EV to EBITDA

Enterprise value divided by EBITDA. The workhorse multiple for capital-heavy businesses and the default in transaction analysis.

A company with an enterprise value of ₹13,020 crore and ₹1,340 crore of EBITDA trades at 9.72 times.

It earns its place because both sides are measured before capital structure and before the depreciation policy, which lets you compare a company with new plant against one with old plant, and a heavily borrowed firm against a debt-free one.

It hides exactly what it excludes. Two businesses on nine times EBITDA are very differently priced if one needs to spend 90% of that EBITDA on capital expenditure and the other 30%. That is most of the difference between telecom and consumer staples, and the multiple cannot see it.

Read it beside capital expenditure to sales, every time.