Group no.

SLP4

Mandeep Singh 108

Ameya Mane

137

Revilla Monteiro 138

Ben Peter

158

Hindalco
Risk free rate or Govt Bond Rate
Spread from CRISIL- AA rating

Cost of debt(Kd)

7.87%
1.00%
8.87%

tax rate
after tax (ki)

34%
5.85%

Cost of equity
Re = Rf + Beta * (Rf - Rm)
Rf

7.87%

Beta
Rm(Market rate)

Cost of equity

1.34
8.30%
18.99%

Capital Proportions
Market Capitalization(in Cr)
Non-current Liabilities(in Cr)
Current Maturities of long-term
borrowing
Total Debt (Cr)
Retained Earnings (Cr)

Proportion of debt
Proportion of equity
Debt / Equity

WACC

29255
24,455.71
652.64
25,108.35
1,956.87
56,320.43
0.445812469
0.519442235
0.858252254
12.48%

http://www.tradingeconomics.com/india/government-bond-yield

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/countrytaxrate.htm

Beta is calculaged in the COE tab taking into account historical data of thr returns

Stock Price
141.7

We have taken the values from Annual report of Hindalco

Taking into the account the Governemnt 10 year bond

yield rates

Taking into the account the corporate marginal tax

rates

Outstanding shares
2,064,587,868

BSE 200
Month
Close
Jan-10 2065.21
Feb-10 2071.72
Mar-10
2199.5
Apr-10 2230.17
May-10 2152.21
Jun-10 2248.06
Jul-10 2281.63
Aug-10 2302.88
Sep-10 2530.47
Oct-10 2541.85
Nov-10 2451.45
Dec-10
2533.9
Jan-11 2270.22
Feb-11 2185.86
Mar-11 2378.69
Apr-11 2363.68
May-11 2301.65
Jun-11 2314.65
Jul-11 2256.48
Aug-11 2061.08
Sep-11 2028.27
Oct-11 2155.58
Nov-11 1953.03
Dec-11 1850.89
Jan-12 2097.94
Feb-12 2190.92
Mar-12 2157.89
Apr-12 2136.82
May-12
2003.1
Jun-12
2138.1
Jul-12 2114.47
Aug-12 2124.06
Sep-12 2307.58
Oct-12 2276.15
Nov-12 2389.51
Dec-12 2424.38
Jan-13 2461.12
Feb-13 2307.98
Mar-13 2287.96
Apr-13 2388.98
May-13 2409.22
Jun-13 2323.83
Jul-13 2270.93

Returns
0.003152
0.061678
0.013944
-0.03496
0.044536
0.014933
0.009314
0.098828
0.004497
-0.03556
0.033633
-0.10406
-0.03716
0.088217
-0.00631
-0.02624
0.005648
-0.02513
-0.0866
-0.01592
0.062768
-0.09397
-0.0523
0.133476
0.04432
-0.01508
-0.00976
-0.06258
0.067396
-0.01105
0.004535
0.086401
-0.01362
0.049803
0.014593
0.015154
-0.06222
-0.00867
0.044153
0.008472
-0.03544
-0.02276

HINDALCO
Month
Close
Returns
Jan-10
147.25
Feb-10
161.25 0.095076
Mar-10
181.7 0.126822
Apr-10
177.9 -0.02091
May-10
150.1 -0.15627
Jun-10
144.5 -0.03731
Jul-10
160.3 0.109343
Aug-10
166.4 0.038054
Sep-10
196.75 0.182392
Oct-10
210.5 0.069886
Nov-10
206.05 -0.02114
Dec-10
246 0.193885
Jan-11
229.4 -0.06748
Feb-11
200.8 -0.12467
Mar-11
208.65 0.039094
Apr-11
215.55 0.03307
May-11
197.1 -0.08559
Jun-11
181 -0.08168
Jul-11
168.4 -0.06961
Aug-11
150.35 -0.10719
-0.1267
Sep-11
131.3
Oct-11
136.35 0.038462
Nov-11
122.65 -0.10048
Dec-11
115.75 -0.05626
Jan-12
146.65 0.266955
Feb-12
148.65 0.013638
Mar-12
129.45 -0.12916
Apr-12
120.6 -0.06837
May-12
116.7 -0.03234
Jun-12
119.9 0.027421
0
Jul-12
119.9
-0.1347
Aug-12
103.75
Sep-12
120.5 0.161446
Oct-12
116.45 -0.03361
Nov-12
116.35 -0.00086
Dec-12
130.6 0.122475
Jan-13
115.75 -0.11371
Feb-13
99.35 -0.14168
Mar-13
91.5 -0.07901
Apr-13
97.25 0.062842
May-13
102.25 0.051414
Jun-13
99.75 -0.02445
Jul-13
90.15 -0.09624

BSE Returns
0.003152
0.061678
0.013944
-0.03496
0.044536
0.014933
0.009314
0.098828
0.004497
-0.03556
0.033633
-0.10406
-0.03716
0.088217
-0.00631
-0.02624
0.005648
-0.02513
-0.0866
-0.01592
0.062768
-0.09397
-0.0523
0.133476
0.04432
-0.01508
-0.00976
-0.06258
0.067396
-0.01105
0.004535
0.086401
-0.01362
0.049803
0.014593
0.015154
-0.06222
-0.00867
0.044153
0.008472
-0.03544
-0.02276
-0.04534

Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15

2167.96
2281.93
2490.49
2463.86
2530.58
2425.46
2494.74
2681.35
2688.05
2951.21
3124.4
3144.77
3233.65
3251.84
3392.39
3510.28
3428.09
3474.24

-0.04534
0.05257
0.091396
-0.01069
0.027079
-0.04154
0.028564
0.074801
0.002499
0.0979
0.058684
0.00652
0.028263
0.005625
0.043222
0.034751
-0.02341
0.013462

Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15

104.9
111.95
115
122.7
122.5
109.55
105.1
141.7
134.7
147.7
164.1
191.6
170.1
156.8
163.2
173.9
157.7
160.1

0.163616
0.067207
0.027244
0.066957
-0.00163
-0.10571
-0.04062
0.34824
-0.0494
0.096511
0.111036
0.167581
-0.11221
-0.07819
0.040816
0.065564
-0.09316
0.015219

0.05257
0.091396
-0.01069
0.027079
-0.04154
0.028564
0.074801
0.002499
0.0979
0.058684
0.00652
0.028263
0.005625
0.043222
0.034751
-0.02341
0.013462

HINDALCO
Returns
0.095076
0.126822
-0.02091
-0.15627
-0.03731
0.109343
0.038054
0.182392
0.069886
-0.02114
0.193885
-0.06748
-0.12467
0.039094
0.03307
-0.08559
-0.08168
-0.06961
-0.10719
-0.1267
0.038462
-0.10048
-0.05626
0.266955
0.013638
-0.12916
-0.06837
-0.03234
0.027421
0
-0.1347
0.161446
-0.03361
-0.00086
0.122475
-0.11371
-0.14168
-0.07901
0.062842
0.051414
-0.02445
-0.09624
0.163616

Column 1
Column 2

Column 1 Column 2
0.00242247
0.00331435 0.011483

Variance
Covariance
Beta
Risk free premium (Rf)
MRP

0.00246353
0.00331435
1.34536603
7.87
8.3

Cost Of Equity
19.0365381
Cost of Equity = Risk free premium + MRP* Beta

0.067207
0.027244
0.066957
-0.00163
-0.10571
-0.04062
0.34824
-0.0494
0.096511
0.111036
0.167581
-0.11221
-0.07819
0.040816
0.065564
-0.09316
0.015219

Proportion of
debt
Proportion of
equity
Debt / Equity
Cost of Equity
After tax Cost of debt
Taxrate

WACC

0.445
0.519
0.85741811
18.99%
5.85%
34%
12.45906

WACC =wd*rd(1-TC)+we*re

where wd=proportion of debt ,we =proportion of equity,rd=co

=proportion of equity,rd=cost of debt,re=cost of equity,tc=corporate tax rate

Now Hindalco is now venturing into the infrastrucutire sector by going into the Cement sector

Related companies
ACC Limited
Ambuja Cement Limited
Ultratech Cement Limited
India CEMENT Limited

Average Beta

Beta

Market Cap(Cr)
1
0.92
0.83
1.4

26770.6
35,791.38
75,244.17

2654.024

1.0375

We take company with closest to the Average beta I.e ACC Limited

Discount rate for New project = WACC for new Project+Risk premiums estimates to account for uncertainity
WACC =wd*rd(1-TC)+we*re
where wd=proportion of debt ,we =proportion of equity,rd=cost of debt,re=cost of equity,tc=corporate tax rate

Total Equity
Total Debt
Proportion of Equity for ACC
Proportion of debt for ACC

7824.74
0.00
1
0

WACC for new Project=A

Rp for any other uncertainty=B
Lack of experience
Change in Policies
Total

20.57674064

Final Discounting Rate(A+B)

22.07674064

0.50%
1%
1.50%

NOTE:All values used are refered from balance sheet and IS of respective companies and Beta value is taken from in.reuters.c

g into the Cement sector

Data of ACC Limited

Beta
Debt (Long Term Debt)
Market value for common stock
Debt to Equity Ratio
Tax Rate
Adjusted Beta (Unlevered Beta = Levered Beta / (1+((1-T)*D/E))

Calculating new cost of capital

Hindalco long term debt
Market value for common stock
Debt-to-equity ratio
New Hindalco LEVERED BETA (levered Beta = unLevered Beta * (1+((1-T)*D
Risk Free yield on 10 Yr Govt Bond
Risk Premium for India (Rm-Rf)

nt for uncertainity
Risk Premium For Hindalco

porate tax rate

Cost of Equity of new project given by formula

Re =
Cost of Debt of new project given by formula

the valuea are collected from Annual Reports of ACC

policies can be changed by the Governemtn as we have seen that the growth OF CEMENT industry till now was stunted due t

lue is taken from in.reuters.com

1
2,666.64
3851.27
0.0000
34
1.000

25,108.35
31212.08
0.804443344
1.53
7.87
8.3
12.71
Rf+RP
20.58
Cost of Debt*(1-Tax rate for Hindalco)
5.8542

y till now was stunted due to recent issues with coal block allocations