In a case pack, the plan takes a uniform maker's EBITDA margin from 10% to 15% on Rs 500 crore of revenue growing 8%. Entry and exit at 9x with 4x debt. What share of the IRR depends on the margin plan, and what evidence would you ask for?

The margin plan carries 43% of the IRR and 57% of the money made: 31.4% with it, 17.7% without. Exit EBITDA is Rs 110 crore with the plan and Rs 73 crore without, and the extra cash also repays more debt. With so much resting on one lever, diligence goes to the four sources of margin: signed fabric quotes, pilot line data, contract escalators and the corporate pipeline.

Run the deal twice, changing only the margin. A tailor who doubles her orders and also starts buying cloth wholesale has two sources of extra profit; to know which one matters, you price her year with the cheaper cloth and without it. With the plan, revenue grows to Rs 735 crore and EBITDA to Rs 110 crore; with the margin held at 10%, the same revenue gives Rs 73 crore. At 9x that is Rs 992 crore against Rs 661 crore of exit value, and the higher cash flow also takes debt to Rs 14 crore instead of Rs 96 crore.

With the plan, equity of Rs 250 crore becomes Rs 978 crore, 3.91x and 31.4%; without it, Rs 565 crore, 2.26x and 17.7%. The margin plan supplies 13.6 of the 31.4 points of IRR, 43%, and Rs 413 crore of the Rs 728 crore of money made, 57%. Revenue growth alone gives a respectable 18%, which is the floor if the plan fails completely, and the number to quote first when an investment committee asks what happens if management is wrong.

Break the five points into the levers and ask for proof of each, in order of size. When most of the return rests on one plan, diligence goes there, and the plan is only as good as its largest line. Central fabric buying is worth 2 points: ask for signed quotes at the new price and the volumes they assume. Automated cutting is 1.5 points: ask for output per worker on the pilot line before and after, and the capex it needs, which this case left in the 2% of revenue. Escalators are 1 point: read the school contracts already signed, not the ones the plan hopes to sign. Corporate mix is half a point: ask for the named pipeline and the margins on the last ten corporate orders.

Then say how you would underwrite it. A disciplined sponsor credits the levers with hard evidence, perhaps fabric and escalators, three points, and treats the rest as upside. Even half the plan would lift the return well above the flat case. The limit of this attribution is that the levers interact with growth: automated cutting may also free capacity that lets revenue grow faster, which this simple split does not capture.