EBITDA - what and why

EBITDA = Earnings Before Interest, Tax, Depreciation, and Amortization. It's the closest thing the P&L has to "how much cash the operations threw off this quarter" - though it isn't actually cash; we'll cover the distinction below.

How it's calculated

EBITDA = Revenue − COGS − Employee cost − Other operating expenses

It excludes:

• Depreciation (a non-cash bookkeeping charge for past investments)
• Interest expense (depends on financing choices, not operations)
• Tax (depends on jurisdiction and accounting maneuvers)

So two companies in the same industry, one financed entirely by equity and the other by debt, would still have comparable EBITDA. That's the whole point of the number - it lets you compare operating performance independent of capital structure.

EBITDA margin

EBITDA margin = EBITDA ÷ Revenue. Indian listed companies range widely:

• IT services: 22–30%
• FMCG: 18–25%
• Paints: 18–22%
• Cement: 15–20%
• Steel: 10–18% (cyclical)
• Telecom infrastructure: 40–50% (capital-heavy)
• Banks and NBFCs: EBITDA isn't used; they report Net Interest Margin (NIM) instead