What does P/BV, (EBITA/EBITDA) & PAT speaks about Midcap?

 

Indian midcap sectors that might perform well shortly (as of February 20, 2025), and considering the historical performance midcaps with a 10-year CAGR of 18.8% outperforming large caps (13.2%) and small caps (15.7%), albeit with higher risk (25% standard deviation and 49% max drawdown). The Nifty Midcap 100 is trading at a forward P/E of ~33x, a 58% premium over the Nifty 50’s 20.8x, and the BSE Midcap 150 is at ~26x, down from a 5-year median of 30.6x. Despite the correction, valuations remain elevated, reflecting a partial unwind of the 2023-2024 rally’s exuberance.

 Price-to-Earnings (P/E) Ratio

The Nifty Midcap 150’s forward P/E ratio is approximately 35.1 as of February 19, 2025, per data from sources.

• This is down from higher levels in 2024 (e.g., above 40x during the peak), following an 18% correction from the September 2024 high. The Nifty Midcap 150 trades at a significant premium to the Nifty 50 (20.8x), roughly 68%-88% higher, depending on the exact P/E used (35.1x vs. 39x).
•  The P/E has moderated from its 5-year median (closer to 31x-33x), but remains elevated, signalling that while the correction has reduced froth, midcaps are not yet at historical bargain levels.

 

Earnings Before Interest, Taxes, and Amortization (EBITA/EBITDA)

• Exact EBITDA for the Nifty Midcap 150 isn’t readily available as a real-time aggregate. However, EBITDA can be inferred from PAT and operating margin trends. With midcap operating margins up 35-40 basis points year-on-year in FY25 (per earlier analyses), and assuming a PAT-to-EBITDA ratio typical for midcaps (e.g., 40%-50% of EBITDA converts to PAT after interest, taxes, etc.), EBITDA could range from ₹4.5 lakh crore to ₹5.5 lakh crore annually as of early 2025.
• This aligns with the index’s market cap of ₹82.5 lakh crore (June 2024), implying an EBITDA-to-market-cap yield of ~5.5%-6.5%. Posts on X and reports suggest midcap EBITDA growth mirrors PAT (e.g., 138% EPS rise FY20-FY24), though FY25 growth is slower.

 

Profit After Tax (PAT)

•  For the Nifty Midcap 150, PAT isn’t reported as a single figure daily, but aggregate data provides insight. From June 2019 to June 2024, the index’s PAT doubled (207% growth) to ₹2.05 lakh. Assuming a 7%-8% growth rate in FY25 (consistent with midcap earnings trends), PAT could be around ₹2.18 lakh crore to ₹2.22 lakh crore as of early 2025.
• This growth outpaces the Nifty 50, with midcap PAT rising 138% from FY20 (₹15 EPS) to FY24 (₹489 EPS). However, FY25 growth has slowed (7-8% vs. historical double-digit rates), reflecting macro headwinds like FII outflows and muted demand.

Valuations analysis over the years

• Last 2 Years: P/E spiked to 40x in 2024, then fell to 35.1x-39x in 2025, with P/B peaking at 6x and PAT/EBITDA showing slower growth (7-8%), reflecting a correction phase.
• 5 Years: P/E rose from 20x to 35x+, P/B from 3.5x to 5x, and PAT/EBITDA doubled, driven by a 22.3% CAGR and 138% EPS growth (FY20-FY24).
• 10 Years: P/E climbed from 18x to 35x+, P/B from 3x to 5x, and PAT/EBITDA quadrupled, with a 15.4% CAGR, showcasing midcaps’ long-term outperformance.

 Conclusion

For a long-term portfolio (5+ years), now is a decent time to start building exposure to Indian midcaps, particularly in the sectors above, but not an all-in moment. The recent decline tempers the risk of buying at peak valuations, and midcaps’ historical edge (18.8% CAGR) supports gradual entry.