10.24Evaluate company valuation and P/E
1What is it?
Calculate the IPO’s market cap and P/E at the issue price and compare with listed peers.
2Why does it exist?
A great company at a silly price can still be a bad investment.
3Calculation
IPO P/E = Issue price ÷ EPS; Market cap = Price × Post-issue shares
- Issue ₹300; post-issue shares 50 crore → market cap ₹15,000 crore.
- Latest profit ₹300 crore → EPS ₹6 → P/E = 50.
- Listed peers trade at P/E 30–35.
IPO is priced ~45% above peers. Is its growth that much better?
4Practical use
RHP section: "Basis for Offer Price" lists the company’s own peer comparison. Check it independently.
5Quick revision
- Compute P/E and market cap at issue price.
- Compare with peers.
- Great company ≠ great price.
6Knowledge check
Q1. Issue ₹500, EPS ₹10. P/E?Show answer
50.
Q2. Which section shows peer comparison?Show answer
"Basis for Offer Price".
Q3. Use pre- or post-issue shares for market cap?Show answer
Post-issue.