The WACC of Natco Pharma Ltd (NATCOPHARM.NS) is 14.1%.
Range | Selected | |
Cost of equity | 13.2% - 15.4% | 14.3% |
Tax rate | 17.0% - 18.0% | 17.5% |
Cost of debt | 6.0% - 7.5% | 6.75% |
WACC | 13.1% - 15.2% | 14.1% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.77 | 0.81 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 13.2% | 15.4% |
Tax rate | 17.0% | 18.0% |
Debt/Equity ratio | 0.02 | 0.02 |
Cost of debt | 6.0% | 7.5% |
After-tax WACC | 13.1% | 15.2% |
Selected WACC | 14.1% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
NATCOPHARM.NS | Natco Pharma Ltd | 0.02 | 1.23 | 1.21 |
AJANTPHARM.NS | Ajanta Pharma Ltd | 0 | 0.41 | 0.41 |
ASTRAZEN.NS | Astrazeneca Pharma India Ltd | 0 | 0.84 | 0.84 |
ERIS.NS | Eris Lifesciences Ltd | 0.11 | 0.68 | 0.63 |
JBCHEPHARM.NS | J B Chemicals and Pharmaceuticals Ltd | 0.01 | 0.78 | 0.77 |
LAURUSLABS.NS | Laurus Labs Ltd | 0.07 | 1.25 | 1.19 |
PFIZER.NS | Pfizer Ltd | 0 | 0.46 | 0.46 |
PGHL.NS | Procter & Gamble Health Ltd | 0 | 0.66 | 0.66 |
SANOFI.NS | Sanofi India Ltd | 0 | 0.48 | 0.48 |
SUVENPHAR.NS | Suven Pharmaceuticals Ltd | 0 | 0.65 | 0.65 |
Low | High | |
Unlevered beta | 0.64 | 0.7 |
Relevered beta | 0.66 | 0.72 |
Adjusted relevered beta | 0.77 | 0.81 |
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 NATCOPHARM.NS:
cost_of_equity (14.30%) = 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.