DRREDDY.NS WACC - Weighted Average Cost of Capital

The WACC of Dr.Reddy's Laboratories Ltd (DRREDDY.NS) is 14.3%.

The Cost of Equity of Dr.Reddy's Laboratories Ltd (DRREDDY.NS) is 14.45%.

The Cost of Debt of Dr.Reddy's Laboratories Ltd (DRREDDY.NS) is 7.85%.

	Range	Selected
Cost of equity	13.30% - 15.60%	14.45%
Tax rate	24.30% - 26.80%	25.55%
Cost of debt	7.50% - 8.20%	7.85%
WACC	13.1% - 15.4%	14.3%

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	0.77	0.83

Additional risk adjustments	0.0%	0.5%
Cost of equity	13.30%	15.60%

Tax rate	24.30%	26.80%
Debt/Equity ratio	0.02	0.02
Cost of debt	7.50%	8.20%

After-tax WACC	13.1%	15.4%


Selected WACC	14.3%

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 (14.45%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.77) + 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.