COST OF CAPITAL ANALYSIS OF ABB INDIA LIMITED: A Five-Year Trend Study with Peer Benchmarking (FY2021–FY2025)

This study estimated the cost of capital for ABB India Limited across FY2021–FY2025, applying CAPM for the cost of equity, a credit-rating-based proxy for the cost of debt, and both book-value and market-value weights for WACC. The key result is that ABB India is essentially debt-free and rated CRISIL AAA, with its WACC (roughly 11.8–11.9%) almost wholly determined by its cost of equity — a pattern also seen in its closest listed peers, Siemens Limited and Hitachi Energy India Limited. Measured against after-tax Return on Capital Employed, which rose from 11.7% in FY2021 to 29.3% in FY2024 and then eased to 22.5% in FY2025, the analysis indicates that ABB India earned returns above its cost of capital in every year from FY2022 to FY2025, with FY2021 close to break-even. The study further highlights a practical pitfall in estimating the cost of capital — the standard interest-expense approach to the cost of debt fails for nearly debt-free companies — and presents a credit-rating-based alternative that yields a much more economically sound result. Subsequent research could build on this analysis by reconstructing year-specific historical CAPM inputs, and by investigating whether a moderate rise in leverage would add value for ABB India, given its steady cash flows and top-tier credit rating.

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