A cement company needs new capacity. Building a plant is cheaper but takes two years; buying a rival's plant earns from day one. Compare the two on value and timing and give the board a view.

On these numbers building is worth about Rs 127 crore more, but the margin is thin enough that a one-year delay would flip it. Buying costs about Rs 469 crore more in today's money and buys two extra years of EBITDA worth about Rs 343 crore. A build that slips a year loses Rs 146 crore of value, more than its lead. Tell the board: build, if the region can wait and the project is well controlled; otherwise the premium buys certainty worth paying.

Time and certainty. Both options end with the same plant earning the same Rs 200 crore a year; the only differences are what you pay, when you pay it, and when the earnings start. So compare just those differences, rather than valuing two whole plants. It is like choosing between building a house and buying a finished one next door: the finished house costs more, but you stop paying rent two years sooner.

Cost first. Building is Rs 700 crore now plus Rs 700 crore in a year, worth Rs 1330.6 crore today. Buying is Rs 1,800 crore now. The premium for buying is about Rs 469 crore, and what it buys is EBITDA in years 1 and 2, worth Rs 200 crore over 1.11 plus Rs 200 crore over 1.11 squared, about Rs 343 crore. Building comes out ahead by about Rs 127 crore.

Run the risks that sit only on the build side. A one-year delay pushes Rs 200 crore of EBITDA from year 3 into the future and costs about Rs 146 crore, more than the Rs 127 crore lead; a cost overrun of about 10% wipes the lead out too. Greenfield cement plants face land, permits and equipment delivery, so neither is unlikely. Two points cut the other way: real cash flow is EBITDA less tax and maintenance capex, which shrinks the value of the two early years, and an acquired plant is older, so it may need more maintenance and have a shorter life. At 75% cash conversion, the build lead grows to about Rs 212 crore.

Then the strategic point the numbers cannot hold: if a rival will add capacity in the region within two years, buying the plant now both adds Tarkesh's capacity and removes a competitor's, and the price of the market share lost while building could exceed the whole difference. The board recommendation should say which of these the decision hangs on, not just which number is bigger.