SMSPHARMA.NS WACC - Weighted Average Cost of Capital

The WACC of SMS Pharmaceuticals Ltd (SMSPHARMA.NS) is 13.4%.

The Cost of Equity of SMS Pharmaceuticals Ltd (SMSPHARMA.NS) is 14.35%.

The Cost of Debt of SMS Pharmaceuticals Ltd (SMSPHARMA.NS) is 7.95%.

	Range	Selected
Cost of equity	12.80% - 15.90%	14.35%
Tax rate	26.40% - 27.20%	26.80%
Cost of debt	7.90% - 8.00%	7.95%
WACC	12.0% - 14.7%	13.4%

WACC

SMSPHARMA.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.72	0.86

Additional risk adjustments	0.0%	0.5%
Cost of equity	12.80%	15.90%

Tax rate	26.40%	27.20%
Debt/Equity ratio	0.13	0.13
Cost of debt	7.90%	8.00%

After-tax WACC	12.0%	14.7%


Selected WACC	13.4%

SMSPHARMA.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 SMSPHARMA.NS:

cost_of_equity (14.35%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.72) + 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.