What P/E means
P/E = price per share ÷ earnings per share (EPS)
EPS is the company’s profit after tax divided by its number of shares. So a P/E of 20 means you pay ₹20 for every ₹1 of yearly profit, or, put differently, 20 years of today’s profit.
For an IPO, the price is the issue price. Before the final price is known, use the upper end of the price band, since that is where most issues are priced.
Which EPS to use
This is where IPO P/E figures differ. There are three common versions:
| EPS based on | Where it comes from | Effect on P/E |
|---|---|---|
| Weighted average shares in the year | The RHP’s Basis for Issue Price | Often the lowest P/E |
| Shares just before the IPO | The RHP’s Capital Structure | Higher if shares were issued recently |
| Shares after the IPO | Pre-IPO shares plus the new fresh issue shares | Usually the highest P/E |
The RHP must show EPS as reported in its restated accounts. That is a fair disclosure, but it describes the company before the IPO. After the IPO, the same profit is shared across more shares if there is a fresh issue.
Why the share count matters
A fresh issue creates new shares. An offer for sale does not, because existing shares change hands. Read fresh issue vs offer for sale.
So for an issue that is mostly fresh, the P/E after the IPO can be much higher than the RHP’s. For an issue that is all offer for sale, the share count does not change, and the gap is small.
A company that issued shares, or a bonus, during the year also shows a weighted average share count lower than its current one. That makes its RHP EPS higher and its P/E lower.
A worked example: Bombay Coated
Bombay Coated and Special Steels has a price band of ₹78 to ₹82 and a fresh issue only, of ₹183.06 crore. The figures come from its RHP; the calculations are ours.
- RHP basis. FY26 diluted EPS is ₹7.64. At ₹82, the P/E is about 10.7 times.
- New shares. ₹183.06 crore ÷ ₹82 = about 2.23 crore new shares, added to 4.05 crore before the IPO, for about 6.28 crore in all.
- EPS after the IPO. FY26 profit of ₹30.54 crore ÷ 6.28 crore shares = about ₹4.86.
- P/E after the IPO. ₹82 ÷ ₹4.86 = about 16.9 times.
The RHP’s peer composite is 48.18 times, across three companies the company chose. Even at 16.9 times, the issue is priced below that composite. Whether the peers are a fair comparison is a separate question, covered below.
A worked example: Antala Industries
Antala Industries, an SME IPO on BSE SME, has a revised price band of ₹62 to ₹66 and a fresh issue of 34,82,000 shares. The figures come from its RHP and BSE; the calculations are ours.
| Basis | EPS | P/E at ₹66 |
|---|---|---|
| RHP: FY26 EPS on weighted shares | ₹7.40 | 8.9 times |
| FY26 profit ÷ shares before the IPO (86,74,736) | ₹4.89 | 13.5 times |
| FY26 profit ÷ shares after the IPO (1,21,56,736) | ₹3.49 | 18.9 times |
The same company at the same price shows a P/E of 8.9, 13.5 or 18.9. The RHP’s figure is lower because the company was a partnership firm until August 2024 and issued shares during FY26, so the weighted average share count is small. The RHP’s peer average is 21.56 times, across two companies.
Comparing with peers
The RHP’s Basis for Issue Price section compares the company with listed peers. Three checks help:
- Are they the same business? A steel processor compared with steel producers, or a regional company with national leaders, is not a like-for-like comparison.
- Are they a similar size? Large listed companies often trade at higher P/E for reasons a small issuer may not share.
- When were the peer prices taken? The RHP states a date. Prices may have moved since.
A P/E below the peer average does not mean the IPO is cheap. It can mean the company deserves a lower multiple.
What else to read with the P/E
A P/E is one number. Before drawing anything from it, look at:
- Growth. Is profit rising steadily, or did it jump just before the IPO?
- Cash from operations. Profit that does not turn into cash is weaker. Antala’s operating cash flow was negative in FY25 and FY26.
- Debt. A company with high borrowings carries more risk at the same P/E.
- One-off items. A gain from selling an asset can lift one year’s profit.
Read how to read an RHP for where each of these is.
When P/E does not work
A P/E needs a profit. For a loss-making company, there is no meaningful P/E, and the RHP usually shows EPS as negative or not applicable.
For such issues, and for banks, insurers and asset-heavy companies, other measures are more useful:
- Price to book (P/B): the price against net asset value per share, common for financial companies.
- Price to sales: the market value against revenue, used for young companies that are growing but not yet profitable.
- Return on net worth (RoNW): shown in the RHP; it tells you how much profit the company earns on its equity.
The RHP’s Basis for Issue Price section gives the figures the company considers relevant, and the key performance indicators it tracks.
Annualising a part-year
RHPs often include a recent part-year, such as April to September. It is tempting to double a half-year’s profit to get a full year, which would make the P/E look much lower.
Many businesses are seasonal, and a strong half can overstate the year. It is safer to use the last full year for the P/E, and note the recent trend separately. If you do annualise, label it as your estimate.
Common mistakes to avoid
- Using the RHP’s P/E alone. Work out a P/E on the shares after the IPO too.
- Using the floor price. Most issues are priced at the cap, so use the cap.
- Annualising a strong half-year. It can make an expensive issue look cheap.
- Trusting the peer list as given. The company chose it.
- Reading a low P/E as a bargain. It may reflect real weaknesses.
What to do next
Each IPO page on IPO24by7 shows P/E at the cap with the share count used, labelled as ours where we calculated it. See them on any open IPO. Then read what a price band is and SME IPO vs mainboard IPO.
Sources: SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Schedule VI: Basis for Issue Price disclosures, including EPS, P/E, return on net worth and peer comparison; Bombay Coated and Special Steels RHP dated 21 Oct 2026 (Basis for Issue Price, p. 128 to 130); Antala Industries RHP dated 23 Oct 2026 (Basis for Issue Price, p. 101 to 106) and BSE issue details, 2 Nov 2026 (revised price band).
Frequently asked questions
How do I calculate the P/E ratio of an IPO?
Divide the upper end of the price band by the latest full-year diluted earnings per share. For a P/E after the IPO, divide the full-year profit by the number of shares after the issue to get EPS first.
Where do I find the EPS of an IPO company?
In the RHP's Basis for Issue Price section and in the restated financial statements. The share count after the issue is in the Capital Structure section, or can be worked out from the fresh issue size and price.
Why is the P/E on IPO24by7 different from the RHP?
The RHP usually uses EPS on the shares before the IPO, often a weighted average for the year. We also show figures based on the shares after the IPO, labelled as our calculation, which are usually higher.
Is a low IPO P/E a good sign?
Not by itself. A low P/E can reflect slow growth, high debt, one-off profit or a share count that does not include the new shares. Read it alongside the business and the financials.
Should I annualise half-year profit?
With care. Many businesses are seasonal, and a strong half-year can overstate the full year. It is safer to use the latest full year and note the recent trend separately.
What P/E do peers have?
The RHP's Basis for Issue Price section lists the peers the company chose, with their P/E on a stated date. Check whether those companies are really similar in business and size.