DRREDDY.NS WACC - Weighted Average Cost of Capital

The WACC of Dr.Reddy's Laboratories Ltd (DRREDDY.NS) is 13.8%.

The Cost of Equity of Dr.Reddy's Laboratories Ltd (DRREDDY.NS) is 14.15%.

The Cost of Debt of Dr.Reddy's Laboratories Ltd (DRREDDY.NS) is 9.25%.

	Range	Selected
Cost of equity	13.10% - 15.20%	14.15%
Tax rate	25.50% - 26.80%	26.15%
Cost of debt	7.50% - 11.00%	9.25%
WACC	12.8% - 14.9%	13.8%

WACC

DRREDDY.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.75	0.79

Additional risk adjustments	0.0%	0.5%
Cost of equity	13.10%	15.20%

Tax rate	25.50%	26.80%
Debt/Equity ratio	0.04	0.04
Cost of debt	7.50%	11.00%

After-tax WACC	12.8%	14.9%


Selected WACC	13.8%

DRREDDY.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 DRREDDY.NS:

cost_of_equity (14.15%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.75) + 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.