The WACC of EIH Ltd (EIHOTEL.NS) is 14.9%.
Range | Selected | |
Cost of equity | 13.2% - 16.8% | 15% |
Tax rate | 23.7% - 25.5% | 24.6% |
Cost of debt | 4.5% - 7.5% | 6% |
WACC | 13.1% - 16.7% | 14.9% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.76 | 0.96 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 13.2% | 16.8% |
Tax rate | 23.7% | 25.5% |
Debt/Equity ratio | 0.01 | 0.01 |
Cost of debt | 4.5% | 7.5% |
After-tax WACC | 13.1% | 16.7% |
Selected WACC | 14.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
EIHOTEL.NS | EIH Ltd | 0.01 | 0.97 | 0.96 |
509546.BO | Graviss Hospitality Ltd | 0.04 | 0.22 | 0.21 |
532992.BO | CHL Ltd | 1.33 | 0.38 | 0.19 |
AHLEAST.NS | Asian Hotels East Ltd | 1.2 | 0.52 | 0.28 |
CHALET.NS | Chalet Hotels Ltd | 0.13 | 1.14 | 1.03 |
EIHAHOTELS.NS | EIH Associated Hotels Ltd | 0 | 0.92 | 0.92 |
LEMONTREE.NS | Lemon Tree Hotels Ltd | 0.21 | 1.16 | 1 |
MHRIL.NS | Mahindra Holidays and Resorts India Ltd | 0.45 | 1.17 | 0.88 |
TAJGVK.NS | TAJ GVK Hotels and Resorts Ltd | 0.04 | 1.68 | 1.62 |
VICEROY.NS | Viceroy Hotels Ltd | 0.36 | -0.21 | -0.16 |
Low | High | |
Unlevered beta | 0.64 | 0.93 |
Relevered beta | 0.64 | 0.94 |
Adjusted relevered beta | 0.76 | 0.96 |
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 EIHOTEL.NS:
cost_of_equity (15.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.76) + 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.