Sebi member raises concerns over valuation practices

Mumbai, Jun 14, 2025

Synopsis
SEBI has expressed concerns regarding existing valuation practices, highlighting potential conflicts of interest where valuers are compensated by the entities whose assets they assess. Ananth Narayan emphasized the significant variations in valuations stemming from differing assumptions and limited transparency. He advocated for valuers to disclose assumptions, sensitivity ranges, and track records, promoting greater accountability for substantial valuation changes.

The Securities and Exchange Board of India (Sebi) on Friday raised concerns about current valuation practices.

"There are some perceived challenges around valuations like those faced earlier with credit ratings. A perceived conflict of interest-valuers are hired and paid by the very entities whose assets they value," Sebi whole-time member Ananth Narayan said. He was speaking at the ETCFO NextGen event here.

He highlighted the wide divergence in valuations due to differing assumptions, often with minimal disclosure, and lack of accountability when valuations change sharply over time.

"Just as credit rating agencies 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 held accountable for egregious deviations," he said.

He also urged chief financial officers to reduce the time lag between financial results and annual reports.

[The Economic Times]