Case 071ValuationWarm up
How would you value Chatpata Wheels, a campus food truck serving 250 customers a day at Rs 150, and what assumptions would you make?
1The situation
Chatpata Wheels is the most popular food truck outside a Pune college. It serves about 250 customers a day at an average of Rs 150, on 300 days a year. Food and packaging cost 35% of revenue. Two helpers cost Rs 12 lakh a year together, and permits, fuel and upkeep cost Rs 6 lakh. The owner runs the truck full time and draws nothing; a manager doing the same job would cost Rs 9 lakh a year.
The truck itself cost Rs 18 lakh and will need replacing in about six years. Tax is 25% of profit after depreciation. A buyer of a business this small would want a 25% return, and you should assume no growth.
2Your task
What is the business worth, and what assumptions drive the answer?
Quick check
Before working the numbers: which line do most candidates forget?
Worked solution
Try it on paper, then open one step at a time.
30-second answerThe answer to give first
About Rs 1.3 crore. Revenue is 250 times Rs 150 times 300 days, Rs 112.5 lakh. After food at 35%, helpers, running costs and a Rs 9 lakh market wage for the owner, EBITDA is Rs 46.1 lakh. Set aside Rs 3 lakh a year to replace the truck and pay 25% tax, and free cash flow is about Rs 32.3 lakh. At a 25% required return with no growth, that is Rs 129 lakh, 2.8x EBITDA.
Step 1What assumptions do you state before any arithmetic?
The ones that change the answer by more than rounding. Customers a day, price, days open, food cost, the owner's wage, the truck's life and the required return: name each, give a number, and say which you are least sure of. Here the setup gives them; in the interview you would be inventing them, and the interviewer is listening for whether you know that 250 customers a day and the 25% discount rate matter far more than the permit fee. A valuation of a small business is a short list of guesses with arithmetic attached, and saying so is a mark of competence, not weakness.
Step 2What does the truck actually earn?
Build it line by line. Revenue is Rs 112.5 lakh. Food takes 35%, Rs 39.4 lakh. Helpers Rs 12 lakh, permits and fuel Rs 6 lakh. Then the line most candidates skip: the owner works full time for nothing, and a buyer would have to pay Rs 9 lakh for that labour, so it is a cost of the business whether or not the owner books it. EBITDA after the owner's wage is Rs 46.1 lakh. A shopkeeper who says the shop makes Rs 5 lakh a year, while working in it twelve hours a day, is describing a salary, not a profit; the owner-adjusted earningsA small business profit figure restated as if the owner were paid a market wage and personal expenses were removed, so it shows what a buyer would actually earn. separate the two.
| Rs lakh a year | Amount |
|---|---|
| Revenue: 250 x Rs 150 x 300 days | 112.5 |
| Food and packaging, 35% | (39.4) |
| Helper wages | (12.0) |
| Permits, fuel, upkeep | (6.0) |
| Owner's market wage | (9.0) |
| EBITDA | 46.1 |
| Truck depreciation, 18 over 6 years | (3.0) |
| Tax at 25% on profit after depreciation | (10.8) |
| Add back depreciation, less truck replacement reserve | 0.0 |
| Free cash flow | 32.3 |
| Value at 25%, no growth | 129 |
Step 3Why 25%, and why no growth?
Because the business is one truck, one location and one cook. A required return of 25% says a buyer wants the money back in about four years, which is the right instinct for an asset whose revenue depends on a college gate not moving and a recipe not walking away. No growth is honest for the same reason: the truck is already at capacity for its spot. Value is simply cash flow divided by the rate: Rs 32.3 lakh over 0.25, about Rs 129 lakh, which is 1.1x revenue and 2.8x EBITDA. Those multiples are low by listed-company standards and normal for a one-person business, and saying that shows you know which world you are in.
| 32.3 | free cash flow after the owner's wage, tax and the truck reserve, Rs lakh |
| 0.25 | the return a buyer of a single-truck business demands |
| g = 0 | no growth: the spot is already at capacity |
Step 4How sensitive is the answer, and what would you check?
The customer count dominates. At 200 customers a day the truck is worth about Rs 86 lakh; at 300, about Rs 173 lakh; and forgetting the owner's wage adds Rs 27 lakh of value that does not exist. So before paying Rs 1.3 crore you would stand outside for a week and count, check that the permit transfers to a new owner, and ask whether the customers come for the location or the cook. If it is the cook, the buyer is paying for a person who may leave, and the right structure is a lower price with the cook on a contract. Say the limit: a six-year truck life and a 25% rate are judgements, and the answer moves roughly in proportion to both.
Where candidates lose it
The common miss is valuing the owner's unpaid labour as profit. The truck's books show Rs 55 lakh of EBITDA; a buyer who must pay a manager sees Rs 46 lakh, and the gap is a fifth of the valuation.
The second is applying a listed-company multiple, 8x or 10x EBITDA, to a single truck. The discount rate for a business this concentrated is 20% to 30%, which is a multiple of three to five, and the interviewer wants to hear why.
What the interviewer asks next
- The college moves the truck parking 200 metres away and traffic falls 30%. What is the business worth now?
- Would you value it differently if the owner stayed on as cook for three years under contract?
- What would a second truck at another college be worth, given what you have learned here?
Asked at Citi, Investment Banking, New York, 2026 (Wall Street Oasis): How would you value your schools most popular food truck? what assumptions would you make?
Company names and figures are illustrative.