Define the proposed issue

Identify the issuer, proposed investors, class of security, subscription terms and transaction date. Clarify whether the valuation is intended for a corporate requirement, a cross-border transaction, tax analysis or commercial negotiation. More than one framework may need to be considered.

Understand the capital structure

Pre-money and post-money values describe different points around an investment. Existing shares, options, convertible instruments and the proposed new issue can affect ownership and economic rights. Review the fully diluted capital structure and the terms of each instrument rather than relying on the current issued share count alone.

Confirm the applicable requirements

The permitted method, professional eligibility and reporting requirements depend on the transaction and law applicable at the relevant date. Historical guidance should not automatically be used for a new issue. Coordinate the valuation brief with the company’s legal, tax and secretarial advisers before the report is finalised.

A simple illustration of dilution

Assume a company has an agreed pre-money equity value of ₹8 crore and receives ₹2 crore for newly issued ordinary shares with the same rights as the existing shares. In this simplified example, the post-money equity value is ₹10 crore and the new investor holds 20%. Existing shareholders collectively hold the remaining 80%.

This illustration assumes all the investment enters the company and ignores fees, options, convertibles and special rights. A purchase of existing shares from a shareholder does not put that purchase price into the company. Real transactions need a capitalisation table that reflects the actual terms.

Prepare a clear information pack

Bring together recent financial statements, current management accounts, forecasts and the assumptions supporting them. Include the shareholding register, outstanding options and convertible instruments, proposed issue terms and the planned use of funds. Explain any major changes since the latest accounts.

The report should distinguish the value conclusion from the eventual subscription terms and identify the securities, date, purpose and limitations. Where the proposal changes during negotiation, review the valuation brief before using the report for the revised issue.