EBITDA: Meaning, Definition & Indian Stock Market Examples

Earnings before interest, tax, depreciation and amortisation — proxy for operating cash flow.

Disclaimer: This article is for educational purposes only and does not constitute SEBI-registered investment advice. Consult a SEBI-registered investment advisor before making investment decisions.

What is EBITDA?

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) measures a company's core operating profitability, stripping out capital structure, tax jurisdiction, and non-cash charges. It is widely used to compare profitability across companies with different debt levels or depreciation policies.

EBITDA — Indian Stock Market Example

Jio Platforms' EBITDA margin reached above 50% as its fixed-cost network scaled, making it one of the most profitable telecom businesses globally. Airline companies like IndiGo have volatile EBITDA due to fuel and forex costs. EBITDA margins above 20% are considered healthy for most Indian industries.

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Frequently Asked Questions about EBITDA

Is EBITDA the same as cash flow?

No. EBITDA is an accounting approximation, not actual cash flow. It ignores working capital changes, capital expenditure (capex), and tax payments. Free Cash Flow (FCF) = Operating Cash Flow − Capex, and is a better measure of cash generated for shareholders.

Why do analysts use EV/EBITDA?

EV/EBITDA is capital-structure neutral — it allows comparison of companies with different debt levels. It is preferred over PE for valuing capital-intensive businesses, M&A targets, and for cross-border comparisons where tax rates differ.

Related Terms

EV/EBITDA

Enterprise value divided by EBITDA — capital-structure-neutral valuation multiple.

Operating Profit Margin

Operating profit (EBIT) ÷ revenue — shows efficiency before interest and tax.

Return on Capital Employed

EBIT as a percentage of capital employed — measures total capital efficiency including debt.

Free Cash Flow

Operating cash flow minus capex — actual cash available after maintaining business.

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