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Stream/Area:
-
Subject:
-
Paper ID:
IJSREM68045
Volume:
10 |
10 |
Oct 2026
Pages:
1-6
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
Mangement
Lovely professional university
Mangement
Lovely professional university
Mangement
Lovely professional university
Mangement
Lovely professional university
The cost of capital is central to corporate finance because it influences investment decisions, valuation and performance measurement. A company creates value when its returns exceed its cost of capital and destroys value when they fall below it. This study examines the cost of capital of Blue Star Limited, a leading Indian air-conditioning, refrigeration and MEP services company, for FY2021 to FY2025. The cost of equity is estimated using the Capital Asset Pricing Model (CAPM), the cost of debt is derived from financial statement data, and the two are combined into the Weighted Average Cost of Capital (WACC). Blue Star's WACC rose from approximately 12.0% in FY2021 to 13.7% in FY2025, mainly because of a shift in capital structure following the ₹1,000 crore Qualified Institutional Placement (QIP) and bonus share issue in 2023. Over the same period, Return on Capital Employed (ROCE) rose from 13% to 26%. ROCE remained above WACC in every year, and the company therefore created value for its capital providers.
KEYWORDS
The study analysed Blue Star Limited's cost of capital and its impact on firm value for FY2021–FY2025. WACC rose gradually, primarily because of the financing changes that followed the 2023 QIP and bonus share issue. Even so, the company kept operating returns well above this level, supported by strong growth in revenue, profitability and capital efficiency. The widening gap between ROCE and WACC shows that Blue Star consistently created value for shareholders and lenders while maintaining a financially stable capital structure, highlighting the importance of efficient capital management for long-term shareholder value.
• Durand, D. (1952). Cost of Debt and Equity Funds for Business: Trends and Problems of Measurement. • Habibniya, H., Dsouza, S., Rabbani, M. R., Nawaz, N., & Demiraj, R. (2022). Impact of Capital Structure on Profitability: US Telecom Industry. • Hussain, F. Cost of Capital and Firm Performance: An Empirical Evidence from Pakistan. • Kurniasih, R., et al. (2022). Cost of Capital and Firm Value: Evidence from Indonesia. • Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. • National Stock Exchange of India. (2013). Estimating the Cost of Capital of CNX Nifty. • Panchal, S., & Chand, S. (2023). Impact of Capital Structure on Firm Performance: Indian Manufacturing Sector. • RBSA Advisors. (2020). Cost of Capital in India (4th Edition). • Screener.in. Blue Star Ltd. Financial Statements and Ratios. • TipRanks. Blue Star Limited Valuation and Stock Statistics. • Blue Star Limited. Annual Reports FY2021–FY2025.
Publication Date
10/16/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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Conflict of Interest
The authors declare no conflict of interest related to this research work.
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