How to value an IPO: 10 methods to check if the price is fair

An IPO price is a seller's price. The company and its bankers set it, and they want it high. Ten quick methods, each needing only numbers printed in the offer document, tell you whether that price sits below, near or far above what the business is worth.

Step zero: work per share, after the issue

Every method below compares the IPO price with a value per share, so first put the company on the same footing as the price.

• Shares after the issue = shares before the issue + fresh issue amount ÷ issue price. The offer for sale does not create new shares.
• EPS after the issue = latest full-year profit after tax ÷ shares after the issue. The EPS printed in the document is usually on the old share count, so it flatters the P/E.
• Book value per share after the issue = (net worth + fresh issue money) ÷ shares after the issue.

Use a full financial year. A three- or six-month period should not be multiplied up, because many businesses are seasonal.

The ten methods

1. Peer P/E. The "Basis for Offer Price" chapter lists listed peers and their P/E. Value = EPS × the peers' median P/E; use the 25th and 75th percentile for a range.
2. Industry P/E. EPS × the P/E of the NSE sector index the business belongs to (table below). Useful when the peer list is short or hand-picked.
3. Market P/E for its size. EPS × the P/E of the Nifty Midcap, Smallcap or Microcap index. A small company rarely deserves a large-cap leader's multiple.
4. Growth-adjusted P/E (PEG of 1). A rough rule says a fair P/E equals the growth rate. EPS × sales growth % (capped between 8 and 40) gives a growth-aware value.
5. Earnings power, no growth. EPS ÷ cost of equity (about 12.5% in India). What today's profit is worth if it never grows: a conservative floor.
6. Graham number. √(22.5 × EPS × book value per share). Benjamin Graham's ceiling of 15 times earnings and 1.5 times book; conservative for growth companies.
7. Peer P/B. Book value per share × the peers' median price-to-book. The main yardstick for lenders, NBFCs and asset-heavy businesses.
8. Industry P/B. Book value per share × the sector index P/B.
9. EV/EBITDA. (EBITDA × peers' EV/EBITDA − net debt after the issue) ÷ shares. Removes the effect of different debt levels and depreciation policies.
10. The last private deal. The capital structure chapter shows every allotment and its price. Divide the last price by later bonus and split multipliers and compare it with the IPO price. See pre-IPO valuation from share capital history.

NSE sector multiples, October 2026

Trailing P/E and P/B of NSE indices as of 30 October 2026 (Nifty Services Sector as of 28 October 2026), from NSE index data published via stockpil.com and trendlyne.com. Index multiples move daily; use them as a yardstick, not a target.

From ten numbers to one range

Plot each method as a bar on one chart, a "football field". Take the middle (median) of the earnings, book and EV methods as the fair value, and the 25th to 75th percentile as the fair range. Keep the conservative methods (earnings power, Graham number, book value) as a floor rather than averaging them in.

Worked example. A cash-logistics company earns ₹38 crore and will have 10.7 crore shares after the issue: EPS ₹3.56. At the services index P/E of 20.5x that is ₹73; at the smallcap P/E of 31.3x, ₹111; at a PEG of 1 with 7% growth (floored at 8x), ₹28. Book value per share is ₹18.6; at the services P/B of 3.6x that is ₹67. The middle of the earnings and book methods is about ₹70, against an upper band of ₹99: a 41% premium. The business may still be good, but the price already assumes a lot of growth.

Mistakes that make an IPO look cheap

• Using EPS on the pre-issue share count.
• Annualising a part-year period.
• Comparing with peers that are much larger or in a different business.
• Ignoring a loss: when profit is negative, the P/E methods do not apply; lean on P/B and the last private deal.
• Treating the grey market premium as a valuation. It is mood, not value: see IPO GMP explained.

Also read: How anchor investors and QIBs evaluate an IPO · Should I apply for this IPO? A decision framework · How to analyse an IPO: a 12-point checklist

This guide is general education about how Indian offer documents are structured. It is not investment advice or a recommendation to subscribe to any issue. Regulations change; always read the current offer document and the SEBI regulations it refers to, and consult a SEBI-registered investment adviser before you invest.