The WACC of Kotak Mahindra Bank Ltd (KOTAKBANK.NS) is 13.8%.
Range | Selected | |
Cost of equity | 14.7% - 17.3% | 16% |
Tax rate | 24.7% - 24.8% | 24.75% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 12.7% - 14.8% | 13.8% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.94 | 1.01 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 14.7% | 17.3% |
Tax rate | 24.7% | 24.8% |
Debt/Equity ratio | 0.22 | 0.22 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 12.7% | 14.8% |
Selected WACC | 13.8% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
KOTAKBANK.NS | Kotak Mahindra Bank Ltd | 0.22 | 0.77 | 0.66 |
AXISBANK.NS | Axis Bank Ltd | 0.61 | 1.27 | 0.87 |
ICICIBANK.NS | ICICI Bank Ltd | 0.22 | 0.24 | 0.2 |
IDBI.NS | IDBI Bank Ltd | 0.19 | 1.64 | 1.43 |
IDFCFIRSTB.NS | IDFC First Bank Ltd | 0.72 | 0.96 | 0.62 |
INDUSINDBK.NS | Indusind Bank Ltd | 0.8 | 1.4 | 0.88 |
J&KBANK.NS | Jammu and Kashmir Bank Ltd | 0.19 | 1.64 | 1.43 |
PNB.NS | Punjab National Bank | 0.84 | 1.42 | 0.87 |
UNIONBANK.NS | Union Bank of India Ltd | 0.25 | 1.67 | 1.41 |
YESBANK.NS | Yes Bank Ltd | 1.16 | 1.24 | 0.66 |
Low | High | |
Unlevered beta | 0.78 | 0.87 |
Relevered beta | 0.91 | 1.01 |
Adjusted relevered beta | 0.94 | 1.01 |
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 KOTAKBANK.NS:
cost_of_equity (16.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.94) + 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.