Once the market case and the analyst case both exist as driver sets, you can draw the gap between them. The valuation bridge is a waterfall that starts at the traded price, adds one bar per driver and finishes at the target. For Vindhya the gap to explain is ₹294.70 per share.
Why do the bars depend on the order of the drivers?
Building it exposes a problem that most published bridges ignore. The bars depend on the order in which you apply the drivers, because the drivers interact inside the model. Raise growth first and then margin, and you get a different growth bar from raising margin first and then growth, since a higher margin applies to a larger revenue base.
Here are both, computed on the same model.
| Driver | Sequential bar, growth first (₹/share) | Sequential bar, terminal growth first (₹/share) | Independent bar, one at a time (₹/share) |
|---|---|---|---|
| Revenue growth | +39.78 | +58.17 | +39.78 |
| EBITDA margin | +104.14 | +101.98 | +95.55 |
| Capex intensity | +63.67 | +62.44 | +58.16 |
| Discount rate | +38.91 | +34.70 | +32.26 |
| Terminal growth | +48.20 | +37.42 | +37.42 |
| Sum of bars | +294.70 | +294.70 | +263.17 |
| Ends at | ₹1,303.92 | ₹1,303.92 | ₹1,272.38 if summed |
Two facts come out of that table. The sequential construction always sums to the gap with nothing left over, in any order, because each bar is measured from where the previous one left off. And the revenue-growth bar moves by ₹18.39 between the two orders, which is 6.2% of the whole gap. So the order is a real editorial choice, and you can't wave it away as a technicality.
The independent construction moves one driver at a time from the market case, so each bar answers a clean question: what is that driver alone worth? Those bars don't sum. They total ₹263.17 against a gap of ₹294.70, leaving ₹31.53 unaccounted for, which is 10.7% of the gap. That residual is the interaction. Growth and margin together are worth more than growth plus margin taken separately.
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How do you draw a bridge that adds up?
Only two ways of showing this tell the reader the whole truth, and each takes one extra line on the page.
Use the sequential bars and state the order in the footnote, phrased so the reader knows the order was a choice. Or use the independent bars and draw the interaction as its own bar, labelled as interaction, so the waterfall still finishes at the target. You can't present five independent bars as though they summed while the arithmetic fails to tie. Anyone who checks will find ₹31.53 missing, and they'll assume the rest of the deck is just as casual.
A bridge follows the chart grammar you already know, with no exception needed. It's a bar chart of contributions, so the form matches a comparison across categories. The order is intrinsic, because it's the sequence in which the drivers were applied, and that's the one case where sorting by value is wrong. Colour carries meaning: one hue for increases, another for decreases, neutral grey for the start and end columns, and nothing else coloured at all.
What should the title of a valuation bridge say?
The action title states the finding. On this bridge the finding is that the operating drivers do the work. Growth, margin and capital intensity together supply 70.4% of the gap, while the discount rate and terminal growth supply 29.6%. A title reading "Valuation bridge: price to target" describes furniture. A title reading "Seven-tenths of the ₹295 gap is operating performance, not a lower discount rate" makes a claim the exhibit then proves.
The distinction matters more here than anywhere else in the deck. A bridge dominated by the discount rate and terminal growth tells the reader that your target comes from model settings instead of from the business. Some analysts hide that by choosing a bar order that flatters the operating drivers. Draw both orders in the appendix and you can't fool yourself.