HDFCBANK.NS WACC - Weighted Average Cost of Capital

The WACC of HDFC Bank Ltd (HDFCBANK.NS) is 12.5%.

The Cost of Equity of HDFC Bank Ltd (HDFCBANK.NS) is 16.30%.

The Cost of Debt of HDFC Bank Ltd (HDFCBANK.NS) is 5.00%.

	Range	Selected
Cost of equity	14.80% - 17.80%	16.30%
Tax rate	24.50% - 25.00%	24.75%
Cost of debt	5.00% - 5.00%	5.00%
WACC	11.5% - 13.6%	12.5%

WACC

HDFCBANK.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.95	1.07

Additional risk adjustments	0.0%	0.5%
Cost of equity	14.80%	17.80%

Tax rate	24.50%	25.00%
Debt/Equity ratio	0.43	0.43
Cost of debt	5.00%	5.00%

After-tax WACC	11.5%	13.6%


Selected WACC	12.5%

HDFCBANK.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 HDFCBANK.NS:

cost_of_equity (16.30%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.95) + 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.