Topic-wise strategy to ace the IBBI valuation exam

Case studies require adequate practice. We suggest that you build concepts well – by reading Overview of Valuation, Valuation Approach and Valuation Applications thoroughly. Those topics are the building blocks to solve Case Studies.

Topic-wise strategy to ace the IBBI valuation exam


Topic-wise strategy to ace the IBBI valuation exam for asset class - Securities or Financial Assets

The IBBI Valuation Examination is conducted to test the knowledge, practical skills and ethics of individuals with respect to valuation. A person, who passes the Valuation Examination becomes eligible to become a Registered Valuer

The examination is computer-based, in a proctored environment, with questions framed in an objective/multiple-choice format.

The exam consists of 90 questions. Out of which 80 questions carry 1 mark each and 10 questions carry 2 marks each.

The syllabus for the securities or financial assets asset class is as follows;

Brackets indicate weightage in the examination

  • Macroeconomics (3%)
  • Finance and Financial Statement Analysis (6%)
  • Professional Ethics (4%)
  • General Laws (18%)
  • Indian Accounting Standards (5%)
  • Valuation – Overview, Approaches and Applications (42%)
  • Judicial Pronouncements on Valuation (2%)
  • Case Studies (20%)

Here is our topic wise content summary and study strategy and tips.

Macroeconomics (3%)

Macroeconomics topic is divided into four topics;

  • National Income Accounting
  • Basics of Fiscal Policy
  • Basics of Monetary Policy
  • Understanding Business Cycles

National income accounting deals with definitions of total output measure such as gross domestic product, national income etc. Questions on this topic mostly test your understanding of differences in the various measures of the output of the economy.

Fiscal and monetary policy tests your understanding of what policy instrument achieves what objective. As an example, does an increase in the repo rate lower or increase the total output of the economy? Do OMO purchases improve money supply?

In business cycles, you are tested on the features of particular stages that an economy is in. For instance, how contraction differs from the peak stage of an economy.

These four topics are independent in themselves and cover a fairly decent volume of reading. You need dedication to properly understand these topics in their true form. It’s safer to learn and truly understand the subject matter rather than resort to guesswork.

Recommended reading;

  • ICAI intermediate course, Economics for Finance (select chapters) or;
  • NCERT Class 12 Macroeconomics (select chapters), available for free online or;
  • ISC class 12 Macroeconomics, select chapters, Frank Brothers

Finance and Financial Statement Analysis (6%)

This section deals with finance topics such as capital budgeting and financial ratio analysis. Basically, there are two subtopics here: Finance and Financial Statement Analysis.

Finance covers basic concepts of corporate finance such as time value of money, dividend decision, IRR, net present value and other similar concepts.

Financial Statement Analysis deals with ratio analysis, capital structure analysis, the definition of operating and non-operating assets.

Recommended reading;

  • Fundamentals of Financial Management by James Van Horne (select chapters) or;
  • Principles of Corporate Finance by Brealey, Myers (select chapters) or;
  • ICAI intermediate course, Financial Management (select chapters)


Professional/Business Ethics and Standards (4%)

We would recommend you to read the full notification - Companies (Registered Valuers and Valuation) Rules, 2017. We suggest you practice multiple-choice questions (MCQs) on this topic since questions are usually based on memory and careful reading of the words. Just reading the notification once may not be sufficient. You must get familiar with the question types as well.

Recommended reading;

  • IOVRVF study material, available freely on the IBBI website
  • Companies (Registered Valuers and Valuation) Rules, 2017, download from the MCA website
  • Reading material, MCQs from the 50-hour educational course


General Laws

This section carries 18% weightage. Here, your RVO study material or the free study material (IOVRVF study material) is a sufficient resource. If time permits study SEBI and FEMA regulations well since these carry approximately three to four marks.

In the syllabus vast area of Income Tax is covered. But the questions tested are very basic in nature. Try to solve MCQs for this topic. Reading all the chapters in the Income Tax Act prescribed in the syllabus may not be required.

Focus your attention on valuation-related topics within income tax such as Rule 11UA, Section 50CA, Section 56(2)(X) and Section 56(2)(viib). Also, know the limit for gifts and the taxation thereof.

Recommended reading;

  • ICSIRVO study material, available for purchase from ICSI;
  • IOVRVF study material, available freely on the IBBI website
  • ICAI intermediate course, Income Tax Law (select topics), available for download on the ICAI website
  • Scanners for ICAI, ICSI exams for select topics

Financial reporting under Indian Accounting Standards (Ind AS) (5%)

Here the candidate must read Ind-AS 113, Fair Value Measurement thoroughly. Concepts such as fair value, highest and best use, Level 1, Level 2, Level 3 inputs, principal market are mainly important and frequently tested.

He should also read Ind-AS 36 dealing with Impairment of Assets with a specific focus on goodwill impairment, the definition of the cash-generating unit, recoverable amount and definition of Value in Use.

Students must also be knowledgeable about Business Combination (Ind-AS 103), the effect of acquisition accounting, bargain purchase, identifiable assets, and the distinction between monetary and non-monetary asset.

Recommended reading;

  • Ind-AS 113: Fair Value Measurement
  • Ind-AS 36: Impairment of Assets
  • Ind-AS 103: Business Combination

All the standards are available for download for free on the MCA website.

Valuation: Overview, Approaches and Applications (42%)

Valuation topics are covered under three headings:

  • Overview of Valuation (4%)
  • Valuation Approaches (3%)
  • Valuation Applications (35%)


Your preparation in the above areas is critical. It’s the single area in the exam that determines your pass/failure.

Overview of Valuation

This is a short topic but requires careful reading. Here you are tested on your understanding of subtle differences between various definitions of value viz., fair value, intrinsic value, special value etc.

Valuation Approaches

In Valuation Approaches, you will learn a host of valuation techniques and terminologies such as FCFE, FCFF, Gordon growth model, relative valuation model, precedent transaction etc.

Pay special attention to equity valuation models such as Gordon growth model, two-stage dividend discount model, Free-Cash-Flow-to-Firm (FCFF), Free-Cash-Flow-to-Equity (FCFE), Required Rate of Return, Weighted Average Cost of Capital.

Valuation Applications

This is an important section with the highest 35% weightage in the syllabus for a single topic. In Valuation Application, there is a lot of theoretical reading with respect to equity valuation. Easy areas like business strategies, specific valuation situations such as startup, distressed and intangible assets are covered. These are low hanging fruits from an exam perspective.

Fixed Income securities is a challenging area within valuation applications that requires attention. Within fixed income securities, pay attention to basic yield formula, duration and embedded options. If you find fixed income securities difficult, go back to dealing with the time value of money (in corporate finance) as a foundational topic. Know the difference between modified and Macaulay duration.

Derivatives is another area in which candidates must have a reasonable level of knowledge. You must learn the basic differences between forward and futures contract. In option valuation, get familiar with the basic payoff of call and put options. The binomial valuation model is a highly probable area of testing. Black Scholes is tested occasionally.

It is critical that you gain an edge over topics such as Equity Valuation, Fixed Income Securities and Options Valuation. You have a good chance of passing the IBBI Valuation exam if you know these topics thoroughly. Right from the time you enrol for the 50-hour educational course, your focus should be on real learning of core valuation topics - not pattern detection or rote memorization.

Recommended reading;

  • ICSIRVO study material or
  • ICAI final course, Strategic Financial Management, select chapters (Security Analysis, Security Valuation, Corporate Valuation. Available for free download from the ICAI website.
  • Websites covering CFA Level 1 and Level 2 syllabus. Examples include Investopedia, Analystforum – an online discussion forum for CFA candidates.

The free IOVRVF material available for download on the IBBI website doesn’t cover Valuation Applications in depth. Hence reliance only on that book is not advised.

Judicial Pronouncements on Valuation (2%)

Judicial pronouncements reinforce valuation principles already in practice. These are case laws or judgements where the judiciary interprets the appropriateness of certain valuation methodologies applied by the valuer in a particular corporate acquisition or merger.

The judge reviews the fairness opinion issued by the Chartered Accountant and assesses whether he followed due diligence in applying conventional valuation principles. You are most likely not going to learn any new valuation technique or principle in this section, but just reinforcement of principles learned in other sections.

We suggest you download all the case laws mentioned in the syllabus and read them at leisure. Do make some notes as you go along. Preferably make 5 critical points from each judgement and keep it handy.

Recommended reading;

  • Judgements available on indiakanoon.org for free
  • ICSIRVO study material
  • IOVRVO study material available for free on the IBBI website

Case Studies (20%)

Case studies require adequate practice. We suggest that you build concepts well  – by reading Overview of Valuation, Valuation Approach and Valuation Applications thoroughly. Those topics are the building blocks to solve Case Studies.

When you face a case study and you are perplexed as to where to begin, break down the problem into small portions. Identify each portion with the specific techniques, formulae from valuation approaches and application. Assess if you know the techniques and formulae with confidence. For instance, if your basics in the Gordon growth model or Capital Asset Pricing Model are not strong, you will be unable to solve the case study.

Don’t get unduly worried about case studies if you are not able to solve them, especially in the first attempt. Go back to the three core valuation topics – Overview, Approaches and Application – and evaluate the areas where you are weak. Study those areas thoroughly and then come back to solving case studies.

Case studies take time to master. Focus on doing one case study per day. Only over time, you will gain expertise. This is not a section where you can gain mastery in one sitting. Take it bit by bit and accumulate learning over time.

Case studies separate a passing candidate from a failing candidate. Typically, candidates scoring in the high 50s, complain about their inability to comprehend case studies. There is no easy method to prepare for exam case studies. One has to go back to getting thorough with basic concepts. A case study is just an aggregation of shorter facts and formulae. It is important that you master this area before appearing for the exam.

There are 2 Case studies that will appear on the examination. Each has 4 multiple-choice questions. Each question carries 2 marks. That’s 8 marks for each case study. The question can be numerical or would test a concept. Since negative marking is half of the marking allotted for the right answer, the cumulative negative marking here is 4 marks for each case study. In a worst-case scenario, a candidate who gets all 8 questions wrong would stand to lose 8 (half of 16 marks) marks in the exam. Hopefully it is clear why this section is very important.

Recommended reading;

  • ICSIRVO study material: Overview of Valuation, Valuation Approaches and Valuation Applications for fundamentals.
  • ICAI Final course, Strategic Financial Management, Security Valuation – end of chapter questions
  • CFA Asset Valuation
  • Review basic concepts on investopedia.com, refer to Anaylstforum.com for relevant discussions

The above concludes our topic-wise summary of important topics, recommended reading and study strategies.

Here is a final list of some more tips and study strategies.

  • Study consistently, dedicate 1-2 hours per day
  • Don’t over-rely on multiple choice question (MCQs) during preparation. Build your concepts and make real learning happen.
  • Master fixed income securities valuation (a lot of finance basics are built on the understanding of time value of money, duration, net present value).
  • Get familiar with using a spreadsheet, especially open office software.
  • Don’t ignore easy areas in valuation such as theory topics like business strategies or valuation standards.
  • Moderate your efforts in some areas like General Laws since these are vast but questions are limited. Here a quiz/MCQ based study strategy works better than reading reams of statutes.
  • Focus on building concepts in the core valuation topics listed in this post.

Is the 50-hour educational course sufficient?

In the 50-Hour educational course, much time will be devoted to solving multiple-choice questions and faculties would advise focusing on certain areas. Each RVO would attempt to do its best and see that its candidates pass the exam.

However, the 50 hours is a limited duration to cover all concepts thoroughly. You will need to put in additional efforts before attempting the exam. Depending on your appetite for knowledge and how quickly you grasp, you may need an additional 50 – 150 hours of preparation.

We believe following our study plan, strategies and tips are a recipe for success. Wishing you all the best from the School of Valuation!