A fastener maker's top customer is 45% of revenue on a contract ending in 18 months. Value the business in each scenario and probability-weighted, and say what the seller should do before launching a sale.

Rethvik is worth Rs 480 crore if the contract renews, Rs 240 crore if it is lost, and Rs 384 crore probability-weighted at 8x. A buyer will price it harder, cutting the multiple for the concentration as well, nearer Rs 336 crore at 7x, or paying Rs 240 crore up front with the rest as an earn-out. The family's best move is to renew or extend the contract before launching, which is worth about Rs 96 crore to them, and to be ready to wait if the customer will not sign.

A food stall outside one office building does well until the building empties; its profit is really the building's decision. Rethvik's largest customer is Rs 180 crore of revenue and, because the plant costs stay when the orders go, half of its EBITDA. That makes the 60% renewal estimate the single biggest input in the valuation. Everything else on the deck, the margin, the growth, the capex, moves the number by a few crore; this one input moves it by Rs 240 crore. The first thing a buyer will ask is not what the EBITDA is but what it is after the tractor maker leaves.

Value each branch, then weight. At 8x, renewal gives Rs 480 crore and loss gives Rs 240 crore; weighting by 60% and 40% gives Rs 384 crore. That is Rs 96 crore below the value of the business as it stands today, which is the price of the uncertainty. Notice what the weighting assumes: that the buyer accepts management's 60% and is risk neutral between the branches. Neither is true in practice, and the next step is to see how a buyer actually prices it.

Buyers price concentration twice. They haircut the probability, because management always thinks renewal is likely, and they cut the multiple, because even a renewed contract leaves the next renewal hanging over the exit; at 7x and the same 60% the offer is nearer Rs 336 crore, and a cautious buyer will offer Rs 240 crore in cash with up to Rs 240 crore as an earn-outPart of the purchase price paid later, only if an agreed event happens or a target is met, here the renewal of the contract. paid on renewal. That structure moves the renewal risk back to the seller, which is where the information sits. The family should therefore do three things before launch: go to the customer now and seek a three-year extension, even at a price concession, because every rupee of margin given up is worth less than the Rs 96 crore the uncertainty costs; document the relationship so a buyer can diligence it; and start winning the second and third customers that would make the next concentration number 30% instead of 45%.

Close with the alternative. If the customer will not extend, the honest advice is to delay the sale until the renewal is known, because launching into an 18-month cliff invites every buyer to bid the downside and structure the rest. The limit: a 60% renewal probability is management's number, and a buyer's diligence call with the customer may move it either way; the sell-side adviser's job is to make that call before the buyers do.