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NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report

A report projects revenue of Rs 800 crore with an EBITDA margin of 15%, depreciation of Rs 30 crore, interest of Rs 20 crore and a tax rate of 25%. It then states PAT as Rs 52.5 crore. What should a reviewer conclude?

PAT of Rs 52.5 crore is correct. EBITDA is Rs 120 crore, EBIT Rs 90 crore after depreciation, and profit before tax Rs 70 crore after interest. Tax at 25% is Rs 17.5 crore, leaving Rs 52.5 crore. The report's figures reconcile, so no correction is needed.

  1. APAT is correct at Rs 52.5 croreCorrect
  2. BPAT should be Rs 51 crore because tax is applied to EBITDA less depreciation only
  3. CPAT should be Rs 90 crore because tax was not applicable
  4. DPAT should be Rs 67.5 crore because interest should not be deducted

Explanation

EBITDA = 800 x 15% = 120. EBIT = 120 - 30 = 90. PBT = 90 - 20 = 70. Tax = 17.5. PAT = 52.5, so the report is internally consistent. Option 2 ignores interest in the tax base and gives 90-... not 51 correctly; option 4 skips interest (67.5 = 90 x 0.75).

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