BHEL.NS WACC - Weighted Average Cost of Capital

The WACC of Bharat Heavy Electricals Ltd (BHEL.NS) is 18.5%.

The Cost of Equity of Bharat Heavy Electricals Ltd (BHEL.NS) is 19.75%.

The Cost of Debt of Bharat Heavy Electricals Ltd (BHEL.NS) is 9.80%.

	Range	Selected
Cost of equity	16.00% - 23.50%	19.75%
Tax rate	13.20% - 19.80%	16.50%
Cost of debt	9.10% - 10.50%	9.80%
WACC	15.1% - 21.8%	18.5%

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	1.1	1.67

Additional risk adjustments	0.0%	0.5%
Cost of equity	16.00%	23.50%

Tax rate	13.20%	19.80%
Debt/Equity ratio	0.12	0.12
Cost of debt	9.10%	10.50%

After-tax WACC	15.1%	21.8%


Selected WACC	18.5%

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 (19.75%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.1) + 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.