New valuation rules seek fairer outcomes in bankruptcy cases
The aim is to implement a scientific approach and minimize the scope of arbitrary methods in the valuation of companies under stress, which significantly affects lenders’ evaluations of tender offers and revival plans.
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The circular comes in the wake of the Insolvency and Bankruptcy Board of India’s (IBBI) discussion paper dated November 2025 on valuation guidelines.
The latest guidelines consist of three parts. The first part sets out the general requirements regarding the documents that must be kept by the registered valuer, the minimum content of the valuation report, the main parameters that must be taken into account in the valuation of receivables, and the duties of registered valuers towards the designated coordinating valuer.
The second section contains asset-specific formats of the valuation report. The third and final section sets out the dos and don’ts for the person coordinating the valuation in determining the fair value of the stressed firm.
The regulator stated that the documents would constitute a comprehensive written record of the valuation and would include client-related communications, working papers and supporting material evidencing the conclusions reached. The regulator added that the registered valuer will ensure that documentation is maintained in a way that clearly describes the valuation process and is sufficient to evidence the final results.
Receivables valuation
According to the circular, the person making the appraisal should take into account the nature of the receivables of the company under stress, credit risk profile, related party status, aging of the receivables, legal applicability and documentation, past collection and collection records.
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In addition, the valuer must consider macroeconomic and industry factors, such as industry-specific default trends and economic conditions affecting the recoverability of receivables, and other parameters relevant to the valuation.
As of March, the decade-old IBC had facilitated resolution of 1,419 companies, bringing in ₹4.32 lakh crore to creditors, with recovery reaching 30.6% of accepted claims.
