Equity Valuation

M-CRIL carries out independent equity valuation of financial institutions primarily engaged in financial inclusion.

The objectives include

  • independent review of valuations in case of fresh equity investments, and
  • meeting accounting and auditing requirements such as measuring fair value in accordance with relevant standards, such as US-GAAP (Generally Accepted Accounting Principles), ASC (Accounting Standards Codification) 820 or IFRS 13 (International Financial Reporting Standards).

The scope of the valuation covers the following

  • validation of the business plan
  • analysis of various risks, computation of risk premium and cost of equity
  • review of publicly available data on price multiples of comparable entities
  • computation of share price using one or more valuation methods, as briefly mentioned below
  • application of discounts for illiquidity and/or lack of management control.

M-CRIL uses one or more methods for computation of share price. The primary method is the discounted free cash flow method. If there are comparable entities in the local market, the methods include relative transaction methods such as multiples of Price to Equity (P/E), or Price to Book Value (P/BV). In relatively mature markets like India and Cambodia, the valuation is guided by publicly available data.M-CRIL’s experience in financial inclusion and risk diagnostics ensures realistic valuation, in validating the business plan, specifically the growth estimates based on the economic environment (country context), the microfinance sector context in the country and an analysis of the strength of the company’s business; and computing an adequate Risk Premium and discounts for Illiquidity or lack of management control.

“Excellent work and we look forward to the next reports.
Livingston Parsons, Chief Financial Officer, Accion (June, 2016)

Contact our Managing Director & Co-founder, Sanjay Sinha – sanjaysinha@m-cril.com for more information