ROCE (Return on Capital Employed) measures how efficiently a company generates operating profit from all the capital it uses — both equity and debt.
ROCE = EBIT ÷ Capital Employed × 100
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Capital Employed ≈ Equity + Long-term Debt (or Total Assets − Current Liabilities)
A ROCE above the company's cost of capital (WACC) means it is genuinely creating value; below it, the business destroys value even if technically profitable.
ROCE vs [ROE](/glossary/roe)
ROE only uses equity in the denominator. ROCE includes debt. For industries with significant borrowing (steel, infrastructure, NBFCs, real estate), ROCE is more meaningful because it prevents debt from flattering the return figure.
A business with 25% ROE but 8% ROCE is probably over-leveraged — its returns are driven by borrowed money, not operational strength.
Why it matters for unlisted shares
For an unlisted manufacturing or infrastructure company, ROCE is one of the first metrics to check. Consistent ROCE above 15% with an improving trend is a strong signal of durable value creation.
Example: An unlisted steel company had 28% ROE but only 10% ROCE — revealing the returns were leverage-driven, not operationally earned.