Zentara Chemicals' EBITDA fell from Rs 400 crore to Rs 310 crore. Build the bridge from price, volume, raw material, currency and other items, and judge which parts are temporary.

Zentara's run-rate EBITDA is about Rs 357 crore, not Rs 310 crore and not Rs 400 crore. Of the Rs 90 crore fall, Rs 43 crore is lasting: new overseas capacity cut prices, partly offset by the volume gain, plus a wage reset. The other Rs 47 crore is temporary: a feedstock spike and a four-yearly overhaul, less a currency gain. At 9x EBITDA that distinction is worth about Rs 423 crore of enterprise value.

A household's grocery bill jumps one month. Part of it is a festival, which will not recur; part of it is a rent rise passed on by the local shop, which will. Adding up the reasons tells you what happened; sorting them into once and forever tells you what next month looks like. An EBITDA bridge becomes useful only when every step carries a label saying whether it will still be there next year. The arithmetic, 400 less 60 plus 25 less 40 plus 5 less 20 equals 310, is the easy half.

Ask what caused each step and whether the cause is still in place. New capacity in the industry does not leave when the quarter ends, so the Rs 60 crore price cut is lasting until demand grows into that capacity. The volume gain comes from a line Zentara built, so it stays. The feedstock spike has reversed on the futures curve, and the overhaul happens once every four years, so both are temporary. The currency gain is temporary too: it is a Rs 5 crore gift from a weaker rupee, and analysts who capitalise currency gains get caught when the rupee turns. Watch the interplay between price and raw material: a spread businessA company whose profit depends on the gap between what it sells a product for and what its main raw material costs, rather than on either price alone. lost Rs 100 crore of spread this year, but only Rs 40 crore of that squeeze was the input side.

The market prices Zentara on about 9x EBITDA. Capitalising Rs 310 crore instead of Rs 357 crore takes about Rs 423 crore off the enterprise value for costs that will not recur. Capitalising Rs 400 crore makes the opposite error, pricing back in Rs 43 crore of profit that new capacity and the wage reset have taken away for good.

Close with the test that would change your labels. If the new overseas plants run below capacity for a year, prices may partly recover and the Rs 60 crore is less lasting than it looks. If feedstock spikes twice more in the next three years, it is a feature of the business, not a one-off. Saying that out loud shows the interviewer you treat labels as judgements with evidence behind them.