Weighted Average Cost of Capital or WACC is a metric that indicates the company’s average cost of financing from all of its sources, including debt and equity. This metric represents the average rate of return that the company must pay to its investors to finance its assets.
For an investor like yourself, the WACC typically does not apply directly as it applies to companies. Rather, the term WACC in the Nepali stock market is used very loosely to indicate the average purchase cost of shares of investors required for the purpose of calculating Capital gain tax. WACC includes your purchase price, broker commission, SEBO commission and DP fee.
Let us try to be clear by using an example. You make three buy transactions of SCB as below:
- 100 shares @ Rs. 600 on Monday
- 20 shares @ Rs. 610 on the same Monday
- 1000 shares @ Rs. 620 on the following Tuesday.
Calculation of WACC
| Number of shares | Purchase Price (Rs) | (a)Total Purchase Amount (Rs) | (b)Broker commission (Rs) | (c)SEBON Commission (Rs) (0.015%) | (d)Proportionate DP Fee (Rs) | (e=a+b+c+d) Total purchase cost (Rs) |
| 100 | 600 | 60,000 | @0.33% = 198 | 9 | 20.83 | 60,227.83 |
| 20 | 610 | 12,200 | @0.36% = 43.92 | 1.83 | 4.17 | 12,249.92 |
| 1000 | 620 | 620,000 | @0.31% = 1922 | 93 | 25 | 622,040 |
| Total | 694,517.75 |
Your WACC for SCB = Total purchase cost/total number of shares
= Rs.694,517.75/1120
= Rs.620.11 per share
Capital gain tax in Nepal is calculated on a transaction basis i.e. whenever you sell shares, your capital gain or capital loss is calculated and tax is charged if you make a capital gain. You will make of capital gain if your adjusted selling price (selling price net of broker commission, SEBON commission and proportionate DP fee) is higher than WACC and vice versa.
Now, the question here arises, – how to calculate WACC? Furthermore, as an investor and shareholder, you should also be aware of how to transfer shares to brokers after selling. So how do you do it?
In this blog, we discuss how to calculate WACC and transfer shares using Meroshare. So, with this in mind, let’s get started!
How To Calculate WACC?
For individuals, the process of calculating WACC is rather simple. The overall process involves going to the Meroshare application (www.meroshare.cdsc.com.np) and going to the left menus. By following a few straightforward steps, you can calculate the WACC for shares. To calculate the WACC, you can follow the process below:
- Login to Mero Share
- Go to “My Purchase Source” and click on the “Purchase Source” button
- Enter your Scrip and click on search. A list of your transactions will appear. Check for your purchase prices. You can modify prices if they differ from your actual price. Mention remarks.
- Check or tick mark the transaction and click on Proceed.
- Accept the declaration clause and click on update.
- You will get your WACC.
WACC helps you manage your portfolio more effectively, estimate risks associated with your investments, and evaluate the potential returns on your capital.
Transfer Share Using Meroshare (EDIS)
Electronic Delivery Instruction Slip, or EDIS for short, is a tool that allows you the electronic transfer of shares from your DEMAT account to your broker’s DEMAT accounts after you sell shares. It must be done by 9:00 PM of T+1 day. If you fail to transfer shares by the EOD of T+1 day, you will be regarded as a defaulter and 20 percent of the sell amount will be charged to you as a fine.
That said, the question here is How to transfer share from EDIS. The process is actually rather simple. You can follow the process below to transfer shares from EDIS.
- Log in to your Meroshare application.
- Calculate WACC (if you have not calculated already) as explained above.
- Calculate Your Holding period of shares
- This is required to identify the share you have held for the long term and the short term. There is a different CGT rate for the long-term and the short-term.
- Go to “My purchase source” on the left menu of Meroshare and click on the “My holdings” button.
- Enter your scrip in the field or you can select from a drop-down list and click search. A list of your transactions with holding days will appear. Check for your holding period. You can modify the holding period if they differ from your actual holding period. Mention remarks.
- Check or tick mark the transaction and click on Proceed
- Accept the declaration clause and click on update.
- You will get your Holding Period.
- Go to “My EDIS” on the left menu and click on the ‘Transfer Shares’ button. Select ‘View Detail’.
- Choose the transaction/shares you want to transfer by checking or making a tick mark.
- Click ‘Proceed.’
- Review the transfer details.
- Tick the statement ‘I agree…. and click on the confirm button.
- Successfully requested for transfer share’ message will appear. The share transfer is complete.
Alternatively, you can transfer shares by using physical DIS. It is a cheque-like instrument provided to you by your DP. You must fill in the necessary information in the DIS and submit it to your DP by going to the DP’s office within T+1. This is a cumbersome and time-consuming process. It also entails transportation costs. Also, you must calculate WACC and provide it to your broker in a specified form.
Conclusion
Understanding how to calculate the Weighted Average Cost of Capital (WACC) and transfer shares through the Electronic Delivery Instruction System (EDIS) are valuable skills for individual investors. The process of calculating WACC through the Mero Share app provides a straightforward method for evaluating your investments’ financial efficiency. Similarly, the ability to transfer shares via EDIS offers a convenient and secure way to transfer shares to your broker accounts. By following the outlined steps, you can easily start and authorize share transfers online, streamlining your investment management process.
In this blog, we discussed how to calculate WACC and transfer Share using meroshare. We hope you found this helpful. If you seek further insights regarding various aspects of the stock market, do check out some of our other content related to the stock market.
Moreover, if you want the best services regarding the share market and other securities, look no further than Secured Securities Ltd, one of the best stock brokers in Nepal (Broker Number 36). Thank you for reading till the end.
FAQs on Calculating WACC and Transferring Share from EDIS
What is WACC?
WACC stands for Weighted Average Cost of Capital. It’s a metric that calculates a company’s average cost of financing from all sources, including debt and equity. This metric represents the average rate of return that the company must pay to its investors to finance its assets.
However, the term WACC in the Nepali stock market is used very loosely to indicate the average purchase cost of shares of investors required for the purpose of calculating Capital gain tax. WACC includes your purchase price, broker commission, SEBO commission and DP fee.
How to calculate WACC?
Calculating WACC can be simplified for individual investors using the Mero Share app. The process of calculating WACC is as follows:
- Login to Mero Share.
- Go to “My Purchase Source” and click on the “Purchase Source” button.
- Enter your Scrip and click on search. A list of your transactions will appear. Check for your purchase prices. You can modify prices if they differ from your actual price. Mention remarks.
- Check or tick mark the transaction and click on Proceed.
- Accept the declaration clause and click on update.
- You will get your WACC.
How to calculate the Holding Period?
Calculating the holding period can be simplified for individual investors using the Mero Share app. The process of calculating the holding period is as follows:
- Go to “My purchase source” on the left menu of Meroshare and click on the “My holdings” button.
- Enter your scrip in the field or you can select from a drop-down list and click search. A list of your transactions with holding days will appear. Check for your holding period. You can modify the holding period if they differ from your actual holding period. Mention remarks.
- Check or tick mark the transaction and click on Proceed.
- Accept the declaration clause and click on update.
- You will get your Holding Period.
What is EDIS?
EDIS stands for Electronic Delivery Instruction Slip. It’s a tool that allows for the electronic transfer of shares between DEMAT accounts. EDIS modernizes the process of share transfers, making it faster, more secure, and more convenient than traditional paper-based methods. It’s an essential part of the digital transformation in the securities market.
How do you initiate a share transfer in EDIS?
To start your share transfer in EDIS, follow the following steps:
- Log in to your Meroshare application.
Calculate WACC and holding period. - Go to “My EDIS” on the left menu and click on the ‘Transfer Shares’ button. Select ‘View Detail’.
- Choose the transaction/shares you want to transfer by checking or making a tick mark.
- Click ‘Proceed.’
- Review the transfer details.
- Tick the statement ‘I agree…. and click on the confirm button.
- ‘Successfully requested for transfer share’ message will appear. The share transfer is complete.
Is the Mero Share app necessary to calculate WACC?
The Mero Share app provides a simple method for individuals to calculate WACC. This app simplifies the process significantly. It’s designed to make this complex financial metric more accessible to individual investors, potentially improving their decision-making capabilities.
Can I check the transfer request report in case I get confused?
Yes, you can. Go the ‘My EDIS’ and click on ‘Transfer Request Report’. You can view your transfer reports.
