A 0.2 change in beta cost a promoter ₹47 crore.
A buyout. A Rs. 500 crore equity value on the table. Two valuers, same company, same financials, same date. They were Rs. 47 crore apart before they had argued about a single rupee of cash flow.
The entire gap was beta.
The seller’s valuer had pulled a 2-year regression beta from Bloomberg. It came to 0.85. The buyer’s valuer pulled a 5-year beta on the same stock. It came to 1.05. A thinly-traded small-cap, where the choice of regression window swings the number, because there are not enough trading days for the two windows to agree.
Here is what that 0.2 does.
At a risk-free rate of 6.5 percent and an India equity risk premium near 7.5 percent, a beta of 0.85 gives a cost of equity around 12.9 percent. A beta of 1.05 gives 14.4 percent. A swing of 1.5 percentage points in the discount rate.
On a stable-cash-flow business valued at Rs. 500 crore, that swing moves the equity value by close to Rs. 47 crore. Same company. Same numbers. One regression window.
The fight took 90 minutes. Neither valuer was wrong. Both betas were defensible, pulled from the same terminal, on the same stock, on the same day. That is the uncomfortable part. Beta is not a fact you look up. It is a choice you make, and for a thinly-traded Indian small-cap that choice quietly decides crores.
This is the line in the model that promoters never inspect. They will argue for an hour about a revenue growth assumption they can feel. They will accept a beta they never saw being chosen.
If you are buying or selling a small-cap, do not start with the cash flows. Ask which beta was used, over which window, and why.
The number you do not argue about is the one that costs you the most.
Have you seen a deal move on a single technical assumption nobody flagged? In one line, what was it?
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