§ 01 — What It Is
One scheme, three valuation questions — answered consistently.
An ESOP touches three distinct valuation requirements, each with its own rules and its own reviewer. The fair value of the option at grant date drives the share-based payment expense under Ind AS 102. The fair market value of the underlying share on the exercise date drives the perquisite tax the employee pays. And the exercise price itself needs a supportable share value behind it when the scheme is created or a new pool is carved out.
We handle all three as one coherent exercise: a defensible value of the underlying share, an option-pricing model (typically Black-Scholes or binomial) with documented inputs, and a report that states clearly which valuation date, which standard of value and which regulation each number serves. Every engagement is led and signed by a senior valuer — an IBBI Registered Valuer for Securities or Financial Assets — who remains accountable from scoping to auditor questions.
§ 02 — Who Needs It
Common triggers
- Creating or refreshing the pool — a new ESOP scheme, or a pool expansion, needing a supportable share value to set exercise prices.
- New grant cycles — annual or event-driven grants requiring grant-date fair values for each tranche and vesting schedule.
- Statutory audit — auditors asking for the Ind AS 102 fair value working papers behind the share-based payment expense in the books.
- A new funding round — investors requiring a formal ESOP scheme, or a pool top-up as a condition of the round.
- Exercises and liquidity events — exercise-date fair market values for perquisite tax computation and TDS by the employer.
§ 03 — Our Approach
Date discipline, documented inputs
ESOP valuations fail review for predictable reasons: the wrong valuation date, volatility pulled from nowhere, and an expected life that no one can explain. Our approach is built around eliminating exactly those failure points:
- Valuation date vs. grant date discipline — each number is pinned to the date the standard actually requires, and the report says so explicitly, so accounting and tax numbers are never confused with each other.
- Underlying share value first — triangulated across income and market approaches, consistent with any recent funding round, before any option model runs.
- Documented option inputs — volatility benchmarked to identified comparable listed companies, expected life reasoned from vesting terms and exercise behaviour, risk-free rate and dividend assumptions all sourced and cited.
- Audit-ready working papers — the file is assembled so the statutory auditor's review questions are answered before they are asked.
The deliverable includes a plain-English value narrative — one page your CFO, board and HR team can actually use when communicating grants to employees — and a post-delivery advisory note covering when the valuation should next be refreshed.
§ 04 — FAQ
Questions we hear before every mandate
What is the difference between a grant-date and an exercise-date valuation?
They serve different masters. The grant-date fair value of the option determines the expense your company books under Ind AS 102, spread over the vesting period. The exercise-date fair market value of the share determines the perquisite taxed in the employee's hands, on which the employer must deduct TDS. Same scheme, different dates, different methods, different reviewers — which is why our reports keep them explicitly separate.
How often do we need to refresh the valuation?
Each new grant needs a fair value as at its own grant date — a valuation from last year's cycle does not carry forward automatically. Between cycles, a refresh is warranted when something material moves value: a funding round, a significant change in trading performance, or a restructuring. Our post-delivery advisory note flags the specific events that should trigger a refresh for your company.
Why can't one number serve both Ind AS 102 and tax?
Because the rules differ. Ind AS 102 wants the fair value of the option (share value plus time value, via an option-pricing model) at grant date. Perquisite tax wants the fair market value of the share itself, determined under the Income Tax rules, at exercise date. Using one for the other is a common — and detectable — error. We compute each under its own framework and reconcile them in the report so the relationship between the numbers is transparent.
Our auditor challenged our last ESOP valuation. How do you prevent that?
Auditor challenges almost always target inputs, not arithmetic: unexplained volatility, an arbitrary expected life, or a share value inconsistent with a recent round. We document the source and reasoning for every input, test the share value against recent transactions in the company's own securities, and the signing valuer responds directly to auditor queries as part of the engagement — not as a paid extra.
How long does it take, and how is the fee structured?
For standard mandates, an indicative valuation range within 5–7 business days and a full signed report within 10–15. Fees are fixed and scope-bound, quoted after a short scoping call — multi-tranche grant cycles are scoped once so subsequent tranches move faster. If the scope genuinely changes, we re-quote before proceeding.