Valuation Under IBC 2026: How Assets Are Priced in Insolvency — Step-by-Step Guide

 How Are Assets Priced Under IBC?

Under the Insolvency and Bankruptcy Code (IBC), assets are priced by two independent IBBI-registered valuers appointed by the Resolution Professional within 7 days of their own appointment. Each valuer independently determines both Fair Value (the orderly sale price) and Liquidation Value (the distressed sale floor). The average of their reports becomes the official reference — used by the CoC to evaluate resolution plans and by NCLT to approve or reject them. From April 2026, all IBC valuations must follow International Valuation Standards (IVS) per IBBI circular.

Assets under IBC are priced through a structured process governed by IBBI Regulation 27 and 35. Two independent IBBI-registered valuers are appointed within 7 days of the Resolution Professional’s appointment. They independently determine Fair Value — the estimated price in an orderly market transaction — and Liquidation Value — the distress-sale floor. Their reports are averaged. These two figures guide the Committee of Creditors in evaluating all resolution plans submitted during CIRP.

Most business valuations answer a single question: what is this company worth? IBC valuation must answer three distinct questions simultaneously — and each question demands a different analytical lens:

Question 1 — What can creditors actually recover if the company is sold as a going concern? → This is Fair Value — the best-case reference point for resolution plans.

Question 2 — What is the worst-case floor if no resolution applicant comes forward? → This is Liquidation Value — the piecemeal distress-sale scenario.

Question 3 — Is it economically rational to revive this business or liquidate it? → The gap between Fair Value and Liquidation Value answers this.

When Fair Value significantly exceeds Liquidation Value, revival through a resolution plan makes economic sense — creditors recover more. When they converge, the business may not be viable as a going concern and liquidation may be the rational path.

This is why IBBI mandates both figures simultaneously — they together define the decision space for every CIRP.

The scale of what this process governs:

India’s insolvency ecosystem has grown into one of the world’s most active. As of mid-2025:

• 52,446 cases received under IBC since inception
• 1,350 resolution plans approved — recovering ₹4.38 lakh crore for creditors
• 31,285 companies resolved prior to NCLT admission (IBC’s deterrent effect)
• Average recovery rate under IBC: 35% vs 22% under SARFAESI and 7% under DRT
• 57% of closed CIRP cases resulted in going-concern rescue (FY25)

Every one of those 1,350 approved resolution plans was anchored by a registered valuer’s determination of Fair Value and Liquidation Value. These numbers are not administrative formalities — they determine the financial outcome for hundreds of thousands of creditors across India.

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Before walking through the valuation process, it is important to understand the three major regulatory changes that took effect between February and April 2026. These changes directly affect how every IBC valuation is now conducted:

Change 1 — IBBI CIRP Amendment Regulations 2026 (February 25, 2026)

Fair Value definition revised: Fair Value now includes “underlying synergies” of the corporate debtor — not just individual asset values. For manufacturing companies, integrated supply chains, or businesses with interdependent assets, this means going-concern enterprise value is explicitly within scope. The previous definition often understated value by treating each asset in isolation.

Coordinator-valuer model: Each “set” of registered valuers must now designate one coordinator valuer responsible for consolidating all asset-class valuations into a single Aggregate Fair Value (AFV). This prevents the IL&FS-type problem where separate valuations of 300+ entities produced incoherent aggregate numbers.

Updated appointment timeline: Resolution Professionals must appoint valuers within 7 days of their appointment — and no later than the 47th day from insolvency commencement. This outer deadline did not exist previously, allowing admission-to-valuation gaps of months in some cases.

Change 2 — IBBI IVS Circular (April 1, 2026)

IBBI Circular IBBI/RV/93/2026 makes International Valuation Standards (IVS) mandatory for all valuations under the IBC — effective immediately. This means every valuation report submitted in any IBC proceeding from April 1, 2026 must include:

• Explicit Basis of Value (Fair Value or Liquidation Value — clearly stated)
• Defined Scope of Work (what assets, what purpose, what date)
• Methodology rationale with documented reasons for approach selection
• Assumptions and limiting conditions explicitly listed
• Supporting market evidence for key inputs

Change 3 — IBC Amendment Act 2026 (April 6, 2026)

The Act formally defines “registered valuer” in the IBC itself under new Section 3(27A) — giving valuers statutory standing within the code rather than relying solely on IBBI Regulations. It also introduces the CIIRP (Creditor-Initiated Insolvency Resolution Process) where valuation requirements mirror regular CIRP.

The 6-Step IBC Valuation Process — Complete with Timelines

Step 1 — RP Appointment & Valuer Mandate (Days 1–7)

Trigger: NCLT admits CIRP application → Resolution Professional is appointed.

What happens immediately: The 7-day clock on valuer appointment (Regulation 27) starts from the moment the RP is appointed — not from CIRP commencement. The RP must appoint two independent sets of IBBI-registered valuers, each covering all required asset classes.

Key decisions the RP makes at this stage:

• Which registered valuers to appoint (must be IBBI-registered for all relevant asset classes)
• Whether to appoint a single RVE covering all three asset classes (Plant & Machinery, Land & Building, Securities) or multiple firms
• Scope definition — which assets are in scope, which locations require site visits
• Timeline negotiation — target 40–50 days for standard cases, longer for complex

Documentation executed: Engagement letter, Non-Disclosure Agreement, independence declaration from each valuer (no conflict of interest with corporate debtor or CoC members).

Post-2026 requirement: RP must ensure both sets of valuers designate a coordinator valuer and that the appointment happens no later than the 47th day from insolvency commencement.

Step 2 — Information Memorandum & Data Room Review (Days 3–10)

The RP provides valuers access to the Information Memorandum (IM) — the primary document package for CIRP — along with supporting data.

What valuers extract from the IM and data room:

Common challenge: Many companies under CIRP have outdated or missing asset records. Valuers work from what is available, documenting gaps that increase uncertainty in the report.

Step 3 — Physical Site Verification (Days 7–25)

This is the most operationally intensive step — and the one most often scrutinised in NCLT challenges.

IBBI regulations require physical verification of inventory and fixed assets. A valuer who submits a report without site inspection is vulnerable to challenge on this ground alone — multiple NCLT benches have set aside valuation reports for inadequate physical verification.

What physical verification involves:

For Plant & Machinery:

• Physical count of machinery units against asset register
• Condition assessment — working, idle, under repair, scrapped
• Age verification and depreciation assessment
• Remaining useful life estimation
• Comparison with replacement cost data

For Land & Building:

• Physical identification and boundary verification
• Measurement (built-up area, plot area) against records
• Structural condition assessment
• Encroachment checks
• Local market enquiry for comparable sales

For Inventory:

• Physical count of raw material, WIP, finished goods
• Condition assessment — usable, near-expiry, damaged
• Mark-to-market pricing for commodity-linked inventory

PAN-India challenge: A large manufacturing group may have 30 facilities across 15 states. Each must be physically verified. This is why mobilisation speed matters — and why firms with PAN-India teams have a structural advantage in CIRP assignments.

Step 4 — Valuation Modelling (Days 15–35)

This is the analytical core of the assignment. Each valuer independently applies the appropriate methods for each asset class without coordination with the other valuer.

The method selected depends on the nature of the asset, the quality of available data, and the valuation objective (Fair Value vs Liquidation Value).

Primary methods used in IBC valuation:

Income Approach (DCF — Discounted Cash Flow)

Best suited for: Going-concern businesses with projectable cash flows — manufacturing, power, infrastructure, telecom.

Key IBC-specific consideration: In distress, historical cash flows are often negative or distorted. Valuers project a “normalised” operating scenario — what the business would generate under competent management without the financial distress. This normalised free cash flow is then discounted at a WACC that reflects the business risk, not the insolvency premium.

Market Approach (Comparable Company/Transaction Analysis)

Best suited for: Companies in sectors with active listed peers or recent M&A transactions.

Key multiples used by sector:

• Manufacturing: EV/EBITDA (8–14× depending on sector specifics)
• Power/Infrastructure: EV/EBITDA (6–10×) or DCF based on PPAs
• Real estate: Price per square foot of completed inventory, NAV of land bank
• Telecom: EV/Revenue (1–3×), subscriber metrics
• Pharmaceuticals: Revenue multiple (2–5×) with ANDA pipeline premium

Asset / Cost Approach (Net Asset Value)

Best suited for: Asset-heavy businesses, holding companies, businesses in sectors without reliable comparable data, and Liquidation Value determination.

The forced sale value is always lower than fair market value — typically a 20–50% discount depending on asset type, condition, and marketability.

Step 5 — Sensitivity Analysis & Report Preparation (Days 30–45)

Sensitivity analysis — mandatory under post-2026 IVS requirements:

The valuation conclusion is not a single number. Per IVS requirements, every report must include scenario modelling showing how Fair Value and Liquidation Value change under key assumption variations:

This matrix gives the CoC a range of fair and liquidation values rather than a single number — enabling them to understand the confidence interval around the valuation conclusion.

Report structure (IVS-compliant from April 2026):

1. Executive Summary — Fair Value and Liquidation Value, one-page overview
2. Engagement Details — Scope, purpose, valuation date, basis of value
3. Company and Industry Background — Business overview, sector context
4. Asset Inventory — Detailed asset list with condition assessment
5. Methodology Selection — Rationale for approach selected (per IVS requirement)
6. Valuation Analysis — Full models, calculations, and assumptions
7. Sensitivity Analysis — Bear/Base/Bull scenarios
8. Conclusion — Final Fair Value and Liquidation Value with basis
9. Assumptions and Limiting Conditions — Explicitly listed (IVS requirement)
10. Annexures — Site visit photographs, comparable transaction data, market evidence

Step 6 — Report Submission, CoC Presentation & Post-Submission Support (Days 40–50)

Submission to RP: Both valuers submit their reports independently. The RP then:

• Compares the two Fair Value estimates
• Compares the two Liquidation Value estimates
• If variance exceeds 25% in Liquidation Value (per asset class): may appoint third valuer
• If within 25%: takes average as the official Fair Value and Liquidation Value

CoC Presentation: The RP presents both valuation reports to the Committee of Creditors. From 2024–25 amendments onwards, valuers must disclose their methodologies to the CoC — the black-box era of “submit-and-forget” valuation is over.

Active CoC from 2026: Under the IBC Amendment Act 2026, the CoC now supervises the liquidation process if CIRP fails — meaning valuation reports remain live documents for longer. The CoC may require updated valuations if the process extends significantly.

Post-submission objection support: Resolution applicants, creditors, or the corporate debtor may challenge valuation reports before NCLT. The valuer must be available to:

• Provide written responses to objections
• Appear as expert witness
• Explain methodology and assumptions under cross-examination

This is the most important practical question in IBC valuation — and the answer is different for every sector. Here is the complete sector guide:

Manufacturing (37% of CIRP cases — Largest Sector)

Primary method: Asset / Cost approach for Liquidation Value; DCF or EBITDA multiple for Fair Value.

Key valuation drivers:

• Plant vintage and condition — machinery older than 15 years faces steeper liquidation discounts
• Sector-specific EBITDA multiples (Steel: 6–10×; Cement: 12–18×; Chemicals: 10–18×)
• Replacement cost of specialised machinery — often provides Fair Value floor
• Environmental liabilities — contaminated sites reduce realisation significantly
• Order book visibility — surviving customers provide revenue bridge for DCF

Liquidation discount: 30–50% of Fair Value, higher for very specialised or geographically remote assets.

Common challenge: Idle machinery in CIRP deteriorates rapidly. A 2-year-old CIRP case may have plant in significantly worse condition than at admission — valuers must physically reverify if time gaps are large.

Real Estate (22% of CIRP cases)

Primary method: NAV (land + completed inventory + under-construction projects) for Fair Value; Market Comparable + forced-sale discount for Liquidation Value.

Key valuation components:

2026 specific: Real estate CIRP cases increasingly involve home buyer creditors — whose claims are treated as financial creditors. Valuers must account for advances received from home buyers in both Fair Value and Liquidation Value.

Liquidation discount: 20–40% of Fair Value for completed inventory; 40–60% for land bank in non-prime locations.

Infrastructure & Power (12% of CIRP cases)

Primary method: DCF based on contracted revenue (Power Purchase Agreements, toll concessions, pipeline tariffs) for Fair Value; replacement cost or asset approach for Liquidation Value.

Key valuation drivers:

• Remaining concession period — shorter concession = lower DCF value
• Counterparty risk on PPAs — state DISCOM creditworthiness materially affects cash flow projections
• Regulatory assets — pending claims from regulators that may or may not be recoverable
• PLF/utilisation assumptions for power assets — operating vs shutdown plants

Going-concern premium: Infrastructure assets often have significantly higher going-concern Fair Value than liquidation value — the value embedded in operating licenses, transmission connections, and power offtake agreements disappears in liquidation.

Telecom / Technology / Media

Primary method: Enterprise value based on subscriber metrics, network value, spectrum, and brand for Fair Value; Net Asset Value for Liquidation.

Key valuation drivers:

• Subscriber count, ARPU, churn rate — core DCF inputs
• Spectrum value — tradeable government licenses
• Tower assets — increasingly valued separately with tower company comparables
• Technology obsolescence — 4G vs 5G readiness affects forward EBITDA
• Brand value — telecom brands can retain significant value even in CIRP

Liquidation challenge: Telecom licenses are typically non-transferable in liquidation — which dramatically reduces liquidation value. The gap between Fair Value and Liquidation Value is often the largest in this sector.

Pharmaceuticals & Healthcare

Primary method: Combination of DCF (for ongoing operations) and Market Approach (using P/E or EV/EBITDA multiples from listed Indian pharma comparables) for Fair Value.

Key valuation drivers:

• ANDA pipeline value for generics companies
• FDA compliance status — US FDA observations can destroy value overnight
• API vs formulation split — different multiples apply
• Manufacturing capacity utilisation
• Brand value of domestic formulation portfolio

Intangible assets in pharma: Drug formulation patents, ANDA filings, WHO-GMP certifications, and brand equity are significant value contributors often missed in pure asset-based approaches. IVS requirements now make these mandatory considerations.

Hospitality / Real Estate Hotels

Primary method: Income capitalisation of hotel EBITDA; comparable hotel transaction data for Market approach; replacement cost for Liquidation Value.

Key valuation drivers:

• Occupancy rates (ADR × occupancy = RevPAR)
• Brand affiliation — branded vs independent affects multiple
• Location premium — metro, tier-2 city, resort
• F&B and banqueting contribution
• Lease vs freehold structure

Company profile: A mid-sized steel manufacturing company admitted under CIRP in Q3 2025. Total admitted claims: ₹800 crore from financial creditors + ₹80 crore from operational creditors = ₹880 crore total.

Assets:

• Plant and machinery: 2 facilities, 15 acres
• Land and buildings: 18 acres freehold land + factory buildings
• Financial assets: Trade receivables, bank balances
• Intangibles: Brand, supplier relationships

Valuation approach selected:

• Fair Value: DCF (income approach) + EV/EBITDA (market approach) — weighted average
• Liquidation Value: Net Asset Value with forced-sale discounts

Fair Value Calculation (simplified):

Liquidation Value Calculation (simplified):

What these numbers mean for the CoC:

The valuation data transformed what could have been an emotional negotiation into a data-driven framework. The company was eventually resolved at ₹520 crore — 65% recovery for financial creditors vs the 44% liquidation floor.

Understanding what goes wrong in IBC valuations helps all stakeholders — RPs, CoC members, and resolution applicants — evaluate the quality of the reports they receive.

Mistake 1 — Valuator Appointed Too Late

The 7-day Regulation 27 deadline is frequently missed in complex CIRP cases. Every day of delay is a day of potential value erosion — idle machinery deteriorates, customers shift, employees leave. RNC can mobilise within 24 hours of engagement confirmation.

Mistake 2 — Physical Verification Skipped or Superficial

Some valuers conduct “desk valuations” from asset register data without physical visits — especially for geographically dispersed assets. NCLT benches have set aside such reports. RNC’s PAN-India teams physically verify every site.

Mistake 3 — Ignoring Synergies in Fair Value

The February 2026 IBBI amendment explicitly added “underlying synergies” to Fair Value. Valuers who continue to use piecemeal asset-by-asset approaches may undervalue the going-concern significantly. This hurts creditors by lowering the Fair Value benchmark that resolution plans must clear.

Mistake 4 — Unrealistic Normalisation in DCF

Using pre-distress financials as the “normalised” base in a DCF without adjusting for the business deterioration during CIRP produces misleadingly high Fair Values. Good valuers model a realistic turnaround scenario — not the historical peak.

Mistake 5 — Inadequate Liquidation Discount

Many valuers apply a standard 20–30% liquidation discount to all assets regardless of type. Specialised manufacturing equipment in a remote location may realise 50–60% below replacement cost. Lack of sector-specific and location-specific discount evidence is a common NCLT objection ground.

Mistake 6 — No Sensitivity Analysis

Before IVS became mandatory in April 2026, many valuation reports presented a single-point Fair Value with no scenario analysis. CoC members had no way to understand the confidence interval around the number. IVS-compliant reports now require explicit sensitivity matrices.

Mistake 7 — Ignoring Intangible Assets

Brand value, customer relationships, operating licenses, domain expertise, and assembled workforce are frequently omitted from IBC valuations. In technology, pharmaceutical, and service businesses, these can represent 30–60% of total enterprise value — and their omission systematically undervalues the going-concern.

Mistake 8 — Not Accounting for the 25% Variance Risk

When two valuation reports diverge significantly, the 25% Liquidation Value threshold triggers a potentially costly third-valuer appointment. Experienced valuers structure their methodology to minimise unexplained divergence — through consistent market data, comparable selection, and documented assumptions.

he Finance Minister cited in Parliament that creditors have recovered ₹4.11 lakh crore through IBC — with financial creditors recovering over 64% of their claims in resolved cases. But these numbers mask wide variation:

• Top-quartile resolutions: 85–95% recovery against Fair Value
• Bottom-quartile resolutions: Below 40% recovery
• Liquidation cases: Average recovery less than 10% of admitted claims

The quality of the valuation report is a significant determinant of which quartile a particular CIRP falls into:

High-quality valuation → Higher bids: When resolution applicants have confidence in the valuation methodology, they bid more aggressively knowing the Fair Value reflects genuine market reality. Speculative underbidding decreases.

Defensible Liquidation Value → CoC discipline: A well-supported Liquidation Value prevents CoC members from accepting low bids out of exhaustion. The floor has teeth.

IVS-compliant reports → Faster NCLT approval: Courts have consistently signalled greater confidence in valuation reports that clearly document methodology, assumptions, and evidence. Disputed valuations cause delays — every month of delay in CIRP is an average ₹3–5 crore of value erosion in a mid-sized case.

This is why the April 2026 IVS mandate is ultimately beneficial for creditor recovery — it raises the documentation floor for every valuation submitted in every CIRP across India.

1. How are assets priced during insolvency under IBC?

Assets in IBC are priced by two independent IBBI-registered valuers appointed by the Resolution Professional within 7 days of their appointment (Regulation 27). Each valuer independently determines Fair Value (the orderly market price) and Liquidation Value (the distress-sale floor) for all assets. The average of their reports becomes the official reference. Where their Liquidation Value estimates differ by 25% or more, a third valuer may be appointed. From April 2026, all IBC valuations must comply with International Valuation Standards (IVS) per IBBI circular IBBI/RV/93/2026.

2. What is the difference between Fair Value and Liquidation Value under IBC in 2026?

Fair Value (Regulation 2(hb), as amended February 2026) is the estimated realisable value of the corporate debtor and its assets — including underlying synergies — in an orderly arm’s-length transaction after proper marketing. It is the going-concern reference. Liquidation Value is the estimated proceeds from selling assets separately in a distressed, time-constrained scenario. Fair Value is invariably higher and serves as the CoC’s benchmark for evaluating resolution plans. Liquidation Value is the floor — no CoC can accept a resolution plan offering creditors less than Liquidation Value.

3. Which valuation method is used for IBC — DCF, Market, or Cost?

The method depends on the asset type and sector. For going-concern manufacturing or infrastructure businesses with projectable cash flows, DCF (income approach) is primary. For sectors with comparable listed peers or recent M&A transactions, the Market approach (EV/EBITDA or revenue multiples) is used. For asset-heavy businesses or for Liquidation Value determination, the Asset or Cost approach (Net Asset Value with forced-sale discounts) is applied. IVS now requires valuers to document the rationale for the method selected — making blanket single-method approaches increasingly vulnerable to challenge.

4. How long does IBC valuation take?

Standard CIRP valuation takes 40–50 days from engagement to report submission. This covers NDA and scope confirmation (Day 1–2), data room review (Day 3–10), physical site verification across all locations (Day 7–25), valuation modelling and sensitivity analysis (Day 15–35), IVS-compliant report preparation (Day 30–45), and formal submission (Day 40–50). Complex assignments — multi-state manufacturing, infrastructure with 50+ locations, or group companies — may require 60–75 days. Appointment within 7 days is preferred; the hard outer limit post-February 2026 is the 47th day from insolvency commencement.

5. What is the 25% variance rule in IBC valuation?

Under Regulation 35 of the IBBI CIRP Regulations, if the two valuers’ Liquidation Value estimates differ by 25% or more — calculated as (L1−L2)/L1 where L1 is the higher value — the Resolution Professional may appoint a third registered valuer. When a third valuer is appointed, the final Liquidation Value is the average of the two closest estimates, not all three. This threshold applies per asset class. The 25% rule creates a quality-control mechanism that encourages methodological consistency between independently prepared reports.

6. Can IBC valuation reports be challenged in NCLT?

Yes. Any stakeholder — creditor, resolution applicant, corporate debtor, or guarantor — can challenge a valuation report before NCLT. Common grounds include: failure to conduct mandatory physical verification of assets, methodology errors, use of outdated market data, undisclosed conflicts of interest, significant unexplained divergence from the second valuer’s report, or non-compliance with IVS standards (mandatory from April 2026). NCLT benches are increasingly scrutinising valuation methodology in high-value cases. Reports with rigorous documentation, sensitivity analysis, and explicit methodology justification are significantly less vulnerable to challenge.

7. What new requirements did the April 2026 IVS mandate add for IBC valuations?

IBBI Circular IBBI/RV/93/2026 (April 1, 2026) makes IVS mandatory for all IBC valuations immediately. Under IVS, all reports must now include: explicit Basis of Value (Fair Value or Liquidation Value stated clearly), defined Scope of Work, methodology rationale with documented reasons for approach selection, assumptions and limiting conditions explicitly listed, and supporting market evidence for key inputs. The circular replaces the previous dual-standards approach (IVS for CIRP, Companies RV Rules 2017 for liquidation) with a single unified IVS framework across all IBC proceedings.

8. What did the 2026 Fair Value definition change mean for IBC valuations?

The IBBI CIRP Amendment Regulations 2026 (February 25, 2026) revised the Fair Value definition to explicitly include “underlying synergies” of the corporate debtor — its tangible assets, intangible assets, and the synergies between them. Previously, piecemeal asset-by-asset valuations often missed the going-concern premium — the additional value created when assets work together as an integrated business. The revised definition requires valuers to capture this synergy premium in Fair Value, which tends to produce higher Fair Values for viable going-concern businesses and creates a more appropriate floor for resolution plan bids.