The WACC of HDFC Bank Ltd (HDFCBANK.NS) is 11.6%.
| Range | Selected | |
| Cost of equity | 13.60% - 16.00% | 14.80% |
| Tax rate | 24.50% - 25.00% | 24.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 10.8% - 12.4% | 11.6% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.81 | 0.87 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.60% | 16.00% |
| Tax rate | 24.50% | 25.00% |
| Debt/Equity ratio | 0.41 | 0.41 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 10.8% | 12.4% |
| Selected WACC | 11.6% | |
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 HDFCBANK.NS:
cost_of_equity (14.80%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.81) + 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.