What P/B means

Book value per share told us what a share is worth on the accounting books. P/B — price-to-book — closes that gap: how many rupees is the market paying for each rupee of that accounting net worth?

The formula

P/B = Price per Share / Book Value per Share

Worked example: Desi Bites Foods Ltd

   
IPO Price ₹640
÷ Book Value per Share ₹182.24
P/B 3.51x

Worked example: Britannia Industries

Price is the same 30 June 2025 NSE closing price used throughout this module. For illustration only.

   
Price (30 June 2025) ₹5,851
÷ Book Value per Share ₹180.81
P/B 32.36x

32.36x is a striking number — the market is paying over thirty times Britannia’s accounting net worth per share. Whether that’s justified isn’t something this post judges — but the mechanics behind a number that high follow directly from something this series already established. Back in the ROE post, Britannia’s ROE (return on equity) was 52.5% — the company earns roughly ₹0.53 of profit a year on each rupee of book equity. A business that can keep doing that is worth much more than its accounting net worth, and a high P/B is simply the market’s way of pricing that in. High ROE and high P/B tend to travel together, and this is exactly why.

Common mistakes

  • Reading high P/B as automatically expensive, without checking ROE alongside it. As above, a high P/B paired with a high ROE is a coherent, expected combination — not a red flag on its own.
  • Comparing P/B across asset-light and asset-heavy businesses. A brand-driven FMCG (fast-moving consumer goods) company or a services business carries most of its real value off the balance sheet (brand, customer relationships, know-how) — book value mechanically understates it, inflating P/B for reasons that have nothing to do with overvaluation.
  • Treating low P/B as automatically a bargain. A company with a low ROE and a low P/B can simply be a weak business priced accordingly — not a value opportunity.
  • Forgetting book value can be stale. Assets carried at decades-old historical cost (a factory bought long ago, still on the books at its original price) can understate what a company’s assets are actually worth today. That pushes book value down and P/B up — the same direction as the brand-value issue above, so the two can stack.

Takeaway: P/B measures how much the market pays over a company’s accounting net worth. A high number often just reflects a high return on that equity, so read P/B together with ROE, not as a verdict on cheap or expensive.