The P/B ratio (Price-to-Book ratio) compares the share price to the company's book value per share — its net assets per share as stated on the balance sheet.
P/B = Share Price ÷ Book Value Per Share
A P/B of 1× means the market values the company at exactly its balance-sheet net worth. P/B above 1× means the market expects the company to generate returns above its cost of equity; below 1× can signal distress or undervaluation.
When P/B is most useful
P/B is the primary valuation metric for financial companies — banks, NBFCs, AMCs, and insurance companies — where assets (loans, investments) are the core of the business and book value is a meaningful anchor. For asset-light companies (software, consumer), P/E and EV/EBITDA are more relevant.
Why it matters for unlisted shares
For unlisted banks and NBFCs, P/B is the most natural comparison to listed peers. An unlisted NBFC trading at 1.5× P/B vs listed peers at 3× P/B suggests the market hasn't priced in its potential — or that there are undisclosed risks.
Example: An unlisted private bank at ₹180/share with ₹120 book value traded at 1.5× P/B — compared to a listed peer at 2.5× P/B — suggesting valuation upside at IPO.