Price-to-Earnings (P/E) ratio is calculated as share price divided by earnings per share. For IPOs, this is computed using the upper price band as the share price and the most recent full-year EPS. A P/E of 30 means investors are paying ₹30 of price for every ₹1 of annual earnings the company produces.
P/E is a relative valuation metric — meaningful only when compared against listed peers in the same sector. Comparing a software company's P/E (often 40-80x) directly with an FMCG company's P/E (40-60x) or a bank's P/E (15-25x) misleads. Sector context matters enormously.
For IPO research, the relevant comparison is the IPO's P/E versus the trailing-twelve-month P/E of listed peer companies. An IPO priced at significant premium to its peers' P/E should be justified by either superior growth, structural moats, or sector tailwinds. The RHP's peer-comparison section is the starting point for this analysis.