In Market Approach value is determined by comparing the subject company or assets with its peers in the same industry of the same size and region. Most Valuations in stock markets are market based and it is based on the premise of efficient markets and supply & demand.
Market approach, also referred to as relative approach, is a valuation approach that uses prices and other relevant information generated by market transactions involving identical or comparable (i.e., similar) assets, liabilities or a group of assets and liabilities, such as a business. This is also known as relative valuation approach.
Common Methodologies under Market approach:
1) Market Price Method;
2) Comparable Companies Multiple Mehtod (CCM)
3) Comparable Transaction Multiple Mehtod (CTM)
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Unlock the true worth of your Business with our expert Valuation Services! Whether you're a startup, established business, or investor, our team is here to provide accurate and insightful valuations tailored to your unique needs.
Why choose our Valuation Services?
🔍 Precision and Accuracy: Our seasoned professionals use cutting-edge methodologies to ensure precise valuation results.
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💡 Compliance Assurance: Rest easy knowing that our valuations adhere to industry standards and regulatory requirements.
Ready to elevate your financial strategy? Contact us today to schedule a consultation and discover the true value within your Business!
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It is important to have right approach before start of any work/endeavour.
Similarly, ICAI Valuation Standards 2018 recognizes three broad approaches to business valuation:
1️⃣ Income Approach - Involves Income / Future Income data;
2️⃣ Market Approach - Involves Market / relative / comparable data;
3️⃣ Asset Based (Cost) Approach - Involves cost data.
At @ValuGenius , we team of dedicated experts understand the need of the transaction and carry out valuation using appropriate valuation approach.
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Under Valuation,
Value often depends on the Intended purpose of the valuation. i.e. the same business often has different value depending on the purpose of valuation.
Four broad categories
1) Valuation for transaction
2) Valuation for court case
3) Valuation for compliance
4) Valuation for planning
The primary role of valuation is that it provides both buyer and seller to start with negotiation.
Valuation plays major role in portfolio management, acquisition analysis, corporate finance, legal and tax purposes, etc.
We, at ValuGenius , truly understand the purpose and role of valuation before carrying out the assignment.
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Common Mistakes in Valuations
Valuation exercises often involve complexities that can lead to errors if not handled diligently. Common mistakes in valuations, as highlighted in ICAI guidelines and industry practices, include
1. Over-reliance on Subjective Assumptions
Valuers may make assumptions about growth rates, discount rates, or market conditions that are overly optimistic or not backed by data.
Failure to adequately validate these assumptions against historical data or industry benchmarks.
2. Inadequate Data Collection
Use of incomplete, outdated, or biased data sets can lead to inaccurate valuations.
Neglecting to conduct sufficient due diligence on the underlying data inputs.
3. Improper Use of Valuation Methodologies
Incorrect application of valuation approaches (Income, Market, or Cost Approach) based on the specific asset or entity being valued.
Using a single method without reconciling it with others to cross-check results.
4. Ignoring Market and Regulatory Context
Overlooking the impact of economic conditions, market trends, and regulatory changes on the valuation.
Neglecting jurisdictional and legal compliance requirements, especially in cross-border transactions.
5. Misjudging Discount Rates
Incorrect estimation of discount rates, leading to improper risk assessment and inaccurate valuation conclusions.
Using a generic rate instead of one specific to the entity’s risk profile or industry.
6. Failure to Consider Highest and Best Use
For non-financial assets, failing to evaluate their “highest and best use,” as required under fair value standards like Ind AS 113.
7. Inconsistent Treatment of Cash Flows
Mixing pre-tax and post-tax cash flows with inconsistent discount rates.
Excluding non-recurring items or failing to adjust for working capital and capital expenditure.
8. Overlooking Intangible Assets
Ignoring the valuation of intangible assets such as intellectual property, brand value, or customer relationships, especially in tech-driven businesses.
valuation report
9. Overlooking Contingencies and Liabilities
Not accounting for potential liabilities, pending litigations, or contingent risks.
10. Bias and Conflict of Interest
Allowing personal bias or pressure from stakeholders to influence the valuation outcome.
Failing to disclose limitations and disclaimers clearly in the valuation report.
9. Overlooking Contingencies and Liabilities
Not accounting for potential liabilities, pending litigations, or contingent risks.
10. Bias and Conflict of Interest
Allowing personal bias or pressure from stakeholders to influence the valuation outcome.
Failing to disclose limitations and disclaimers clearly in the valuation report.
11. Neglecting Peer and Industry Comparisons
Failing to benchmark the entity’s performance or metrics against industry peers for a realistic valuation.
12. Insufficient Documentation
Inadequate explanation of assumptions, methods used, and the rationale behind conclusions in the valuation report.
Mitigating These Mistakes
To address these errors, professionals are advised to:
Adhere to ICAI Valuation Standards for consistency and reliability.
Perform comprehensive due diligence and cross-validate data and assumptions.
Use multiple valuation approaches and reconcile results.
Ensure transparency in reporting and incorporate disclaimers to highlight uncertainties.
common mistakes of valuation
These practices ensure a fair, defendable, and stakeholder-aligned valuation process.