By ipomarket.in Editorial Team · Last reviewed: 2026-09-17
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
When a company files for an IPO, one of the first questions worth asking is simple: how does its pricing stack up against companies already listed and doing the same thing? This is the core of what analysts call comparable company analysis, or peer comparison. It will not tell you whether an IPO will list at a gain, but it will tell you whether you are paying a fair price for the earnings, assets and growth you are buying.
This guide walks through the ratios that matter, where to find peer data, and how to judge whether an IPO is asking for a premium it has earned. We use the recent NSE IPO and its listed peer BSE as an illustrative case study, using figures disclosed in the offer document.
Why peer comparison matters
SEBI does not set or approve the IPO price. It only ensures the company discloses how the price was arrived at. That means the responsibility of judging whether a price is reasonable falls partly on the investor. The most reliable reference point you have is the market itself: what are investors already paying for a similar, listed business?
Every company filing an IPO must publish a peer comparison table inside its offer document. To understand where that document sits in the process, see our explainer on what a DRHP is and how to read it. The peer table lists comparable listed companies alongside their valuation ratios, giving you a ready benchmark.
One caveat before we start: the peer multiples printed in the DRHP are dated comparisons, calculated on a specific past closing price. They are not live market numbers. Always recheck peer multiples against current prices before drawing conclusions.
The three ratios that do most of the work
Different businesses need different yardsticks. Three ratios cover most situations.
Price-to-Earnings (P/E)
The P/E ratio shows how much investors pay for every rupee of a company's earnings. It is calculated as share price divided by earnings per share (EPS). Merchant bankers in India lean heavily on the P/E multiple to arrive at IPO valuations, drawing on historical performance, projected earnings and sector benchmarks.
As a rough guide, a lower P/E in the 5 to 15 times range often suggests affordability, while 20 times and above may signal that the market expects strong growth, or that the stock is expensive. Neither reading is meaningful on its own. A high P/E is only justified if the company is genuinely growing faster or earning better margins than peers.
P/E works best for consistently profitable companies. For a loss-making business, it is useless, and you have to fall back on other measures.
Price-to-Book (P/B)
P/B compares the share price to the company's net asset value per share. It is most useful for banks, NBFCs and asset-heavy businesses, where the balance sheet drives value more than a single year's profit.
Enterprise Value-to-EBITDA (EV/EBITDA)
EV/EBITDA compares the total value of the business, including debt, against its operating earnings. Because it accounts for debt, it lets you compare companies with very different borrowing levels on a fairer footing.
Growth metrics: the other half of the story
Ratios tell you what you are paying. Growth metrics tell you what you are getting. A company with a strong record of revenue growth and profitability can command a higher valuation than its peers, and reasonably so. The metrics worth lining up side by side include:
- Revenue growth (year-on-year and over three years)
- Profit growth (PAT growth)
- Operating margins
- Return on net worth (RoNW), which shows how efficiently the company turns shareholder capital into profit
- Debt levels
- Market position or share
The rule of thumb: if an IPO demands a premium over listed peers, it must justify that premium through better growth, stronger margins, lower debt or a dominant market position. If it asks for a premium without any of those, that is a warning worth investigating.
A four-step framework
Step 1: Identify the peer group. The offer document lists comparable listed companies. Start there, and cross-check that the peers are genuinely similar in business model and scale.
Step 2: Calculate the IPO multiple. Divide the IPO price by the company's EPS (annualised if needed) to get its implied P/E. Do the same, where relevant, for P/B and EV/EBITDA.
Step 3: Compare against peers. Line up the IPO's multiple against the average multiple of listed peers. This tells you whether the issue is priced at a premium, discount or roughly in line.
Step 4: Assess the justification. If there is a premium, ask whether growth, margins, RoNW or market share support it. A premium backed by superior fundamentals is different from a premium backed by hope. For a deeper walkthrough, see our guide on how to analyse IPO financials from the RHP.
Case study: NSE vs BSE (September 2026)
The NSE IPO offers a clean example because its only directly listed peer is BSE, another exchange operator. The figures below are drawn from the offer document and recent market data.
Scale. NSE reported total revenue from operations of Rs 16,601.31 crore, against Rs 4,833.95 crore for BSE. That makes NSE's revenue base roughly 3.4 times larger. On profit, NSE's PAT is about 4.1 times BSE's net profit, despite lower FY26 profitability on some measures.
Growth. Here the picture flips. BSE reported 63.4% year-on-year FY26 revenue growth and 88.1% PAT growth, an unusually sharp jump. NSE's three-year profit growth of 24.04% reflects the steadier, more mature pace you would expect from the larger incumbent.
Return on net worth. BSE's RoNW stands at 45%, ahead of NSE's 33.21%, meaning BSE is currently generating a higher return on its net worth.
Valuation reference. The offer document identifies BSE as the listed peer and reports a P/E of 54.28 times, calculated using BSE's 9 September 2026 closing price and FY2026 diluted EPS.
What this example illustrates is that no single number decides the answer. NSE is far larger and more profitable in absolute terms; BSE has posted faster recent growth and a higher RoNW. A peer table gives you the starting point, but you still have to weigh scale against growth, and quality of earnings against price.
One more real-world lesson from this case: peer multiples move. Analyst commentary notes that since NSE's DRHP filing in June 2026, BSE shares have fallen over 22% in under three months, and its P/E corrected from around 66.6 to 47.8. The peer benchmark you read in an offer document filed months earlier may not match today's market. Always refresh the numbers.
(NSE IPO figures above are drawn from the offer document and recent market reports and should be verified against the final prospectus before use.)
What peer comparison cannot do
Peer analysis is a discipline, not a crystal ball. A few honest limits:
- It relies on the peer set being genuinely comparable. A weak or forced peer group produces a misleading benchmark.
- DRHP multiples are historic, not live.
- Listing gains are never guaranteed. Many IPOs, especially in the SME segment, have declined after the initial euphoria faded.
And a specific caution: do not swap fundamental analysis for grey market premium. GMP is not regulated by SEBI, NSE or BSE, it changes quickly, and it often reflects sentiment more than fundamentals. A high GMP does not guarantee a profitable listing. If you want to understand why, read what IPO GMP is and how it works.
FAQ
Where do I find the peer comparison for an IPO?
Every company must publish a peer comparison table in its offer document (DRHP/RHP), which is available on the SEBI website, the BSE and NSE portals, and the registrar's site. The table lists comparable listed companies and their valuation ratios.
Which ratio should I use to compare an IPO with peers?
It depends on the business. P/E suits consistently profitable companies. P/B is more useful for banks, NBFCs and asset-heavy firms. EV/EBITDA helps when companies carry different levels of debt. Often it is best to look at more than one.
Does a higher P/E than peers mean the IPO is overpriced?
Not automatically. A premium can be justified by faster growth, better margins, lower debt or a stronger market position. It becomes a concern only when the premium has no such support behind it.
Are the peer multiples in the DRHP still accurate on listing day?
Often not. Those multiples are calculated on a past closing price and can drift as peer share prices move. In the NSE case, BSE's P/E corrected sharply within months of the filing. Always recheck against current market prices.
Can I rely on GMP instead of doing peer comparison?
No. GMP is unregulated, volatile and driven by sentiment. It is not a substitute for comparing valuation and growth against listed peers.
Last reviewed: 2026-09-17 by the ipomarket.in Editorial Team.