EBITDA

EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortisation — a company's operating profit before financing costs, tax and non-cash charges. It approximates the cash profitability of the core business.

The formula: EBITDA = revenue minus operating expenses (excluding depreciation and amortisation). Equivalently, take PAT and add back tax, interest, depreciation and amortisation. Indian statutory results do not print EBITDA as a line item — companies disclose it in press releases and investor presentations, and analysts compute it from the filed P&L.

EBITDA's appeal is comparability: it strips out capital-structure choices (interest) and accounting policies (depreciation), so two companies in the same industry can be compared on operating strength. EBITDA margin (EBITDA ÷ revenue) is the standard gauge of operating efficiency, and EV/EBITDA is a core valuation multiple, especially for capital-intensive sectors.

Its blind spot is exactly what it excludes. Companies with heavy debt or heavy capex can look healthy on EBITDA while cash flow tells another story — depreciation is non-cash but the capex behind it is very real. Treat EBITDA as a lens on operations, never a substitute for PAT and cash flow.

Related terms

Educational content, not investment advice. Regulations and tax rules change — verify current rules before acting.