Case 024Reading financialsCore

A packaging company shows reported, pro forma and run-rate EBITDA. Build all three, the valuation range on each, and say which figure the multiple should sit on.

Houlihan LokeyNew York · 2026

The situation

Ambrit Packaging, which makes corrugated boxes, reports EBITDA of Rs 60 crore for the last twelve months. Six months ago it bought a box plant that has contributed Rs 5 crore of EBITDA since; on a full-year basis the plant earns Rs 10 crore.

Management has also announced a cost programme, closing a warehouse and renegotiating paper contracts, that it says will save Rs 8 crore a year once complete. About Rs 2 crore of those savings is already showing in the last twelve months. Listed packaging peers trade at 7x to 8x EBITDA.

Your task

Build reported, pro forma and run-rate EBITDA, the enterprise value range on each, and say which one a buyer should pay a multiple on.

Quick check

How much do the cost savings add to run-rate EBITDA?

Worked solution

Try it on paper, then open one step at a time.

30-second answerThe answer to give first

Reported EBITDA is Rs 60 crore, pro forma Rs 65 crore and run-rate Rs 71 crore, giving Rs 420 to 480, Rs 455 to 520 and Rs 497 to 568 crore at 7x to 8x. The multiple should sit on pro forma Rs 65 crore: the plant is owned and earning, so a full year of it is fact. The Rs 6 crore of savings not yet captured is a promise, worth about Rs 45 crore at 7.5x, and belongs in the negotiation, not in EBITDA.

Step 1What is the difference between the three figures?

Each answers a different question. Reported EBITDA is what happened; pro forma is what would have happened if the business had owned today's assets for the whole year; run-rate adds what management expects from actions it has started but not finished. Think of a shop that took over the shop next door six months ago and plans to cut its electricity bill: last year's takings are reported, last year's takings as if both shops had been open all year is pro forma, and adding the electricity saving is run-rate.

Step 2How do you build each one?

Start from Rs 60 crore. The plant has been in the numbers for six months at Rs 5 crore; a full year is Rs 10 crore, so add the missing Rs 5 crore. Pro forma EBITDA is Rs 65 crore. The cost programme saves Rs 8 crore a year when complete, of which Rs 2 crore is already in the reported figure, so add Rs 6 crore. Run-rate EBITDA is Rs 71 crore. At 7x to 8x that gives Rs 420 to 480 crore, Rs 455 to 520 crore and Rs 497 to 568 crore.

Three EBITDA figures for the same company, Rs crore60ReportedLTM+5Plant's firstsix months65Pro forma+6Savings notyet captured71Run-rateEV 420 to 480EV 455 to 520EV 497 to 568Plant bought6 months ago:fact, include itSavings still tocome: a promise,negotiate it
Ambrit's reported Rs 60 crore becomes Rs 65 crore pro forma once the bought plant counts for a full year, and Rs 71 crore run-rate if the Rs 6 crore of savings still to come is added; at 7x to 8x the three give Rs 420 to 480, Rs 455 to 520 and Rs 497 to 568 crore.
Rs croreEBITDAEV at 7xEV at 8xStatus
Reported, last twelve months60420480happened
Pro forma for the plant65455520would have happened
Run-rate with savings71497568expected
Each step up from reported to pro forma to run-rate EBITDA adds Rs 35 to 48 crore of value at 7x to 8x, which is why the argument over which figure to use is really an argument about price.
Step 3Which one should the multiple sit on?

Pro forma. A completed acquisition is a fact: the plant is owned, its contracts are in place, and a buyer of Ambrit gets a full year of it. Make one consistency check before using it: the money spent on the plant, cash or debt, must already be in net debt, which it is since the deal closed six months ago. Uncaptured savings are different. They need management to finish closing a warehouse and to hold paper suppliers to new prices, and a buyer bears the risk if they slip. Paying the full multiple on them hands the seller value it has not yet created.

So treat them as a negotiation point with a price on it. The Rs 6 crore of savings is worth about Rs 45 crore at 7.5x. A buyer might pay for half, about Rs 22.5 crore, on evidence such as the signed paper contracts, or put the rest into an earn-out paid when the savings show up in the accounts. Peers' multiples are almost always quoted on reported or pro forma EBITDA, so applying them to run-rate EBITDA also mixes two different bases.

Where candidates lose it

Candidates add the full Rs 8 crore of savings to Rs 60 crore, counting Rs 2 crore twice, and then put a full multiple on the result. Each mistake is small; together they add about Rs 60 crore of value that does not exist.

The second miss is refusing the pro forma adjustment, valuing Ambrit on Rs 60 crore as if the plant earned only six months of profit. The buyer gets the whole plant, so a full year of it belongs in the base.

What the interviewer asks next

  • How would you treat Rs 3 crore of one-off integration costs for the plant?
  • If the plant was bought for Rs 80 crore of new debt last month, what changes?
  • Why do peers' multiples usually sit on reported, not run-rate, EBITDA?

Asked at Houlihan Lokey, Investment Banking, New York, 2026 (Wall Street Oasis): mini case study that included adjusted EBITDA, multiples, etc.

Company names and figures are illustrative.