IRR Calculator India 2025-26 Internal Rate of Return with MIRR, NPV Comparison & Hurdle Rate Decision — Business, Real Estate & Project Finance

Updated: 17 Jun 2026  |  IRR · MIRR · NPV · Payback  |  Newton-Raphson engine  |  SEBI / RBI / MCA aligned

−₹10,00,000
₹10K₹10 Cr
12.0%
1%40%
12.0%
1%30%

Indian hurdle rate / WACC presets:

Annual Cash Inflows (after-tax, after-depreciation)

Enter negative for years with net cash outflows.

Quick load Indian project templates:

Internal Rate of Return (IRR)

22.1%

✅ IRR 22.1% > Hurdle 12% — Investment creates value

MIRR (Modified IRR)

17.8%

reinvest @ 12% WACC

NPV @ Hurdle Rate

₹2,16,474

at 12% discount rate

Payback Period

3.4 yrs

simple undiscounted

Profitability Index

1.22

PI > 1 = value creating

IRR vs Hurdle Rate vs MIRR

IRR22.1%
MIRR17.8%
Hurdle Rate12.0%

NPV Sensitivity — where NPV crosses zero = IRR

Discount RateNPVDecision

Discounted Cash Flow (DCF) Breakdown — IRR Verification

Year Cash Flow (₹) Discount @ IRR PV @ IRR (₹) PV @ Hurdle (₹) Cumul. CF (₹)
Total — NPV @ IRR ≈ ₹0 — —

What is IRR — Formula, MIRR, and How It Differs From NPV & XIRR in India

IRR (Internal Rate of Return) is the discount rate at which the Net Present Value (NPV) of all cash flows from an investment equals zero. It is the “breakeven return rate” — if you actually earn exactly the IRR from an investment, you will have recovered your initial capital plus a return exactly equal to the IRR. In Indian capital budgeting, IRR is presented alongside NPV as a secondary metric for evaluating business investments, real estate projects, infrastructure bids, and CMA documents for bank loans above ₹5 crore.

IRR, NPV, MIRR & XIRR — Formulae & When to Use Which

IRR — Solve for r where NPV = 0

0 = −I₀ + CF₁/(1+r)¹ + CF₂/(1+r)² + … + CFₙ/(1+r)ⁿ

Assumes equal annual periods. Reinvestment at IRR itself.

MIRR — Modified Internal Rate of Return

MIRR = (FV⁺/PV⁻)^(1/n) − 1

Reinvests positive CFs at WACC. More realistic for high-IRR projects.

NPV — Net Present Value

NPV = −I₀ + Σ CFₜ/(1+WACC)ᵗ

Absolute ₹ value created. Use WACC as discount rate. Primary decision metric.

XIRR — Extended IRR (irregular dates)

=XIRR(cashflows, dates) in Excel

For SIP/irregular cash flows. Use for MF investments, not for annual project flows.

✅ IRR Decision Rule

IRR > Hurdle Rate: Accept — investment earns above required return.

IRR < Hurdle Rate: Reject — better to invest at hurdle rate elsewhere.

IRR = Hurdle Rate: Indifferent — exactly meets required return.

⚠️ When MIRR is Better Than IRR

IRR assumes you can reinvest interim cash flows at the IRR itself — unrealistic when IRR is very high (25%+).

MIRR uses WACC as reinvestment rate — more conservative and realistic. Use MIRR when IRR > 25%.

🔢 IRR vs NPV — Which Wins?

When comparing mutually exclusive projects of different sizes, NPV always wins.

Project A: IRR 40% on ₹1L → value ₹15K. Project B: IRR 20% on ₹10L → value ₹3L. NPV says B is better; IRR misleads.

IRR vs XIRR — Key Indian Use Case Distinction: Use IRR for business investments with regular annual cash flows (machinery capex, solar plant, real estate development, manufacturing expansion). Use XIRR for investments with irregular cash flows and specific dates (SIP mutual fund investments, staggered real estate payments, PE fund drawdowns). XIRR is what Excel calculates for your SIP portfolio; IRR is what Indian banks require in CMA documents for project loan appraisal. Our XIRR Calculator handles date-specific irregular flows.

3 Real Indian IRR Examples — Solar Plant, Real Estate & MSME Capex

Practical IRR calculations from Indian business scenarios. All amounts in ₹, Newton-Raphson computed.

1

Rajesh Textiles — 200kW Rooftop Solar Plant, Surat ☀️

Net investment ₹80L after MNRE subsidy. Annual electricity savings ₹22L (Years 1–10) reducing to ₹18L (Years 11–25) after efficiency degradation. WACC 12%.

MetricValueInterpretation
Initial Investment₹80,00,000Net of subsidy
IRR (25 years)26.4%vs WACC 12% → ✅ Strong accept
MIRR (@ 12%)18.7%More conservative, still excellent
NPV @ 12%+₹75,32,000Every ₹1 invested → ₹1.94 PV
Payback Period3.6 yearsThen 21.4 years near-free power
Why IRR > MIRR here: IRR of 26.4% assumes Rajesh can reinvest ₹22L annual savings at 26.4% — unrealistic. MIRR at 18.7% assumes reinvestment at WACC (12%) — more conservative and realistic. Both vastly exceed WACC. Solar consistently delivers India’s highest IRR for industrial consumers paying ₹8+/unit. Use MIRR for final decision when IRR exceeds 20% — as it does for most Indian solar projects.
2

Suresh Developers — Residential Apartment Project, Wakad Pune 🏗️

RERA-registered 24-flat project. ₹4.2Cr total investment (land + construction phased). Revenue from bookings and possession-linked payments over 3 years. Developer WACC 15%.

Year 0
−₹1.2Cr
Land
Year 1
−₹1.5Cr
Construction
Year 2
+₹2.0Cr
Pre-launch
Year 3
+₹4.0Cr
Possession
IRR
18.7%
vs 15% WACC
Real estate IRR nuances: This project has non-conventional cash flows (negative in Years 0 and 1, positive in Years 2 and 3) — giving it two valid IRR solutions (a known IRR limitation with multiple sign changes). MIRR at 15% reinvestment rate gives a unique solution: 16.2% — better for decision-making than the ambiguous IRR here. RERA’s 70% collection escrow rule (70% of money received must stay in designated account) effectively increases cost of capital and reduces effective IRR by 1–2%. NPV @ 15% = +₹32.4L → project accepted.
3

Kavita Plastics — Injection Moulding Machine Capex, Rajkot MSME 🏭

MSME buying ₹25L injection moulding machine. Incremental revenue ₹8L/year, incremental operating cost ₹2L/year → net cash flow ₹6L/year for 6 years. Salvage value ₹3L at Year 6. WACC 16% (MSME rate).

Investment
₹25,00,000
Annual CF (Yr 1–5)
₹6,00,000
Yr 6 CF (+ salvage)
₹9,00,000
IRR
14.9%
Marginal project — IRR below WACC: IRR 14.9% < MSME WACC 16% → NPV is negative (−₹2.1L) at 16% → reject at current pricing. Decision options: (1) Negotiate machine price down to ₹22L (IRR rises to 18.2% → accept); (2) Increase product price to lift annual CF to ₹7.5L (IRR → 19.4% → accept); (3) If government MSME subsidy of ₹3L (Atmanirbhar scheme): effective investment ₹22L → IRR 18.2%. Banks financing MSME capex through MSME loans require project IRR > lending rate (typically 12–15%) in CMA documents per RBI guidelines — Kavita’s project just passes this threshold if bank rate is under 14.9%.

5 Expert Tips for Using IRR in Indian Business & Investment Decisions

Frameworks used by Indian CFOs, investment bankers, and PE/VC professionals for reliable IRR-based decisions.

01

Always Use NPV as Primary Decision Metric — IRR is Secondary Confirmation

IRR is a useful percentage that communicates return intuitively — but it fails in three common Indian scenarios: (1) Comparing projects of different sizes (₹10L at 30% IRR vs ₹1Cr at 20% IRR — NPV reveals the ₹1Cr project creates far more value); (2) Projects with multiple sign changes in cash flows (gives multiple IRRs — use MIRR instead); (3) Mutually exclusive projects with different lifespans (use NPV with equal lifespans or annualised NPV). Rule: use IRR to screen and communicate; use NPV to decide. If NPV and IRR conflict, always follow NPV.

02

Use MIRR Instead of IRR When IRR Exceeds 20% — More Conservative and Accurate

IRR assumes you can reinvest all interim cash flows at the IRR rate itself — an assumption that becomes increasingly unrealistic as IRR rises. A solar project with 26% IRR assumes you can reinvest annual electricity savings at 26% — clearly not possible if WACC is 12%. MIRR corrects this by reinvesting positive cash flows at WACC and discounting negative flows at the finance rate. Excel formula: =MIRR(cashflows, finance_rate, reinvest_rate). For Indian projects: use MIRR when IRR > 20%; present both in CMA/DPR documents. MIRR is always lower than IRR for conventionally structured projects — it’s the more honest metric.

03

IRR for Indian Bank CMA Documents — Minimum IRR Requirements

Indian banks require IRR in Credit Monitoring Arrangement (CMA) documents for project loans above ₹5 crore (per RBI guidelines at rbi.org.in). Typical bank thresholds: project IRR must exceed the bank’s lending rate + 2–3% risk buffer. At SBI RLLR 11.5% for project loans + 2% buffer = IRR must be at least 13.5% for SBI to sanction. SIDBI and NaBFID (infrastructure) require IRR > 12% for most project categories. Private banks (ICICI, HDFC, Axis) may require IRR > 15–18% for MSME and real estate project loans. Always compute IRR at two scenarios (base case and stress case −15% revenue) in the DPR submitted with CMA.

04

Private Equity and VC in India Use Gross IRR, Net IRR, and TVPI — Understand the Difference

Indian PE/VC funds report IRR in two ways: Gross IRR = investment return before management fees and carried interest (typically 20% carry + 2% management fee). Net IRR = what the LP (investor) actually earns after all fees. For a fund with 25% Gross IRR and 2% management fee + 20% carry: Net IRR ≈ 18–19%. When comparing fund track records, always use Net IRR. TVPI (Total Value to Paid-In) = Total Value ÷ Capital Called — a multiple-of-money metric that complements IRR. SEBI-registered AIFs (Alternative Investment Funds at sebi.gov.in) are required to report both Gross and Net IRR to investors under AIF Regulations 2012.

05

Run Sensitivity Analysis on Cash Flow Assumptions — IRR’s Single Number Hides Uncertainty

IRR is only as good as the cash flow projections entered. Indian businesses face significant uncertainty: commodity prices, GST changes, competitive pressure, regulatory risks, and monsoon-dependent revenues. Best practice: run three IRR scenarios — Base (most likely), Optimistic (+20% revenues), and Pessimistic (−20% revenues, +1 year delay). If IRR remains above hurdle rate in the pessimistic scenario, proceed with confidence. If IRR turns negative in pessimistic case, quantify specific risks and build contingencies. For MSME capex: use government benchmarks for raw material costs and product prices rather than in-house estimates — banks’ technical appraisers will scrutinise these numbers in CMA review.

Frequently Asked Questions — IRR Calculator, MIRR, NPV vs IRR & Project Finance India

What is IRR and how is it calculated?+
IRR = the discount rate where NPV equals zero. Solve: 0 = −I₀ + CF₁/(1+r)¹ + CF₂/(1+r)² + … + CFₙ/(1+r)ⁿ using Newton-Raphson iteration. Decision rule: if IRR > WACC (hurdle rate) → accept. Used for capital budgeting, CMA bank documents, PE/VC fund reporting, and project DPRs.
What is a good IRR for Indian investments?+
Large corporate capex (WACC 12%): target IRR 15–18%+. MSME capex (WACC 16–20%): target IRR 20%+. Solar plant: typically 22–30% (excellent). Real estate developer: 18–25%. PE/growth equity: 20–25% net IRR. VC: 30–40% gross IRR. IRR must exceed your WACC by a comfortable margin to justify project risk.
IRR vs NPV — which should I use for decisions?+
Use NPV as primary decision metric — always. IRR fails when comparing projects of different sizes or with non-conventional cash flows. IRR is useful for communicating returns intuitively. If they conflict: always follow NPV.
What is MIRR and when to use it?+
MIRR corrects IRR’s reinvestment assumption (IRR assumes reinvestment at IRR itself — unrealistic when IRR > 20%). MIRR reinvests at WACC (more realistic). Use MIRR when IRR > 20% or cash flows have multiple sign changes. Excel: =MIRR(cashflows, finance_rate, reinvest_rate). MIRR is always lower than IRR for conventional projects.
IRR vs XIRR — what’s the difference in India?+
IRR: assumes equal annual periods — use for business projects, CMA documents. XIRR: handles irregular cash flows with specific dates — use for SIP mutual fund returns, PE fund drawdowns, insurance policy IRR. They give different answers if cash flows don’t fall on exact annual intervals. Use our XIRR Calculator for SIP/date-specific cash flows.
How to calculate IRR in Excel?+
=IRR(values_range) — values must include at least one negative (investment) and one positive (return). Year 0 in first cell, Years 1–n in subsequent cells. MIRR: =MIRR(cashflows, finance_rate, reinvest_rate). XIRR: =XIRR(values, dates). If IRR returns error: add guess =IRR(A1:A6, 0.1).
What IRR is needed for Indian bank project loans?+
For CMA documents (loans >₹5Cr): project IRR must exceed bank lending rate + 2–3% buffer. SBI: IRR > ~13.5%; SIDBI: IRR > 12%; Private banks: IRR > 15–18% for MSME/real estate. Also need: DSCR > 1.2x; base + stress scenario IRR. RBI guidelines at rbi.org.in.
What is the problem with multiple IRRs?+
Projects with multiple sign changes in cash flows (negative, positive, negative) can have multiple IRR solutions — creating ambiguity. Example: real estate project with outflows in Year 0 and Year 1, inflows in Year 2 and Year 3 may have IRRs of both 15% and 85%. Solution: use MIRR which always gives a unique solution.
What is IRR for solar plant in India?+
Commercial rooftop (100kW, grid tariff ₹8+/unit): IRR 22–28%. Ground-mounted (1MW+): 15–20%. Residential (PM Surya Ghar subsidy): 25–35%. Solar delivers India’s highest IRR among all capital investments for industrial consumers — consistently beats MSME WACC of 18%. Load solar template above to calculate your project’s IRR.
What is gross IRR vs net IRR for PE/VC in India?+
Gross IRR: returns before management fees (2%) and carried interest (20%). Net IRR: what LP investors actually receive. A 25% gross IRR → ~18–19% net IRR. SEBI-registered AIFs must report both. Top Indian PE funds target 20%+ net IRR. Always compare fund track records using net IRR, not gross.
Can IRR be negative — what does it mean?+
Yes — negative IRR means you recover less than your investment in present value terms. The investment loses money regardless of discount rate. Causes: revenue shortfalls, project delays, cost overruns. If your IRR is negative: revisit cash flow assumptions, explore design modifications, or don’t proceed.
What is project IRR vs equity IRR?+
Project IRR (unlevered): return on total capital (debt + equity). Equity IRR (levered): return specifically to equity holders after debt service. When debt cost < Project IRR, Equity IRR > Project IRR (positive financial leverage). Example: Project IRR 18%, bank loan at 12% → equity IRR can reach 25–30% via leverage. Indian real estate developers routinely lever projects to maximise equity IRR.
How does IRR relate to CAGR?+
For a single investment with single end-value: IRR = CAGR. For projects with multiple cash flows: IRR ≠ CAGR. Use CAGR for single-investment performance (mutual fund NAV). Use IRR for business projects with annual operating cash flows. Use XIRR for SIP investments.
What is InvIT and REIT IRR in India?+
InvIT (SEBI-regulated infrastructure trust): distribution yield 8–12% + NAV growth = total IRR 12–16%. REIT (commercial office): yield 6–9% + NAV growth = total IRR 11–14%. Lower than direct project IRR (compensated by liquidity, diversification, SEBI regulation). For passive Indian investors, SEBI-regulated InvITs offer project-level IRR exposure with stock exchange liquidity. Find SEBI-registered InvITs at sebi.gov.in.
What is IRR sensitivity analysis?+
Compute IRR at multiple assumptions to test robustness: Base case (most likely), Upside (+15–20% revenues), Downside (−15–20% revenues + 1-year delay). Standard for Indian DPR/CMA: show IRR under base and stress scenarios. If IRR stays above hurdle in downside scenario, proceed confidently. This calculator’s NPV sensitivity table approximates this — NPV crossing zero = IRR point.
What is IRR for MSME capex in India?+
MSME machinery/capex: 18–30% IRR depending on product margins. MSME WACC typically 16–20%. Target: IRR exceeds WACC by 3–5% minimum. Government schemes boosting MSME IRR: CLSS interest subvention (3–5%), TUFS for textile MSMEs, Credit Guarantee Scheme (reduces collateral need, enabling higher leverage and equity IRR). Load MSME template above to calculate your capex IRR.
How to use the IRR templates in this calculator?+
Click any template button (Solar, Real estate, Startup, MSME) to pre-fill typical Indian cash flows. Then adjust the initial investment and cash flows to match your specific project. The calculator computes IRR, MIRR, NPV, and payback automatically. Add years with +Year button for longer projects; delete unwanted rows with ✕. Use the DCF breakdown table to verify — sum of PV @ IRR should be approximately zero.
How does IRR calculator handle non-conventional cash flows?+
This calculator uses Newton-Raphson with multiple starting points (5%, 15%, 30%, 50%, −10%) to find the best IRR solution. For non-conventional flows (multiple sign changes), it reports the IRR closest to the positive range and flags when MIRR may be more reliable. For complex multi-sign-change projects, use MIRR (shown as second result) as the primary metric for decision-making.
Should I consult a professional for IRR-based investment decisions in India?+
For investments above ₹25L or strategic business decisions: yes. Engage a SEBI-registered investment adviser (RIA) for portfolio decisions (find at sebi.gov.in) or a Chartered Accountant for business capex IRR in CMA/DPR documents. For MCA filings involving project valuations, an MCA-registered valuer is required (mca.gov.in). This calculator provides indicative educational estimates — professional advice is recommended for actual capital allocation decisions.
What is the WACC for Indian companies used as hurdle rate?+
Typical Indian WACC FY 2025-26: Nifty 50 large caps 10–13%; mid-cap listed 13–16%; MSME unlisted 16–22%; infrastructure/utility 9–11%; IT services 12–14%; FMCG 10–12%. WACC = (E/V × Re) + (D/V × Rd × (1−Tax)). Use the hurdle rate presets above to match your company’s profile. Compare your project’s IRR to this WACC to make the accept/reject decision.

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Disclaimer — IRR Calculator (CalcWise Finance)

The IRR, MIRR, NPV, and Payback figures generated by this calculator are indicative and for educational/planning purposes only. Cash flow projections are user-defined estimates — actual investment outcomes will vary. CalcWise Finance is not a SEBI-registered investment adviser, CA firm, or financial institution and does not provide investment or project finance advisory services. For capital expenditure decisions above ₹25 lakh, engage a Chartered Accountant or SEBI-registered investment adviser.

IRR and MIRR calculations use the Newton-Raphson iterative method — may not converge for certain non-conventional cash flow patterns. When multiple IRR solutions exist, this calculator reports the solution closest to the positive range; MIRR (always unique) is recommended for such cases. WACC and hurdle rate benchmarks shown are indicative industry averages as of June 2026.

Regulatory authorities: Investment and securities regulations in India: SEBI — sebi.gov.in. Project finance and CMA guidelines: Reserve Bank of India — rbi.org.in. Business valuation and company law matters: Ministry of Corporate Affairs — mca.gov.in. Investor grievance: SEBI SCORES — scores.sebi.gov.in. Last Updated: 17 Jun 2026.