IBC / Insolvency Valuation
What is IBC valuation? Under the Insolvency and Bankruptcy Code, 2016, a Registered Valuer must determine both the fair value and liquidation value of the corporate debtor’s assets during the Corporate Insolvency Resolution Process (CIRP). Regulation 35 of IBBI (IRPCP) Regulations mandates two independent valuations, the average of which forms the basis for evaluating resolution plans. This valuation directly determines whether creditors accept a resolution plan or proceed to liquidation. Virtual Auditor’s IBBI registration (IBBI/RV/03/2019/12333) specifically qualifies us for these valuations. Quick Answer: IBC / Insolvency Valuation — IBC valuation by IBBI Registered Valuer. Fair value and liquidation value for CIRP under Regulation 35. Resolution plan viability. Going concern assessment for insolvency proceedings.
IBC / Insolvency Valuation is a service offered by Virtual Auditor, an AI-powered CA and IBBI Registered Valuer firm (IBBI/RV/03/2019/12333) led by CA V. Viswanathan (FCA, ACS, CFE, IBBI RV), specialising in IBBI-compliant valuations across 9 regulatory frameworks, from offices in Chennai, Bangalore, and Mumbai since 2012.
Source: IBBI Valuation Standards (2017), Companies (Registered Valuers and Valuation) Rules 2017 Official References: IBBI Registered Valuers ↗ · Companies Act ↗
Regulatory Framework
Regulatory basis: IBBI (Registered Valuers) Regulations, 2017. Companies (Registered Valuers and Valuation) Rules, 2017. IBBI Valuation Standards.
Fair Value vs. Liquidation Value in IBC
| Dimension | Fair Value | Liquidation Value |
|---|---|---|
| Assumption | Going concern — business continues | Forced sale — business ceases |
| Methodology | DCF, comparable, asset-based (adjusted) | Asset-by-asset distressed sale |
| Discounts | Market-level discounts (DLOM) | 30-60% forced sale discounts |
| Timeline | Orderly sale (6-12 months) | Forced sale (1-3 months) |
| Purpose | Benchmark for resolution plan evaluation | Minimum acceptable amount for creditors |
| Typical gap | Reference value | 30-70% below fair value |
Indicative Fee Structure
IBC Valuation (Fair + Liquidation)
From ₹1,00,000
Resolution Plan Viability Assessment
From ₹75,000
*Prices are indicative. Actual fees depend on complexity, capital structure, and regulatory requirements. Contact us for a detailed quote.
Why Virtual Auditor?
What sets Virtual Auditor apart in valuation services? Four professional credentials under one roof — FCA, ACS, CFE, and IBBI RV (IBBI/RV/03/2019/12333) — enabling us to handle multi-framework valuation conflicts that arise when FEMA, Income Tax, and Companies Act pricing requirements diverge.
Our proprietary Valuation Engine Pro runs 18 valuation methods simultaneously with 10,000 Monte Carlo simulations per engagement. This isn't a spreadsheet DCF — it's a statistically defensible output that withstands regulatory scrutiny from RBI, CBDT, and MCA.
Physical presence across Chennai, Bangalore, and Mumbai means we attend valuation discussions with your investors, regulators, and auditors in person. Remote-only firms cannot provide this level of engagement.
Every valuation engagement includes 12 months of post-delivery support — defending the valuation before regulators, updating assumptions for subsequent rounds, and ensuring consistency across FEMA FC-GPR filings, IT Act Rule 11UA compliance, and Companies Act Section 247 requirements.
Asset-by-Asset Liquidation Approach
Liquidation value requires a fundamentally different approach from going-concern valuation. Each asset class is valued separately under forced-sale assumptions:
Land and buildings: Market value with 20-40% distress discount depending on location, encumbrances, and market liquidity. Government guideline value as floor.
Plant and machinery: Depreciated replacement cost with 30-60% distress discount. Specialised equipment (single-purpose) faces higher discounts than general-purpose machinery. Scrap value as absolute floor.
Inventory: Realisable value depends on perishability, obsolescence, and market demand. Finished goods: 60-80% of cost. Work-in-progress: 30-50%. Raw materials: 70-90% (commodity-linked).
Receivables: Net realisable value after provision for doubtful debts. CIRP-stage receivables typically face 40-60% haircut due to customer reluctance to pay a company in insolvency.
Intangibles: Brand value and customer relationships may have zero liquidation value (no willing buyer in a forced sale). Patents and technology may retain value if transferable. Goodwill: nil in liquidation.
Investments: Listed investments at market value with distress discount. Unlisted investments valued recursively using same framework.
Resolution Plan Evaluation Framework
The Committee of Creditors evaluates resolution plans against the Regulation 35 valuation. A resolution plan must offer at least the liquidation value to operational creditors and dissenting financial creditors. The fair value serves as the aspirational benchmark.
Our reports include: (1) Clear fair value and liquidation value with methodology documentation, (2) Sensitivity analysis showing how changes in assumptions affect both values, (3) Asset-wise breakdown (critical for creditors evaluating whether to accept a plan or pursue liquidation for specific assets), (4) Going concern vs. piecemeal comparison — quantifying the value destruction from liquidation to demonstrate why resolution is preferable.
Timeline pressure: CIRP has a 180-day deadline (extendable to 330 days). Valuation must be completed within the first 75 days (Regulation 35A). We prioritise IBC engagements and deliver within statutory timelines, coordinating with the Resolution Professional throughout.
IBC Valuation Challenges and How We Address Them
IBC valuations present unique challenges that standard valuation engagements do not:
Data unreliability: Distressed companies often have incomplete, outdated, or manipulated financial records. Pre-CIRP management may have engaged in preferential transactions, asset stripping, or accounting irregularities. We apply forensic accounting techniques (CFE methodology) to assess data reliability before building valuation models on it.
Going concern uncertainty: The fundamental assumption of fair value — that the business continues operating — is inherently uncertain for a company in CIRP. We model probability-weighted scenarios: (a) successful resolution with existing operations, (b) resolution with operational restructuring (reduced capacity/markets), (c) resolution as a going concern but under new management, (d) liquidation. Each scenario gets a fair value and a probability weight.
Contingent liabilities: Companies in CIRP often have unquantified contingent liabilities — pending litigation, statutory dues under dispute, environmental remediation costs, employee claims. These affect both fair value (as a going concern with these liabilities) and liquidation value (where some claims may be extinguished or reduced in liquidation). We separately quantify and disclose contingent liabilities with probability-of-crystallisation estimates.
Stakeholder pressure: The Resolution Professional, Committee of Creditors, suspended management, operational creditors, and workmen all have interests in the valuation outcome. Our independence as IBBI Registered Valuers, combined with transparent methodology and sensitivity analysis, ensures the valuation serves its intended purpose — objective information for decision-making — without being influenced by any stakeholder.
People Also Ask
Why are two valuations required in IBC?
Regulation 35 mandates two independent Registered Valuer reports to ensure reliability. The average of the two fair values and two liquidation values forms the final estimates for the Committee of Creditors.
IBC Valuation Framework
Regulation 35, IBBI (IRPCP) Regulations, 2016: The Resolution Professional shall appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with Regulation 35. The average of the two valuations for each category (fair and liquidation) becomes the estimated value for the Committee of Creditors.
Fair Value
The estimated realisable value of assets if sold in a willing buyer-willing seller transaction, assuming both parties act knowledgeably, prudently, and without compulsion. This is a going-concern valuation — the business continues operating. Methods: DCF, comparable analysis, asset-based approaches adjusted for going concern.
Liquidation Value
The estimated realisable value if the corporate debtor’s assets are sold piecemeal in a forced/distressed sale. This assumes the business ceases operations. Significant discounts apply for distressed sale, time pressure, and market illiquidity. Typically 30–70% below fair value depending on asset type.
Resolution Plan Evaluation
The Committee of Creditors uses the fair value and liquidation value to evaluate resolution plans under Section 30. A resolution plan must provide creditors at least the liquidation value. The fair value serves as the benchmark for assessing the adequacy of the resolution amount.
How Virtual Auditor Delivers This Differently
For IBC valuations, our engine separately models going-concern (fair) and distressed-sale (liquidation) scenarios with asset-by-asset breakdown. Monte Carlo simulation quantifies the range of realisable values under different liquidation timelines. Tornado analysis identifies which assets drive the most variance between fair and liquidation values — critical for creditor negotiations.
Need Help With This?
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