ROCE (return on capital employed)
Operating profit as a percentage of all the capital a business uses, debt included.
Fundamental ratios
Live NSE examples below
What is ROCE?
Return on capital employed divides operating profit before interest and tax (EBIT) by all the long-term capital in the business: shareholders' equity plus borrowings. Because it counts debt as capital, leverage cannot flatter it the way it flatters ROE. That makes ROCE the cleaner measure of how good the underlying business is. It does not apply to banks, whose borrowing is their raw material.
Formula
ROCE = EBIT ÷ capital employed × 100
Capital employed = equity + borrowings (≈ total assets − current liabilities)
How to read it
- ROCE consistently above the cost of capital (roughly 11-13% for Indian companies) means the business creates value on every rupee reinvested.
- ROCE above 25% for many years usually signals a competitive advantage.
- A falling ROCE while the company grows means new investments earn less than the old ones.
Common mistakes
- Comparing ROCE across industries with very different capital needs (software vs power utilities).
Live: NSE stocks matching this today
Companies with ROCE above 20% 333
| Stock | ROCE | ROE | OPM |
|---|---|---|---|
| PGHHProcter & Gamble Hygiene and Health Care Limited | 157.0% | 104.9% | 25.3% |
| COLPALColgate Palmolive (India) Limited | 108.0% | 84.2% | 29.9% |
| GILLETTEGillette India Limited | 91.0% | 70.6% | 30.3% |
| NESTLEINDNestle India Limited | 85.0% | 70.6% | 23.9% |
| PGHLProcter & Gamble Health Limited | 84.0% | 57.8% | 33.4% |
| GVT&DGE Vernova T&D India Limited | 76.0% | 43.6% | 26.5% |
| HINDZINCHindustan Zinc Limited | 70.0% | 92.1% | 58.2% |
| ESABINDIAEsab India Limited | 65.0% | 38.7% | 17.7% |
Magic formula: high ROCE + high earnings yield 936
| Stock | Earnings Yield | ROCE | P/E |
|---|---|---|---|
| WEBELSOLARWebsol Energy System Limited | 13.4% | 63.0% | 9.00 |
| NATIONALUMNational Aluminium Company Limited | 14.6% | 40.0% | 8.50 |
| KPELK.P. Energy Limited | 18.8% | 39.0% | 6.31 |
| ALPEXSOLARAlpex Solar Limited | 13.3% | 44.0% | 8.64 |
| GARUDAGaruda Construction and Engineering Limited | 13.4% | 42.0% | 9.76 |
| CHENNPETROChennai Petroleum Corporation Limited | 32.8% | 35.0% | 3.70 |
| ORIANAOriana Power Limited | 13.3% | 40.0% | 9.41 |
| HINDZINCHindustan Zinc Limited | 10.9% | 70.0% | 11.58 |
