the capacity of a ‘Registered Valuer’ has been duly recognized under
the Companies Act, 2013, consequently, it has added wings to the profession. An in-depth knowledge of the
subject will definitely assist a Company Secretary-in-Making to explore career opportunities in the areas of
Valuations and Business Modelling.

Days are gone when technical areas like valuation and business modelling were the forte of selected group
of experts. Today, a Company Secretary is competent enough to undertake valuation related activities. In the
era which is marked by soaring merger and acquisitions, particularly, cross-border merger and acquisitions, a
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comprehensive knowledge of the subject will play a pivotal role in understanding the finer aspects of merger
and acquisitions, like valuation of tangibles, valuation of intangibles etc. Similarly during winding-up process,
there is a need for valuation of various assets and in absence of proper understanding on the key concepts of
valuation, it will be next to impossible for a Company Secretary to execute the valuation process.

Any business be it of any magnitude, it can only attain excellence, when it is sustainable. For a business to
be sustainable it needs a robust business model. Like on the rails the train runs and if the rails are of abysmal
quality then there is a probability of derailment, similarly, if a company does not have a sound business model,
then in the long run, the survival of the company may be difficult.

Further, in this dynamic business eon, where only constant thing is change, it is extremely important that
business organizations change or develop new business models as and when the need arises. For instance, if
a company is operating in an industry which is having an oligopoly form of market competition and due to entry
of more firms, it transforms into monopolistic form of market competition, then the business organization may
have to either change or start from the scratch its business model.

A Company Secretary being the ‘Key Managerial Personnel’ of the company and being an indispensable
human capital of the company, it is essential that he / she must possess deep insights regarding various forms
of business models, factors determining a robust business model, MS-Excel applications of various finance
functions etc.

In view of the aforesaid matter, this subject will act as a ‘Lighthouse’ in guiding the Company Secretaries while
performing valuation and business modelling related activities.

Although due care has been taken in publishing this study material, yet the possibility of errors, omissions
and/ or discrepancies cannot be ruled out. This publication is released with an understanding that the
Institute shall not be responsible for any errors, omissions and/or discrepancies or any action taken in that
behalf. Should there be any discrepancy, error or omission noted in the study material, the Institute shall
be obliged if the same are brought to its notice for issue of corrigendum in the e-bulletin Student Company
Secretary. In the event of any doubt, students may write to the Directorate of Academics in the Institute for
clarification at academics@icsi.edu.

There is open book examination for this Elective Subject of Professional Programme. This is to inculcate and
develop skills of creative thinking, problem solving and decision making amongst students of its professional
programme and to assess their analytical ability, real understanding of facts and concepts and mastery to apply,
rather than to simply recall, replicate and reproduce concepts and principles in the examination.

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