Query regarding Calculating Correct Valuation of IPO

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Last Comment 2024-07-09

2024-07-09

Recently, Newly IPO EMCURE Pharma , Everyone saying its overpriced IPO , can someone guide correctly how to calculate correct Valuation

Peers Companies Like Aurobindo Pharma Having Sales of 29000 Crs & EBITA of nearly 11% having Market cap of Rs. 76000 Crs

Glenmark Pharma Having Sales of Around 12000 Crs & EBITA Below 5% having Market cap of Rs. 38,000 Crs

Piramal Pharma Having Market cap of 20,000 crs with Annual Sales of 8000 Crs & Ebita below 5%

EMCURE PHARMA Market cap is around 19,000 crs with annual sales 6658 Crs & EBITA of 19% if u compare above companies sales + ebita & their market cap emcure not looks undervalued ?????

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2024-07-09

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Calculating the correct valuation of an IPO requires analyzing various financial metrics and comparing them to peer companies. You're on the right track by looking at sales, EBITA, and market capitalization. Here's some guide to help you calculate the valuation:

1. Price-to-Earnings (P/E) Ratio: Calculate the P/E ratio by dividing the market capitalization by the company's net profit.

Example: EMCURE Pharma - Market cap: ₹19,000 crs, Net profit: ₹1,259 crs (assuming 19% EBITA margin), P/E ratio: 15.1

1. Price-to-Sales (P/S) Ratio: Calculate the P/S ratio by dividing the market capitalization by the company's sales.

Example: EMCURE Pharma - Market cap: ₹19,000 crs, Sales: ₹6,658 crs, P/S ratio: 2.86

1. Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: Calculate the EV/EBITDA ratio by dividing the enterprise value (market capitalization + debt - cash) by the company's EBITDA.

Example: EMCURE Pharma - Enterprise value: ₹19,000 crs (assuming no debt or cash), EBITDA: ₹1,259 crs (assuming 19% EBITA margin), EV/EBITDA ratio: 15.1

1. Compare with peer companies: Calculate the same ratios for peer companies like Aurobindo Pharma, Glenmark Pharma, and Piramal Pharma.

2. Analysis: Compare the ratios of EMCURE Pharma with its peer companies. If the ratios are higher than its peers, it may indicate overvaluation.

Based on your data, EMCURE Pharma's P/E and EV/EBITDA ratios seem to be in line with its peers, while its P/S ratio is slightly higher. However, it's essential to consider other factors like growth prospects, industry trends, and management's vision before making a final judgment.