EBITDAR

What is EBITDAR?

EBITDAR stands for Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent (or Restructuring) costs.

It is a financial metric used to measure a company's operating performance by excluding both non-operating expenses and rent or restructuring costs, which can vary widely across industries or lease agreements.

Formula

EBITDAR = Net Income + Interest + Taxes + Depreciation + Amortization + Rent or Restructuring Costs

Why Use EBITDAR?

EBITDAR is useful when comparing companies that:

Operate in industries with heavy lease expenses (like airlines, hotels, and retail).
Have one-time restructuring charges due to mergers, downsizing, etc.
Need a measure of core operational profitability without being distorted by financing decisions, tax strategies, or lease structures.

When is EBITDAR Most Relevant?

EBITDAR is particularly helpful in:

Comparing franchise-based businesses, where one owns property and another rents.
Distressed businesses undergoing restructuring.
M&A valuation, to remove inconsistencies caused by lease vs. own decisions.

Example

Let’s say a hotel chain has the following financials:

Net Income: ₹10 crore

Interest: ₹5 crore

Taxes: ₹2 crore

Depreciation: ₹4 crore

Amortization: ₹1 crore

Rent: ₹8 crore

EBITDAR = 10 + 5 + 2 + 4 + 1 + 8 = ₹30 crore

Limitations of EBITDAR

Not a GAAP/IFRS standard: It’s a non-standard metric and may be calculated differently by different companies.
Can be misleading if used in isolation, as it removes real cash outflows like rent.
Not suitable for all industries, especially those without significant lease or restructuring costs.

EBITDAR vs. EBITDA

Metric	Includes Rent?	Use Case
EBITDA	❌ Rent is included in operating expenses	General profitability measure
EBITDAR	✅ Rent is added back	Used when rent varies significantly across companies or is temporarily inflated (e.g., due to COVID-19)

So, EBITDAR provides a more "normalized" view of profitability in businesses where rent is a major cost driver.