Enterprise value

What it would cost to buy the whole business free of debt: market capitalisation plus net debt, plus minority interests and any preferred capital.

A company with ₹12,000 crore of market capitalisation and ₹1,020 crore of net debt has an enterprise value of ₹13,020 crore.

It is the right numerator for any multiple whose denominator is measured before interest, which covers EBITDA, EBIT and sales. Pairing market capitalisation with EBITDA is one of the most common errors in amateur analysis, and it makes leveraged companies look cheap.

Match the numerator to the denominator. Everyone or shareholders, not a mix.

The bridge from market capitalisation is where care is either taken or skipped. Add net debt, add minority interests at their share of value rather than at book, add preference capital, and subtract non-operating assets such as a stake in a listed associate. Each item is a decision, and showing them as separate lines is what lets somebody else check the answer.