BHEL.NS WACC - Weighted Average Cost of Capital

The WACC of Bharat Heavy Electricals Ltd (BHEL.NS) is 13.7%.

The Cost of Equity of Bharat Heavy Electricals Ltd (BHEL.NS) is 14.15%.

The Cost of Debt of Bharat Heavy Electricals Ltd (BHEL.NS) is 8.35%.

	Range	Selected
Cost of equity	11.30% - 17.00%	14.15%
Tax rate	13.20% - 19.90%	16.55%
Cost of debt	8.10% - 8.60%	8.35%
WACC	11.1% - 16.4%	13.7%

WACC

BHEL.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.54	0.98

Additional risk adjustments	0.0%	0.5%
Cost of equity	11.30%	17.00%

Tax rate	13.20%	19.90%
Debt/Equity ratio	0.06	0.06
Cost of debt	8.10%	8.60%

After-tax WACC	11.1%	16.4%


Selected WACC	13.7%

BHEL.NS's CAPM model and how its cost of Equity is calculated

The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.

This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.

Here’s how we figure out the cost of equity for BHEL.NS:

cost_of_equity (14.15%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.54) + risk_adjustments (0.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.