Price band and valuation
The price band tells you what a share costs. Valuation tells you what you are paying for the whole business, and whether that is reasonable for its profit and growth.
From price band to P/E
Divide the top of the price band by the company’s earnings per share (EPS) to get its P/E. A P/E of 30 means you pay ₹30 for every ₹1 of yearly profit.
Multiply the price by the total number of shares after the IPO to get the market capitalisation: the value the IPO puts on the whole company.
Compare with listed peers
The prospectus has a section called Basis for Offer Price with listed companies in the same business and their P/E. An IPO priced well above its peers needs a reason, such as faster growth or better margins.
Peer P/Es change every day, so check them on the exchange websites rather than relying on the prospectus date.
Price is not the only question
A low P/E can still be expensive if profit is about to fall. A high P/E can be fair if profit grows fast for years. Judge the price together with growth, debt and cash flow, exactly as in the fundamentals course.
See it in a real issue
At the top of its ₹1,065–₹1,119 band, Jio Platforms is valued at about ₹10.3 lakh crore after the issue, at a P/E of about 33 on FY26 earnings and about 3 times book value.
An IPO is priced at ₹500 and the company earned ₹20 per share last year. What is its P/E?
- 25
- 10,000
- 4%
Show the answer
25. ₹500 ÷ ₹20 = 25. You pay ₹25 for every ₹1 of yearly profit.
Common questions
How do I know if an IPO is overvalued?
Compare its P/E with listed companies in the same business and with its own growth rate. A much higher P/E needs faster growth or clearly better quality to justify it.
What is the cut-off price in an IPO?
Bidding at “cut-off” means you agree to pay whatever final price is set within the band. Retail investors can bid at cut-off; it usually means the top of the band.
What is market capitalisation at the IPO price?
It is the IPO price multiplied by all the company’s shares after the issue. It is the value the IPO puts on the whole company.
Practise reading company numbers, free
Short chapters, then real calls graded on your reasoning, not luck. No money involved.