The WACC of State Bank of India (SBIN.NS) is 10.7%.
Range | Selected | |
Cost of equity | 15.0% - 18.1% | 16.55% |
Tax rate | 25.6% - 25.8% | 25.7% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 9.8% - 11.5% | 10.7% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.97 | 1.1 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 15.0% | 18.1% |
Tax rate | 25.6% | 25.8% |
Debt/Equity ratio | 0.84 | 0.84 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 9.8% | 11.5% |
Selected WACC | 10.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
SBIN.NS | State Bank of India | 0.84 | 0.89 | 0.55 |
AXISBANK.NS | Axis Bank Ltd | 0.6 | 1.26 | 0.87 |
BANKBARODA.NS | Bank of Baroda Ltd | 1.05 | 1.06 | 0.59 |
BANKINDIA.NS | Bank of India Ltd | 2.23 | 1.28 | 0.48 |
CANBK.NS | Canara Bank Ltd | 0.86 | 1.41 | 0.86 |
DCBBANK.NS | DCB Bank Ltd | 1.97 | 1.26 | 0.51 |
HDFCBANK.NS | HDFC Bank Ltd | 0.43 | 0.77 | 0.58 |
ICICIBANK.NS | ICICI Bank Ltd | 0.21 | 1.03 | 0.89 |
KOTAKBANK.NS | Kotak Mahindra Bank Ltd | 0.24 | 0.81 | 0.69 |
PNB.NS | Punjab National Bank | 0.87 | 1.2 | 0.73 |
Low | High | |
Unlevered beta | 0.59 | 0.71 |
Relevered beta | 0.96 | 1.15 |
Adjusted relevered beta | 0.97 | 1.1 |
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 SBIN.NS:
cost_of_equity (16.55%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.97) + 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.