What is ROCE (Return on Capital Employed)?
ROCE measures profit against all the capital a business uses — equity and debt. The fairest way to compare how efficiently different companies use money.
Return on capital employed (ROCE) measures operating profit as a percentage of all the capital a company uses — both shareholders’ equity and borrowed money. Because it counts debt too, it is harder to flatter than ROE, which is why many investors prefer it for judging business quality.
ROCE answers: how much operating profit does the company squeeze from every rupee of total capital, no matter where that capital came from? A high, stable ROCE across years suggests a durable competitive advantage — the company earns strong returns without constantly needing cheap debt to do it.
Compare ROCE to the cost of borrowing. If a company earns 20% ROCE while paying 9% on its debt, growth genuinely creates value. If ROCE sits below its borrowing cost, expansion is quietly destroying value even if profits look like they are rising.
Formula
ROCE = Operating profit (EBIT) ÷ Capital employed × 100
Example
A company with ₹300 crore operating profit and ₹1,500 crore of capital employed has a ROCE of 20%. If it borrows at 9%, every rupee it reinvests is creating value.
See it on real companies
Browse live financials and decoded filings, or just ask in plain English.
Common questions
Is ROCE better than ROE?
For comparing companies with different debt levels, yes — ROCE includes debt, so it is not flattered by borrowing. Many investors look at both: ROE for shareholder returns, ROCE for business quality.
What is a good ROCE?
A ROCE consistently above ~15–20% (and comfortably above the company’s borrowing cost) is considered strong in India, but compare within the same industry.