Net asset value per share, usually written NAV, is the book value of a company attributable to each share. It is calculated by dividing the net worth, meaning share capital plus reserves and surplus, by the number of equity shares outstanding. It indicates what each share would be worth on paper if the company’s assets were sold at their book value and all liabilities were paid. IPO offer documents report NAV per share along with EPS, P/E and RoNW in the basis for issue price section. Comparing the issue price with NAV gives the price-to-book multiple, which shows how much of the price rests on the value of the assets and how much on expectations of future growth. A price far above NAV is normal for asset-light businesses such as software or consumer brands, while a price close to NAV is more typical for banks, real estate and heavy industry. Note that the NAV of a share has no connection with the NAV of a mutual fund, though the term is the same. After an IPO, NAV per share usually rises because the new shares are sold at a premium to face value and the premium is added to reserves.
Example: A company has a net worth of Rs 200 crore and 10 crore shares, so NAV per share is Rs 20. At an issue price of Rs 100, the price-to-book ratio is 5 times.