Fairness Opinion in Scheme of Arrangement India 2026: SEBI, Valuation & CFO Checklist

Fairness opinion in a scheme of arrangement in India is a transaction-governance document that tests whether the valuation used for a merger, demerger or other restructuring is fair from the perspective required by the applicable SEBI framework. In relevant listed-company schemes, the fairness opinion is distinct from the underlying valuation report: the valuation is prepared by the registered valuer, while the fairness opinion is obtained from an independent SEBI-registered merchant banker. For CFOs and promoters, the practical challenge is therefore not merely obtaining a number—it is building a valuation record, assumptions file and board-ready evidence pack that can withstand scrutiny.

Fairness Opinion in Scheme of Arrangement India: the current framework

SEBI’s framework for schemes of arrangement involving listed entities requires specified documents to be submitted to the stock exchanges. The framework includes the valuation report and, in relevant cases, a fairness opinion on that valuation from an independent SEBI-registered merchant banker. The framework also requires the registered valuer and merchant banker to be independent and free from material conflicts of interest. The exact applicability can vary by transaction structure, listing status and exemptions, so companies should test the facts of the proposed scheme rather than assuming every internal restructuring requires the same documentation.

Current relevance is visible in SEBI’s scheme-of-arrangement processing workflow, which remained active as of August 28, 2026. See SEBI scheme processing status and the NSE master circular on schemes of arrangement.

Valuation report vs fairness opinion: what is the difference?

A common transaction-preparation mistake is treating the valuation report and fairness opinion as interchangeable. They serve related but different functions.

• Valuation report: determines or supports the value of shares, businesses or assets using recognized valuation approaches and methods, with assumptions, adjustments and professional judgement documented by the valuer.

• Fairness opinion: independently considers the fairness of the valuation outcome or exchange ratio within the regulatory context of the scheme.

• Board and independent-director review: uses the valuation and fairness materials as inputs to governance decisions and shareholder-protection analysis.

• Stock-exchange and SEBI process: examines the scheme documentation, disclosures and compliance package in the listed-company context.

Why the finance team matters before the merchant banker signs off

Even where the fairness opinion must be issued by a SEBI-registered merchant banker, a large part of the work that determines whether the process runs smoothly sits with the company’s finance, accounting and transaction teams. Poor financial data, inconsistent forecasts, unrecorded related-party balances, stale cap tables or unexplained differences between management accounts and audited numbers can delay the exercise and weaken the quality of the valuation record.

For this reason, CFOs should think of fairness-opinion readiness as a structured transaction-readiness exercise. The goal is to make every major valuation input traceable to a defensible source.

Fairness opinion valuation checklist for CFOs

• Reconcile historical financial statements to audited or restated numbers used in the scheme documentation.

• Prepare a bridge from reported EBITDA to normalized EBITDA and identify one-off, exceptional and related-party items.

• Document management forecasts, the board-approved business plan and the operational assumptions behind revenue, margins, capex and working capital.

• Reconcile debt, cash, contingent liabilities and debt-like items where enterprise value is converted to equity value.

• Prepare the latest shareholding and capital-structure schedule, including convertibles, ESOPs and other dilutive instruments.

• Identify material related-party transactions, promoter-group exposures and non-arm’s-length arrangements that can influence normalized earnings or risk.

• Maintain source files for peer-company multiples and precedent transactions used in market-based valuation approaches.

• Document the basis for WACC, terminal growth, exit multiples and other assumptions used in DCF analysis.

• Run sensitivities around major assumptions rather than presenting a single valuation output as mechanically certain.

• Create an issues log showing how differences between methods were resolved and which judgements were ultimately adopted.

Mini-case: when the exchange ratio looks simple but is not

Consider an illustrative merger between Listed Company A and Unlisted Company B. A market-multiple approach values A at ₹1,000 crore of equity value. B is valued at ₹400 crore using a combination of DCF and comparable-company analysis. At first glance, the implied ratio may look like a simple 71:29 economic split.

But the result can change materially if B’s forecast contains aggressive margin expansion, if A has surplus cash, if either entity has options or convertibles, or if one business includes non-operating assets. A fairness-opinion process therefore cannot be reduced to checking the arithmetic of the final ratio. The reviewers need to understand the economic logic of the valuation methods, the consistency of assumptions and whether the chosen inputs are supported by the evidence available at the valuation date.

This example is illustrative only and is not a valuation conclusion or recommendation for any actual transaction.

Methods commonly examined in a scheme valuation

The valuation approach depends on the facts of the businesses involved. ICAI Valuation Standard 103 describes market, income and cost approaches and specifically addresses comparable-company multiples, comparable-transaction multiples, DCF, discounts and control premiums. A robust scheme valuation may use more than one method and then reconcile the outcomes through professional judgement.

• Comparable Company Multiple method for businesses with relevant listed peers.

• Comparable Transaction Multiple method where reliable precedent transaction data exists.

• Discounted Cash Flow for businesses where forward cash-flow assumptions can be developed with reasonable support.

• Net asset or cost-based approaches where asset values are economically more relevant than earnings.

• Appropriate control, minority or marketability adjustments where the nature of the interest being valued requires them.

For the technical valuation framework, see ICAI’s Educational Material on Valuation Standards.

Red flags that can undermine a fairness-opinion process

• A valuation date that is stale relative to major events affecting the business.

• Forecasts prepared only for the transaction with no reconciliation to budgets previously used by management.

• Different revenue, EBITDA or debt definitions across the valuation report, board papers and scheme documents.

• Peer-company selections that appear chosen only because they produce a desired multiple.

• Terminal growth or WACC assumptions that are not supported by market or company-specific evidence.

• Unresolved related-party balances or promoter transactions affecting normalized earnings.

• Material contingent liabilities or tax exposures that are excluded from the valuation bridge without explanation.

• Conflicts of interest between transaction advisers that can impair the required independence.

Fairness opinion is not the same as an investment recommendation

A fairness opinion used in a scheme of arrangement should not be confused with a stock recommendation, target price or prediction of future market performance. Its role is transaction-specific. It does not guarantee that shareholders will earn a particular return, that the scheme will be approved, or that the market price will behave in a particular way after the transaction.

How PGT & Associates can support fairness-opinion readiness

PGT & Associates can support companies on the accounting, financial-model, valuation-readiness and transaction-diligence work that precedes and supports a formal fairness-opinion process—such as financial normalization, valuation modelling, data-room preparation, related-party review, net-debt analysis, forecast reconciliation and source-document organization. Where the applicable SEBI framework requires the fairness opinion itself to be issued by an independent SEBI-registered merchant banker, that regulated opinion must be obtained from an appropriately registered professional. PGT & Associates does not represent through this article that it is a SEBI-registered merchant banker.

Related PGT valuation resources

For the underlying valuation framework, read Companies Act Valuation India 2026, Precedent Transaction Analysis India 2026 and Purchase Price Allocation under Ind AS 103.

FAQs

Who gives a fairness opinion in a listed-company scheme of arrangement?

In the SEBI framework applicable to relevant listed-company schemes, the fairness opinion on the valuation is obtained from an independent SEBI-registered merchant banker. The underlying valuation report is prepared by the registered valuer where required.

Is a fairness opinion required for every merger in India?

No. Applicability depends on the legal and regulatory framework governing the entities and the structure of the scheme. Certain internal restructurings or exempt transactions can follow different requirements. The transaction should be tested against the current SEBI, stock-exchange and Companies Act framework.

Can a CA firm issue the SEBI fairness opinion?

Not merely by virtue of being a chartered accountancy firm. Where the applicable SEBI framework requires an independent SEBI-registered merchant banker to provide the fairness opinion, the opinion must come from that appropriately registered intermediary. A CA or transaction-advisory team may still perform substantial financial, valuation-support and diligence work around the process.

What should a CFO prepare before valuation and fairness review?

At minimum: reconciled historical financials, forecasts and assumptions, normalized EBITDA, debt and cash schedules, cap table, related-party exposures, contingent liabilities, key contracts, peer and transaction data, and sensitivity analyses for major valuation assumptions.

What is the practical takeaway?

Treat the fairness-opinion process as a governance and evidence exercise, not as a last-minute sign-off on a valuation number. A defensible result comes from consistent financial data, transparent assumptions, independent review and a clear bridge from source information to the final exchange ratio or transaction conclusion.

Sources

• SEBI / stock-exchange framework for schemes of arrangement and current processing disclosures.

• NSE Master Circular on Scheme of Arrangement.

• ICAI Valuation Standard 103 and related educational material on valuation approaches and methods.