What is Sustainable Growth Rate?
The sustainable growth rate is the maximum growth a company can achieve without raising external capital — funded purely by retained earnings.
Formula
Sustainable Growth Rate = ROE × (1 - Dividend Payout Ratio)
How to Interpret
Growth above the sustainable rate requires external funding (debt or equity). Companies consistently growing above this rate may need to raise capital.
Typical Ranges
Typically 8-15% for healthy Indian companies.