Estimating cost of capital for Indian solar projects


The everchanging business landscape in India makes it essential for investors to constantly re-evaluate cost of capital as against relying on static benchmarks. This report examines different methodologies and related risk issues for estimating risk-adjusted cost of capital for solar projects in India.

The Capital Asset Pricing Model (CAPM) and market multiples method are not appropriate for the sector in our view. We prefer the cost build up method, which uses a suitable proxy market return indicator as a benchmark and makes incremental adjustments for various risk parameters. We have used three different benchmark indicators – DISCOM debt, INVIT trading yield and US solar project yield expectations – to arrive at a range of estimates for cost of capital.

Figure : Cost of capital estimates using different approaches

Source: BRIDGE TO INDIA research
Note: All estimates are shown on post-tax basis at project level (pre-tax for investors).


Recent reports

India Solar Rooftop Map | June 2021

India Solar Rooftop Map is an info-graphic report providing a snapshot of rooftop solar market in India – capacity addition across states and consum...

Download

India Corporate Renewable Brief | Q2 2021

Our latest edition of quarterly report provides a detailed regular update on key trends and developments in the C&I renewable market....

Download

India Renewable Map | June 2021

India’s total utility scale solar and wind capacity reached 77,082 MW by 30 June 2021. New capacity addition in the last 12 months was 6,530 MW, up ...

Download

India Solar Compass Q2 2021   

This report provides a detailed update of all key sector developments and trends in the quarter – capacity addition, leading players, tender and pol...

Buy Report Download Executive Summary

India Corporate Renewable Brief | Q1 2021

Our new quarterly report provides a detailed regular update on key trends and developments in the C&I renewable market....

Download

India Renewable Power CEO Survey | 2021

The India Renewable Power CEO Survey provides a glimpse into key trends of the industry that affect important management decision-making by business l...

Download
We use cookies to offer you an optimal user experience and collect information on website usage.