BHEL.NS WACC - Weighted Average Cost of Capital

The WACC of Bharat Heavy Electricals Ltd (BHEL.NS) is 16.9%.

The Cost of Equity of Bharat Heavy Electricals Ltd (BHEL.NS) is 17.90%.

The Cost of Debt of Bharat Heavy Electricals Ltd (BHEL.NS) is 8.60%.

	Range	Selected
Cost of equity	14.40% - 21.40%	17.90%
Tax rate	13.20% - 19.80%	16.50%
Cost of debt	6.70% - 10.50%	8.60%
WACC	13.6% - 20.2%	16.9%

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	0.91	1.45

Additional risk adjustments	0.0%	0.5%
Cost of equity	14.40%	21.40%

Tax rate	13.20%	19.80%
Debt/Equity ratio	0.1	0.1
Cost of debt	6.70%	10.50%

After-tax WACC	13.6%	20.2%


Selected WACC	16.9%

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 (17.90%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.91) + 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.