EBITDA Multiple
Values the business on operating earnings before interest, tax, depreciation and amortisation — the metric most Indian acquirers actually negotiate on.
How it works
- 1
Calculate EBITDA: operating profit plus depreciation and amortisation. Normalise for owner salary, one-off costs and related-party expenses.
- 2
Select the sector EBITDA multiple band. Indian mid-market ranges are typically 4×–7× for manufacturing and services, 8×–14× for pharma and healthcare, and higher for software.
- 3
Adjust within the band for scale, customer concentration, growth and margin durability.
- 4
Multiply normalised EBITDA by the selected multiple for enterprise value, then adjust for net debt to reach equity value.
Sample: a Coimbatore auto-components maker
| Annual revenue | ₹40,00,00,000 |
| Reported EBITDA | ₹5,20,00,000 (13%) |
| Owner salary add-back | ₹40,00,000 |
| Sector multiple band | 4.5× – 7.0× (auto components) |
| Net debt | ₹3,00,00,000 |
| Step | Formula | Result |
|---|---|---|
| Normalised EBITDA | 5,20,00,000 + 40,00,000 | ₹5,60,00,000 |
| Select multiple | Midpoint 5.75× less 0.25× for customer concentration | 5.5× |
| Enterprise value | 5,60,00,000 × 5.5 | ₹30,80,00,000 |
| Equity value | 30,80,00,000 − 3,00,00,000 net debt | ₹27,80,00,000 |
Equity value is what the shareholders receive. Forgetting the net-debt bridge is the single most common error in owner-run deal negotiations.
- Profitable, established businesses — the default method for Indian mid-market M&A.
- Comparing companies with different debt levels and tax positions.
- Manufacturing, industrials, healthcare and mature services businesses.
- Loss-making or barely profitable companies, where the multiple becomes meaningless.
- Businesses with heavy ongoing capex — EBITDA ignores the cash needed to keep the plant running.
- Companies with aggressive or under-documented add-backs, where normalised EBITDA is contested.
Valuenomic runs this method alongside five others and weights the results.