Financial Services

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13-Sep-2025

 Infosys trades at ~16.7× EV/EBITDA.  

TCS at ~19.2×.  

Wipro at ~16.4×.  

Tech Mahindra at ~24.5×.  

 Most investors look at P/E ratio.  

But in Investment Banking & Equity Research, EV/EBITDA is often the go-to multiple.  

 EV/EBITDA in simple terms:  

EV/EBITDA = Enterprise Value ÷ EBITDA 

 It tells us how much the market (or an acquirer) is willing to pay for the company’s operating earnings, independent of capital structure.  

📊 Why it matters:  

➤ Neutral to debt/equity mix (unlike P/E).  

➤ Useful in M&A comps, where buyers look at enterprise value.  

➤ Allows cross-company comparisons on operating performance. 

 How to read it:  

➤ EV/EBITDA < 12× → Often seen as “cheap”, but could signal slower growth or sector challenges.  

➤ EV/EBITDA > 20× → Premium valuation, usually for companies with strong margins, growth visibility, or durable moats.  

 Current snapshot (Indian IT):  

➤ Infosys (16.7×) → fair multiple, supported by strong client base & resilient margins.  

➤ TCS (19.2×) → premium, rewarded for scale and consistent execution.  

➤ Wipro (16.4×) → at discount, reflecting ongoing turnaround.  

➤ Tech Mahindra (24.5×) → higher multiple amid restructuring bets & growth optimism.  

 But beware — where EV/EBITDA can mislead:  

 ➤ Doesn’t capture differences in capex intensity (infra vs IT).  

➤ Ignores working capital swings.  

➤ High multiple ≠ overvaluation — sometimes it reflects quality of earnings.  

 Takeaway:  

  If P/E tells you what investors pay for equity, EV/EBITDA tells you what buyers would pay for the entire business.