Return on net worth, written RoNW, measures how much profit a company earns on the money that shareholders have invested in it, including retained earnings. It is calculated by dividing net profit after tax by the net worth, which is the sum of share capital and reserves and surplus, and expressing the result as a percentage. Indian offer documents list RoNW in the summary of key performance indicators, often for the last three financial years, and SEBI requires it to be disclosed in the basis for issue price section along with EPS, P/E and NAV. A higher RoNW means the company turns shareholder capital into profit efficiently, and a consistent figure above about 15 percent is usually considered healthy in many sectors, though capital-heavy industries may look lower. Be careful with a very high RoNW, because it can come from a small net worth caused by past losses or heavy debt rather than strong operations. Also check which net worth is used, since the figure can be calculated on year-end or average net worth. RoNW is closely related to return on equity, and the two are often used interchangeably, but the exact formula should be read from the footnote of the offer document.
Example: A company reports a net profit of Rs 30 crore and a net worth of Rs 150 crore. Its RoNW is 30 / 150 = 20 percent, which means it earned Rs 20 for every Rs 100 of shareholder funds.