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my_valuatation-1
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  • Valuation of Employee Stock Options for Client by MyValuation 
ESOP Valuation

Valuation of Employee Stock Options for Client by MyValuation

  • Publicly Listed Company
  • Black-Scholes Methodology

Context and Purpose of Valuation

In 20xx, Client launched the “Employee Stock Option Plan – 20XX” (ESOP 20XX) as a strategic initiative to attract, retain, and incentivize key employees. The plan included granting equity stock options on various dates throughout the year.

To ensure compliance with accounting standards and regulatory requirements, client engaged MyValuation, an IBBI-registered valuer, to determine the fair value of the stock options issued under the ESOP 20XX scheme.

Scope of Engagement

MyValuation’s role encompassed the following:

Understanding the structure and key terms of the ESOP 20XX plan
Identifying relevant grant dates and number of stock options granted
Applying appropriate valuation techniques to estimate the fair value per option
Delivering a defensible and auditable valuation report in line with recognized valuation standards

Valuation Methodology

1. Fair Value of Underlying Equity Shares – Market Price Method

Since client is publicly listed on an active stock exchange, the Market Price Method was used to determine the fair value of the company's shares.

  • Data Source: Daily traded prices of client’s stock

2. Valuation of Stock Options – Black-Scholes Option Pricing Model

The Black-Scholes Model, a widely accepted method for valuing European-style call options, was employed to derive the fair value of the employee stock options.

  • Key inputs considered:
  • Market price of the underlying share
  • Risk-free interest rate
  • Volatility of the underlying stock
  • Exercise price
  • Time to maturity

Conclusion and Impact

The valuation report provided by MyValuation allowed client to:

  • Accurately recognize employee compensation expense in accordance with accounting standards
  • Enhance transparency and fairness in its ESOP disclosures

About MyValuation

MyValuation is a leading valuation firm registered with the Insolvency and Bankruptcy Board of India (IBBI). The firm specializes in the valuation of equity shares, financial instruments, and intangible assets.

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CA Parth Shah is IBBI Registered Valuer u/s 247 of Companies Act, 2013 for Securities or Financial Assets Class vide registration number IBBI/RV/06/2020/13086.

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  • team@myvaluation.in
  • +91 9428116623
Ahmedabad Office
  • A-916, Ratnakar Nine Square, Opp Asopalav, Keshavbaugh Cross Roads, Vastrapur, Ahmedabad – 380015
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  • J.P. Nagar 4th Phase, Bannerghatta Main Road, Bangalore – 560078

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    • Valuation & Advisory
      • Startup Valuation Services in India
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      • ESOP Valuation Services
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      • Valuation Under Income Tax Act
      • Valuation Under FEMA/FDI
      • Valuation Under SEBI
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      • Other Services
    • Virtual CFO Services
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