Business Valuation in India — EV/Revenue & EV/EBITDA Multiples by Sector for FY 2025-26

What is your business worth? In India, valuation is not just a number for investor negotiations — it is a legal requirement enforced by four different regulators. FDI pricing, ESOP fair value, buyback pricing, and M&A deal structure all require a defensible, methodology-backed valuation.

This guide covers the three primary valuation methods, current sector multiples, the Rule 11UA framework for angel tax, and when you need a Registered Valuer versus a CA opinion.

When Valuation Is a Legal Requirement in India

The critical distinction: For NCLT-sanctioned mergers and IBC proceedings, only an IBBI Registered Valuer (individuals registered with one of the three Registered Valuer Organisations: IBBI-RVO) can provide a valuation report. A CA opinion is not sufficient. For most other purposes — angel tax, FDI, ESOP — a CA-certified valuation is acceptable.

The Three Valuation Methods

1. Discounted Cash Flow (DCF) — Forward-Looking

DCF values a business at the present value of its projected free cash flows. The formula:

Enterprise Value = Σ (FCFt / (1 + WACC)^t) + Terminal Value / (1 + WACC)^n

Where:

• FCFt = Free Cash Flow in year t (EBIT × (1 - tax rate) + D&A - Capex - ΔNWC)


• WACC = Weighted Average Cost of Capital (cost of equity + cost of debt, weighted by capital structure)


• Terminal Value = FCFn × (1 + g) / (WACC - g), where g = sustainable long-term growth rate

DCF is the most common method for FDI compliance valuations because FEMA requires it. However, DCF is highly sensitive to terminal growth rate and WACC assumptions — a 1% change in WACC can shift the value by 20–30%.

2. Market Multiples (EV/Revenue, EV/EBITDA) — Comparable Transactions

This method applies the trading multiples of comparable listed companies (or comparable private transactions) to the subject company's financials.

EV = EBITDA × Sector Multiple (or Revenue × Revenue Multiple for pre-EBITDA businesses)

The table below shows current indicative multiples for Indian private companies at Series A–C stage:

These are base-case multiples for FY 2025-26. A growth multiplier applies: companies growing revenue at > 40% typically command 1.2×–1.3× the base multiple; those growing < 5% are valued at 0.8× or below.

3. Net Asset Value (NAV) — Balance Sheet Approach

NAV values the business at net assets: total assets at fair value minus total liabilities. It is the prescribed method under Rule 11UA for unlisted equity shares for angel tax purposes (the default; DCF is the alternative).

Adjusted NAV revalues fixed assets to market value, adjusts investments to fair value, and removes goodwill (unless supported by independent valuation). It is most appropriate for:

• Holding companies with significant investment portfolios


• Asset-heavy businesses (real estate, infrastructure)


• Liquidation scenarios

For operating businesses, NAV typically understates value because it ignores earnings power and franchise value.

Rule 11UA: The Angel Tax Framework — Now Abolished

Note: Section 56(2)(viib) was removed entirely by the Finance (No. 2) Act, 2024, effective AY 2025-26 (1 April 2025). The Rule 11UA framework below is retained for historical reference and for companies with assessments still open from pre-abolition periods. No new compliance obligation exists under this section.

~~Section 56(2)(viib)~~ previously taxed the premium received by an Indian company on issue of shares above the Fair Market Value (FMV) to a resident investor at 30% of the excess, in the hands of the company.

Rule 11UA prescribes how FMV is computed:

• Option A (NAV method): FMV = (Fair value of assets - Fair value of liabilities) / Number of shares


• Option B (DCF method): FMV as determined by a merchant banker or CA, using a DCF model

The company can choose whichever method gives the higher FMV — higher FMV = lower taxable premium. In practice, for growth-stage companies, the DCF method (correctly applied) produces a significantly higher FMV than NAV, protecting the investor round from angel tax.

DPIIT-recognized startups are exempt from Section 56(2)(viib) — this is the most important planning step for early-stage companies. File for DPIIT recognition before closing your first round.

A Worked Example: Series A Valuation for a SaaS Company

A B2B SaaS company, 4 years old, with:

• ARR: ₹6 Cr (Annual Recurring Revenue)


• Revenue growth: 65% YoY


• Gross Margin: 72%


• Net Revenue Retention: 118%


• EBITDA: negative (investing in growth)

Market multiples approach (EV/Revenue):

• Base SaaS multiple: 4.5× revenue


• Growth multiplier (65% growth): 1.3×


• Adjusted multiple: 5.85×


• EV = ₹6 Cr × 5.85 = ₹35.1 Cr

DCF approach (5-year projection):

• Year 5 ARR: ₹38 Cr (68% CAGR decelerating to 30% by Y5)


• Year 5 EBITDA margin: 22%


• Terminal growth: 5%


• WACC: 18% (reflecting early-stage India SaaS risk)


• Implied EV: ₹29–42 Cr depending on exit multiple assumption

Blended indication: ₹32–38 Cr EV — consistent across both approaches. Investor negotiation typically starts at the midpoint.

The IBBI Registered Valuer Requirement

For NCLT-sanctioned mergers, demergers, and IBC resolutions, a valuation by an IBBI Registered Valuer is mandatory — it cannot be replaced by a CA opinion. Registered Valuers are individuals (not firms) who have passed the valuation examination conducted by one of the three RVOs (ICAI-RVO, ICSI-RVO, IBBI-RVO) and are registered with IBBI.

At HRA, our IBBI Registered Valuer associates handle valuation assignments for NCLT filings, IBC proceedings, and SEBI fairness opinions.

See our Growth Finance & Deal Advisory services →

Frequently Asked Questions

Q: Is a CA valuation sufficient for FDI pricing compliance?
For unlisted companies receiving FDI under the automatic route, FEMA pricing guidelines require that the price not be less than the FMV determined by a SEBI-registered Merchant Banker (for unlisted companies) or a CA using internationally accepted pricing methods (DCF). In practice, CA-certified DCF reports are widely accepted by AD Banks for FDI transactions.

Q: What is the difference between enterprise value (EV) and equity value?
Enterprise Value = Equity Value + Net Debt (total debt minus cash). When you see EV/EBITDA multiples, they are applied to the whole-business value. To get equity value (what a shareholder owns), subtract net debt. Example: EV of ₹50 Cr with ₹10 Cr debt and ₹2 Cr cash = Equity Value of ₹42 Cr.

Q: How often should a private company get a formal valuation?
At minimum: before every funding round, before issuing ESOPs, before a buyback, (Section 56(2)(viib) was abolished from AY 2025-26 and no longer requires annual valuation compliance.) Many companies also do annual valuations for Board reporting and insurance purposes.

Q: Can I use the same valuation for both angel tax and FDI?
Yes, if the methodology is appropriate for both purposes. A CA-certified DCF report prepared for Rule 11UA purposes can also support FDI pricing compliance, provided the same or higher value applies.

Q: What discount is applied to unlisted company valuations versus listed comparables?
A Discount for Lack of Marketability (DLOM) of 15%–35% is typically applied to unlisted company valuations relative to listed comparable multiples. The exact discount depends on the company''s stage, the likely exit timeline, and the availability of buyer interest.

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Prepared by Harun Raaj & Associates, Chartered Accountants. For business valuation, IBBI Registered Valuer reports, and deal advisory, contact our team.

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See Also

• Virtual CFO vs Full-Time CFO for Indian SMEs — Cost, Value & When to Hire Which
• Statutory Audit Checklist for FY 2025-26 — CARO 2020 & Schedule III Compliance

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