Book value per share
Also written BVPS · Book value of a share
Equity shareholders' funds as per the balance sheet divided by the number of equity shares issued and paid up — normally treated as the floor value of a going-concern business.
In plain language
Take a company's balance sheet, add up what belongs to the equity shareholders, and divide by the number of shares. The answer is book value per share.
It is "book" value because every figure comes from the books — assets and liabilities at their historical carrying cost, not at what they would fetch today. It ignores the company's future earning power entirely.
That is both its weakness and its use. The workbook says book value of a share is normally considered the floor price, or the least value attributable to a going concern — a business expected to continue. Whatever the future holds, a healthy continuing company should not be worth less than what its books say belongs to shareholders.
How it works
Where it sits (Chapter 12, section 12.5 — Asset based valuation). Asset-based valuation arrives at value per share as net asset value divided by outstanding shares, using one of three approaches:
| Approach | Basis | Suited to |
|---|---|---|
| Book value / NAV | Balance-sheet (historical cost) values | A floor for a going concern |
| Replacement cost | Cost of replacing the business as-is, including set-up costs | Businesses with high entry barriers |
| Break-up value | Salvage value if shut down on the valuation date | Distressed companies without a future business case |
The workbook's Example 12.4 (Alpha Ltd, 10,000 shares). Shareholders' funds are built from:
Equity share capital 1,00,000
General reserve 50,00,000
Capital redemption reserve 25,00,000
Debenture redemption res. 20,00,000
Surplus in P&L account 5,00,000
───────────
Net worth 1,01,00,000
Book value per share = 1,01,00,000 ÷ 10,000 = Rs 1,010
The revaluation reserve of Rs 15,00,000 is excluded — it is not "cash net worth". Break-up value for the same company is only Rs 327.50 a share.
How it is used with other methods. Asset-based valuation is not considered an independent method; it is usually used alongside others. It suits asset-heavy businesses, distressed companies facing liquidation, and financial businesses such as banks and investment companies. The Price to Book Value multiple then compares a market or DCF value with book value.
The formula
Book value per share = Equity shareholders' funds as per balance sheet
÷ Number of equity shares issued and paid up
Break-up value per share = (Liquidation value of assets − Settlement value of debt)
÷ Number of equity shares issued and paid up
A worked example
The company and figures are illustrative; the formula and the P/BV guidance are the workbook's.
A Category II AIF is evaluating an unlisted NBFC in Jaipur. Its balance sheet shows:
Equity share capital (5 crore shares of Rs 10) Rs 50 crore
Reserves and surplus (excluding revaluation) Rs 200 crore
Revaluation reserve Rs 30 crore
Equity shareholders' funds for BVPS = 50 + 200 = Rs 250 crore
Book value per share = 250 crore ÷ 5 crore shares = Rs 50
The revaluation reserve is left out, following the workbook's treatment in Example 12.4. Including it would have given Rs 280 crore ÷ 5 crore = Rs 56 — a 12% overstatement.
The promoter asks Rs 220 a share, backed by a DCF valuation.
Price to book value = 220 ÷ 50 = 4.4 times
The workbook says that for listed companies a market value of 4–5 times book value is considered healthy, and that DCF value in unlisted companies can be cross-checked against the book value multiple. At 4.4×, the DCF price passes the sense check. For Rs 25 crore, the AIF would buy:
25,00,00,000 ÷ 220 ≈ 11.36 lakh shares (about 2.3% of 5 crore shares)
And if the DCF had come out at Rs 40 — below the Rs 50 book value — the workbook's "floor for a going concern" idea would be the first thing to question.
Why NISM asks about it
Chapter 12, section 12.5 (Asset based Valuation), defines book value per share, its "floor price" role and the formula, and works Example 12.4; section 12.7.2 (Price to Book Value Multiple) uses book value as the denominator. Chapter 12 carries 10% weight. Expect the formula, the floor-price interpretation, a computation that tests whether you exclude the revaluation reserve, and the distinction from break-up and replacement value.
Common exam traps
- Book value uses historical carrying costs, not market values. Replacement cost and break-up value use current or liquidation values.
- The denominator is equity shares issued and paid up — not authorised shares, and not preference shares.
- The revaluation reserve is excluded in the workbook's working.
- Book value is a floor for a going concern; break-up value is the relevant measure for a distressed company without a future business case.
- In start-ups and technology companies book value can be negative, and the P/BV multiple cannot be used.
- Workbook arithmetic and labelling slips in Example 12.4: the balance sheet is headed "Rs. crore" but the working treats the figures as rupees; the subtotal "Total Cash net worth 1,00,00,000" does not match its components, which add up to 1,01,00,000 (the figure then used); and that figure is labelled "tangible net worth" although the Rs 10,00,000 of intangible assets is not deducted. The answer the workbook uses is Rs 1,010 per share.
Where this is taught
- Series XIX-E · Chapter 12: Valuationintroduced here
- Series XIX-D · Chapter 11: Valuationintroduced here
Related terms
- Net Asset ValueThe net assets of a mutual fund scheme divided by the number of units outstanding — what one unit of the scheme is worth on a given day, after every liability except the unitholders' own.
- Price to Book ValueShare price divided by book value per share — how many times the accounting net worth of a company the market is willing to pay.
- Equity sharesOwnership in a company entitling holders to a share in profits and a vote on its affairs; equity holders are residual owners after all contractual claims, rewarded by dividend and capital appreciation.
- Net worthEverything you own minus everything you owe — the one number that says where a household actually stands, and the starting point of any financial plan.
- Break-up Value ApproachAn asset-based valuation that measures what a company would fetch if it were shut down on the valuation date and sold in pieces — liquidation value of assets less settlement value of debt.
- Cost approachValuing a business from its assets less its liabilities — by book value, by what it would cost to replace, or by what it would fetch if broken up and sold.
- Replacement costThe part of a seller's delivery-default penalty measured against the market — the gap between the settlement price and the actual spot price the non-defaulting buyer would need to pay to replace the missed delivery.