Enterprise Value (EV) is the total value of a business including both equity and debt holders — the theoretical takeover price. It is the numerator in EV/EBITDA, EV/Sales, and other capital-structure-neutral valuation multiples.
Formula: EV = Market Capitalisation + Total Debt + Minority Interest + Preferred Equity − Cash & Equivalents.
INR example: Reliance Industries market cap ≈ ₹19 lakh crore, total debt ≈ ₹3.3 lakh crore, cash ≈ ₹2 lakh crore. EV ≈ 19 + 3.3 − 2 = ₹20.3 lakh crore. EV is always ≥ market cap for leveraged companies; for net-cash companies (e.g. TCS, Infosys), EV < market cap.
When to use: When comparing companies with different capital structures — EV-based multiples (EV/EBITDA, EV/Sales) neutralise the debt vs equity mix. P/E is distorted by leverage; EV multiples are not.
SEBI note: EV components come from audited quarterly financials (LODR Regulation 33). Use latest reported numbers, not annual report from 9 months ago.
Related terms: EV/EBITDA, Book Value, DCF (Discounted Cash Flow).