Earnings per share, before and after
EPS is profit divided by the number of shares. An IPO with a fresh component creates new shares, so the same profit is spread across a larger base afterwards — post-issue EPS is always lower than pre-issue EPS.
This matters because a price-to-earnings ratio calculated on pre-issue EPS looks cheaper than the one you are actually buying. If a company earns ₹20 a share before the issue and ₹15 after, an issue price of ₹300 is 15× on the old number and 20× on the new one. Both appear in offer documents. Only the second describes what you are paying.
Return on net worth
RoNW is profit as a percentage of shareholders’ funds — what the business earns on the capital already inside it. It is the closest thing in the document to a quality measure, and it travels better across industries than a margin does.
Read it alongside the net worth itself. A very high RoNW on a small equity base is easier to achieve than a moderate one on a large base, and it usually falls sharply after an IPO simply because the fresh issue has just added a great deal of capital that has not been deployed yet.
Net asset value per share
Net worth divided by shares — the book value behind each share. The gap between NAV and the issue price is the premium you are paying over accounting value. A large gap is normal for a business whose value is in its earnings rather than its assets, and alarming for one whose value is supposed to be in its assets.
The peer comparison table
Offer documents include a table of listed companies with comparable ratios. It is useful and it is chosen by the issuer, so read it with that in mind.
Check that the peers are genuinely comparable in scale and business mix. A small speciality manufacturer benchmarked against large diversified groups will look cheap on P/E for reasons that have nothing to do with being cheap. Check the direction of the comparison too: if the issuer’s P/E sits above every peer, the document generally has to explain why, and that explanation is worth reading.
Fresh issue versus offer for sale
Valuation is not only about the multiple. It matters where the money goes. In a fresh issue, the proceeds enter the company and, if deployed well, grow the earnings the multiple is applied to. In an offer for sale, the proceeds go to the selling shareholders and the company’s balance sheet is unchanged the day after listing.
Most issues are a mix. The split is disclosed, and it changes what you should expect from the money you are paying. Where to find it in the RHP.
What the ratios cannot do
They are all backward-looking. Every figure in that section describes a company that has not yet had the money, run by people who have not yet been public-market accountable, in a year that has already happened. A business can be cheap on last year’s earnings and expensive on next year’s.
They also say nothing about demand on listing day, which is what grey market premium is about and what most IPO coverage actually focuses on. Those are two different questions — what a business is worth, and what a stock will open at — and conflating them is the most common mistake in this market.
Where our numbers come from
The fundamentals on our IPO pages are read directly from the company’s own offer document. We cross-check them against each other before publishing — return on net worth has to be consistent with the profit and net worth we read, and share counts have to be consistent with the per-share figures.
Where a document’s numbers do not agree with each other, or where we cannot read a figure reliably, we leave it blank and link the filing rather than publish an estimate. Blanks on this site are deliberate.