dcf-indialisted

# DCF for Indian Companies A DCF is an argument about the future written in arithmetic. This skill sets the India-specific inputs and imposes the discipline that makes the argument honest. ## Choose the right cash flow **FCFF** (firm) discounted at WACC → enterprise value → subtract net debt → equity value. Default choice for a non-financial company. ``` EBIT × (1 − tax rate) + Depreciation & amortisation − Capex − Change in non-cash working capital = FCFF ``` **FCFE** (equity) discounted at cost of equity → equity value directly. Use for banks and NBFCs, where debt is raw material rather than financing — but for lenders prefer an excess-return or residual-income model; see `bank-nbfc-analysis`. Never mix: FCFF discounted at cost of equity, or FCFE at WACC, is the single most common modelling error. ## Cost of equity — India inputs ``` Ke = Rf + β × ERP ``` **Risk-free rate (Rf):** the 10-year Government of India benchmark G-Sec yield. Use the current yield, not a historical average, and state the date. As a sanity band it has traded broadly in the mid-6% to low-7% range through 2026. Sources: RBI, CCIL, or the FBIL benchmark. Do not use the US Treasury yield unless you are building the whole model in USD, in which case you must also convert the cash flows and use a USD-consistent inflation differential in terminal growth. **Equity risk premium (ERP) for India:** approximately **7.0%**, with a defensible range of 6.5–7.5%. This is a *mature-market premium plus a co