ESOP Valuation Services
My Valuation – ESOP Valuation Services in Bangalore, India
Employee Stock Options (ESOP) is the most popular employee benefit plan used in the start-up and corporate world to attract, retain and inspire high skilled employees.
An ESOP plan allows a company to reward its employees with stock options based on their performance. Under this option, employees get the opportunity to own equity shares of their company.ESOP instills a sense of ownership in the mind of employees and motivates them to be more productive and increase shareholder value.
With the increasing demand for ESOP schemes, the requirement for ESOP valuation consultants for regulatory, compliance, and tax-related terms has also increased. ESOP valuation requires intricate modeling to incorporate unique terms and complex risks; thus, the ESOP valuation service plays an important role in the proper planning of ESOP valuation in private companies.
To help you out with proper ESOP planning, My Valuation provides innovative and distinguished ESOP valuation services. My Valuation is one of the top ESOP valuation service providers in Bangalore, India, that guide you with detailed and transparent valuation reports tailored to meet your specific purpose.
ESOP Valuation Services at My Valuation
ESOP share valuation requires substantial knowledge of various ESOP-related terms and regulations. At My Valuation, we are a team of IBBI registered valuers for ESOP valuation; that possesses the stipulated expertise and knowledge required to provide well-designed ESOPs.My Valuation is a leading ESOP valuation service provider in Bangalore, India, guiding companies with structuring, raising financing, and valuation implications of financial, regulatory, and tax aspects of ESOP transactions.
With years of valuation experience, we assure our clients of the best ESOP valuation method and quality analysis. We aim to build a long-term ESOP valuation process that is well suited for listed to unlisted and private companies and their employees. Known for providing the best ESOP valuation to firms, we help you from the advisory and preparation to the implementation of an ESOP plan that enhances the overall productivity of your organization.
What is ESOP?
Employee Stock Option Plan, known as ESOP, is a tax-qualified defined contribution retirement plan destined to benefit both employee and employer.
Under this employee benefit plan, a company compensates or rewards stock options to the employees based on their performance.The main objective of ESOP is to encourage employees to perform better and advance the shareholders’ value. By giving financial gains to employees, ESOP creates a feeling of belonging and ownership in employees’ wit.
When the employees retire, the company repurchases their allocated share at the current fair market value and distributes it to other employees.
Companies require ESOP valuation for accounting purposes and an ESOP valuation is a facilitator used by private and other companies to attract and retain their employees.
Why it is Necessary to Obtain ESOP Valuation?
ESOP Valuation plays a significant role in the success of an ESOP plan. As a result, ESOP valuation from an experienced ESOP valuation firm is necessary.
ESOP valuation is required for accounting purposes to register compensation expenses by the company administering ESOPs over the vesting period and for taxation purposes of calculating perquisite Tax payable by its employees.
The company’s Employee Pension Scheme is concerned with the compensation expense, while the possibility of excess tax payout via employees can make the employee stock option plan scheme unsuitable.
To avoid all these woes ESOP valuation by a certified and registered valuer is very much needed.
ESOP Valuation Report is Required Because:
The ESOP valuation report is necessary to bring out in companies due to particular points,
- The valuation report concentrates on encouraging, maintaining, and rewarding employees who contributed to the growth and success of the company.
- The ESOP report also helps a company with an exit strategy for changing founder members and ownership of an association.
- Another benefit of the ESOP valuation report is it helps establish the perquisite taxable value of employees to relent with relevant provisions of the Indian Income Tax Act, 1961 and CBDT notification.
Steps to Implement ESOP Valuation
Preliminary review to clarify financial objectives
Identify goals and analyze the plan
Determining the right ESOP structure
Preparation of ESOP Scheme
ESOP Scheme approval
Preparation of ESOP Scheme
Issuing grant letters for skilled employees
How to Value ESOP Shares?
ESOP company valuation can be performed by two methods Accounting Valuation and Tax Valuation. Accounting valuation has two different approaches to finding ESOP shares value.
The ESOP accounting valuation methods are
- Intrinsic value method
- Fair Value method
Among the two, the fair value method has different valuation methods for the calculation of ESOP.
1. BLACK SCHOLES FORMULA
The Black Scholes method is the most common approach used for ESOP valuation in India.
This mathematical method estimates the interpretation over time of the underlying stock and derives the price of the stock options using the implied volatility of the underlying stock.
However, companies must understand the limitations of methods and ensure that this method is acceptable for their own circumstances.
2. BINOMIAL MODEL
The binomial model employs computing approaches and is a more complex, advanced method used for ESOP valuation in India.
In this model, the share price is projected from the date of allotment to the date of exercise using ‘up’ and ‘down’ odds.
The probabilities are computed by the assumption of share price volatility. In spite of being simple as the Black Scholes formula, the binomial method is more robust for ESOP valuation services in India.
3. MONTE CARLO METHOD
Similar to the Binomial model, the Monte Carlo method involves projecting the share price. Though the projection of share price is not restricted by pre-determined up and down odds.
In reverse, the share price is sampled from the specified share price allocation. ESOP valuation consultants suggest the Monte Carlo Method the most accurate among all pricing methods.
Who can do ESOP Valuation in India?
ESOP is an employee benefit plan; issued by the company for its employee where company shares are given at a discounted rate.
Any company can issue ESOP, but for the ESOP valuation, IBBI registered valuer is required.
As per Indian Income Tax Law, only a SEBI Register Merchant Banker is allowed to do ESOP valuation to determine the perquisite tax payable in the hands of employees, directors, promoters, and others.
Challenges For ESOP Valuation
- ESOPs impact minority stakes for future shareholders; hence minority valuation methods for minority shareholder ESOP valuation should come.
- Considering the control mechanism, deserved discounts based on practical proof and case should be given.
- In the case company’s accounting and employees’ tax valuation, there should be a difference in valuation approach due to a lot of odds available.
Our ESOP Valuation Services
At My Valuation, we are a team of certified IBBI registered valuers for ESOP valuation with years of multi-industry experience. With a detailed analysis of the management and their business, we help quantify the value of ESOPs for option holders and determine the actual worth for ESOP holders.
Specialized in ESOP, My Valuation; is recognized as the best ESOP valuation consultant in Bangalore, India. We provide comprehensive ESOP valuation services and ESOP valuation reports.
Our ESOP valuation services include ESOP valuations, due diligence and fairness opinion report, transcription and professional support, ESOP scheme designs, admin services, and more.
Get simplified and secure ESOP Valuation from My Valuation
My Valuation is a leading organization providing the best ESOP valuation services in Bangalore, India. Our professional team is focused on simplifying and securing the valuation process by being dedicated to managing all trustee engagements and getting involved in every step of the ESOP valuation analysis and process.
Get in touch with us and get your business to reach greater heights.