Presentation on theme: "The Value of ‘Valuation’ Rajiv Krishnan, DGM State Bank of India Zonal Office, Vadodara Gujarat India Prepared by: Dr Rajesh Khajuria, TEAM Projects &"— Presentation transcript:
The Value of ‘Valuation’ Rajiv Krishnan, DGM State Bank of India Zonal Office, Vadodara Gujarat India Prepared by: Dr Rajesh Khajuria, TEAM Projects & Consultants, Vadodara
Indian Economy Indian economy is 8% plus p.a., likely to touch 10% over next few years. India is one of the top 5 produces or processors of Textiles, Diamonds, Tea and Manpower. Indian economy is one of the oldest, and youngest economies in the world, with half a billion young people.
Indian Economy India’s exports are 25%, and 34% p.a., reaching total export-import of about US$ 300 billion. Indian professionals are more ethical, and deliver upto 3 times more productivity at upto three times less cost of developed nation – hence preferred the world over. How can you benefit as a Valuer? –My Answer is: Knowledge, Practice and Ethics.
Institutions Institution of Valuers, New Delhi –www.InstitutionOfValuers.org Practicing Valuers Association of India –www.pavi.info International Valuation Standards Committee’ UK (www.ivsc.org) –India represented by PAVI. International institutions of Valuers are functioning in major countries. Valuers are also called ‘Appraisers’ in The USA.
4 Valuation Practice Four Practices of Valuation: Determination of Value of ‘Assets’. Forecasting of the ‘Earning Power’ of Assets. Estimation of the ‘Cost’ of Asset. Determining ‘Non-monetary Benefits’ or characteristics that contribute to Value.
Value, Forecasting & Cost of Asset In ‘Valuation’ and in Forecasting of ‘Earning Power’, the word ‘Asset’ is used to describe the rights to the future benefits of something owned or possessed to the exclusion of other persons. The "something owned" may be tangible, intangible or both. In a ‘Cost’ estimation, the word ‘Asset’ is used to describe the "something owned" without regard to its ownership.
Non-monetary Benefits The rendering of judgments as to age, remaining life, condition, quality, or authenticity of physical assets, amenities, based on: An estimate of the amount of a natural resources, population increase, nature of market, rate of absorption, etc.
Principles of Valuation Practice and Code of Ethics Inform those who use the services of Valuers as to what, in the opinion of Association, constitutes competent and ethical valuation practice: –Serve as a guide to its own members in achieving competency in valuation practice and in adhering to ethical standards.
Principles of Valuation Practice and Code of Ethics –Aid in the accomplishment of the purposes of the Association, which include : –(a) Fostering the age of valuation education, –(b) Improvement and development of modern valuation techniques, –(c) Encouragement of sound professional practices, –(d) Establishment of criteria of sound performance for use of employers and staff of valuers, –(e) Enforcement of ethical conduct and practice by its members.
Knowledge & Practice Individual Skills, Competence, and depth of Ethical understanding in valuation practice. Reputation of members. Registration Certificates of Institution or Association of Valuers.
Unethical Practices Contingent Fees (based on proposed value of assets) are unethical, unless specified and agreed by the client or third party (like Bank). Valuer should not be interested in the property to be valued, unless disclosed and agreed by the client or third party. Signature forgery or unsigned valuation reports. Advocacy of self or valuation services offered. Advertising and solicitation of business.
Unethical Practices Unconsidered or preliminary report on valuation without going into required details. Deviation from standards of valuation. Unprofessional conduct. Conviction in Court of Law.
Valuation Report Description of Asset to be valued. Statement of Purpose of valuation. Statement of Contingent and Limiting conditions on findings of valuation. Methodology used. Statement of Valuer’s Disinterestedness. Signature of Valuer, and Dissenting Opinions if any.
Valuer’s 5 Obligations To client. To third party (like Bank). Avoid giving false numerical results. Competency and Ethical Practice. Character of Valuation Practice..
In a Nut-shell Valuer should have ‘Thirst for Valuation’. Collaboration with other professionals like Chartered Accountants (CA / CS / ICWA / CE etc) and Certified Management Consultants (CMCs) is encouraged for best practices. Valuation Standards and Ethics must be observed for long term success of this important profession.