Valuation of Plant and Machinery
Valuation of Plant and Machinery
Plant and machinery valuation focuses on determining the value of all kinds of assets, including manufacturing equipment, industrial plants, vehicles, and other machinery. Sapient Services offers plant & machinery valuation for different purposes, including mergers and acquisitions, insurance, lending, litigation, and tax reporting. We understand the necessary analysis and methodology needed to perform plant and machinery valuations.
Why Plant & Machinery Valuation Matters
A plant and machinery valuation determines your manufacturing facility’s and all its machinery’s fair market value. Our valuation expert conducts a detailed assessment of the plant and the equipment used for delivery and production purposes.
The plant and equipment account for your company’s majority assets, but they also determine revenue and expenses. Valuing these assets is important for determining your business’s overall value and operational purposes.
Plant and Machinery Valuation Ensures:
- Compliance with different kinds of accounting standards, including US GAAP, Ind AS, and IFRS.
- Accurate reporting about finances and impairment testing.
- Fundraising and loan security for private equity sectors and banks.
- Assessment of claim and proper insurance coverage.
Our Expertise in Plant & Machinery Valuation
Our team comprises seasoned valuation experts and engineers who have years of experience in various industries, including:
- Mining Industries
- Construction Equipment
- Glass and footwear manufacturing
- Pharmaceuticals & Chemical
- Home Furnishings and Hospitality
- Renewable Energy & Power Plant
- Semiconductors, Pulp & Paper
Key Purposes of Plant & Machinery Valuation
When it comes to selling or buying machinery and plants, you need to know the equipment’s actual value. Let’s take a look at the purpose of plant & machinery valuation.
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Equipment Financing
For equipment financing, you need to know the value of the machinery and plant that you will need to set up your operations. If you want to get financing for the equipment, we will do the valuation for you and give you a complete idea about the financing that you will need.
Financial Reports
In various financial reports, like balance sheets and accounting documents, plant and machinery valuation is included. The financial report contains the details regarding the valuation of the machinery and plants to determine their worthiness.
Asset Verification & ERUL Analysis
The process of asset verification involves checking the machinery and plant assets that are available against an inventory list. Also, the estimated residual life is determined based on the machinery and plant valuation.
Risk Management
Plant and machinery valuation involves a detailed inspection of the assets to identify potential risk scenarios. This helps you learn about the risks that may be associated with the machinery and plant assets you need to keep in mind.
Valuation Methods We Employ
For plant and machinery evaluation, various methods can be employed. The following are the common methods we employ for plant and machinery valuation.
Income Approach
The income approach estimates the asset’s value based on its potential for income-generation. It’s used to calculate the asset’s value, such as equipment and machinery you rent out.
Cost Approach
This approach determines the value of machinery and plant based on the amount required to replace it with a new comparable asset. It also accounts for the depreciation and current condition of the asset. This approach mostly suits newer machinery that is easy to replace.
Market Approach
In this approach, sales data is used to compare similar asset prices that you sold and purchased recently. This can be useful when there is an established market for similar equipment.
Other Considerations Include
- ESG compliance and technological upgrades.
- Obsolescence and depreciation.
- New acquisition price and cost of replacement.
Critical Factors that Affect Plant & Machinery Valuation
Let’s take a look at the factors that affect plant and machinery valuation.
Supply and Demand
The principle of supply & demand determines the machinery’s value. The value of equipment rises when the demand is high and the supply is limited. On the other hand, the value may drop when the supply is in excess or demand is low.
Age and Condition
Due to aging, equipment loses value. However, even after a few years, well-maintained equipment can be sold at a higher price than depreciated equipment.
Technological Obsolescence
Due to the advancement in technology, even sophisticated equipment can become outdated. When newer models with higher economy and stronger safety rules are introduced, older equipment loses its worth.
Maintenance Records and History
Detailed maintenance of your equipment conveys important information about its previous repairs and general state.
Sector-Specific Valuation Approaches
In valuation, each industry comes with unique challenges:
- Renewable Energy – In this sector, the main emphasis should be on eco-efficiency and compatibility in terms of technology.
- FMCG & Textiles– Increased obsolescence because of advancements in technology.
- Heavy Industries & Mining– If you’re from this industry, you should emphasize the resilience and durability of machinery.
- Hospitality & Healthcare– In this sector, the main focus should be on compliance with operational standards.
Why Choose Sapient Services?
Detailed Valuation
Our specialist team carries out detailed valuations to help you comply with regulatory and legal requirements.
Accurate & Clear Reports
Our reports on valuation are designed to fulfill the highest-quality standards for accuracy and sector knowledge.
High-Level Methodologies
We employ high-level methodologies like computerized tools for correct valuation.
Expert Team
We possess an exclusive team of valuation experts that is well-experienced in providing correct valuations for various plant and equipment.
Sector Coverage
We have extensive experience in all types of industries and have served numerous clients in Delhi NCR and the rest of India.
FREQUENTLY ASKED QUESTIONS (FAQ)
What is the main purpose of plant and machinery valuation?
Plant and machinery valuation is typically performed for Financial Reporting, Mergers & Acquisitions, Leasing or New Purchase, Income & Wealth Tax Calculation, and Expense Investigations.
What should you consider while assessing the value of plant and machinery?
You should consider the utilization efficiency, age & condition, new replacement cost, techno-functional obsolescence, skilled operator expenses, and price value while assessing the value of plant and machinery.
What do you mean by plant and equipment valuation?
Plant and equipment valuation is conducted to determine the tangible assets fair market value. This includes entire manufacturing plants, machinery, industrial equipment, and other physical assets that are important to business operations.
What are the common methods for plant and machinery evaluation?
The common methods for plant and machinery evaluation include the income approach, cost approach, and market approach.
How often should plant and equipment valuation be conducted?
That will depend on the market conditions, the type of business you run, how you use the equipment, and regulatory requirements.
Which industries does Sapient Services provide plant and equipment valuation services for?
Sapient Services provides plant and equipment valuation services for various industries, including Mining, Construction Equipment, Glass and footwear manufacturing, Pharmaceuticals & Chemical, Home Furnishings and Hospitality, Renewable Energy & Power Plant, and Semiconductors, Pulp & Paper.
What is the turnaround time for plant and equipment valuation?
The turnaround time of plant and equipment valuation depends on the purpose and size of the project, access to the equipment, valuation methodology, and research available in the market.
Why should you choose Sapient Services for plant and equipment valuation?
Sapient Services specialises in plant and equipment valuation. We provide reliable and accurate assessments for different industries.