Enterprise and brand valuations are required for share issues, mergers, purchase-price allocation under Ind AS 103, impairment testing, IBC resolution and one-time settlements — and in most of these cases the signature must be that of a registered valuer in the Securities or Financial Assets class.

How is an enterprise valued?

Three approaches, reconciled: income (discounted cash flow — the primary method for going concerns), market (trading and transaction multiples of comparable companies) and asset (net asset value, relevant for asset-heavy or stressed businesses). The choice and weighting must be explained, not asserted.

Brand and enterprise value rest on the technical condition of the business underneath — which is why engineers and CAs work together.
Brand and enterprise value rest on the technical condition of the business underneath — which is why engineers and CAs work together. Photo: McKay Savage from London, UK · CC BY 2.0 · Wikimedia Commons

How is a brand valued?

Most often by relief from royalty: what the business would pay to license the brand if it did not own it, capitalised over its useful life. The excess-earnings method isolates the profit attributable to the brand after charging for all other assets. Kakode & Associates has valued the Provogue brand under IBC and patents for Khandelwal Laboratories.

How much weight each method usually carries in an enterprise valuation
  • Discounted cash flow50%
  • Market multiples30%
  • Net asset value20%

Illustrative weighting for an operating business. Asset-heavy or loss-making companies shift weight towards net assets.

Common mistakes

  • Projections copied from the management plan without stress testing
  • Discount rates without a stated build-up (risk-free rate, equity premium, size and company-specific risk)
  • Ignoring the technical condition of the underlying plant — which is why our financial and engineering teams work together

See Brand, Enterprise & Intangible Valuation.

Enterprise value rests on the technical condition of the business underneath — which is why engineers and chartered accountants work together.
Enterprise value rests on the technical condition of the business underneath — which is why engineers and chartered accountants work together. Photo: iMahesh · CC BY-SA 4.0 · Wikimedia Commons