CORPORATE FINANCE (D1PK202T)

Session – 2023-2025
SEMESTER – II
MBA SECTION – 9
PROJECT
TITLE - "Unravelling the Financial Puzzle: Exploring
Capital Structure Strategies and Outcomes"

SUBMITTED BY (GROUP 4) – SUBMITTED TO –

AMIT MANI TRIPATHI (23GSOB2010105) DR. PRADEEP CHAUDHARY
RINKI YADAV (23GSOB2010264)
SABA ARSHAD (23GSOB2010262)
SABA ZAFRUL (23GSOB2011268)
SALIM HUSAIN KHAN (23GSOB2010406)

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 ACKNOWLEDGEMENT
We would like to thank all of the people who helped us with this project, without
their support and guidance it wouldn’t have been possible. We appreciate our
“CORPORATE FINANCE” teacher respected DR. “PRADEEP CHAUDHARY” Sir for
his guidance and supervision which has provided a lot of resources needed in
completing our project.
We would also like to give special thanks to “GALGOTIAS UNIVERSITY” for
providing us holistic developing environment, which play very important role in
completing this project. Our parents as well as friends were constantly
encouraging us throughout the process when we felt discouraged or became
frustrated because they knew how much work went into this venture so that is
why we want to extend them thanks too!
We are grateful to our group members in developing the project, for their
willingness and assistance. They helped us with this project, which we appreciate
dearly.

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 CERTIFICATE
This project entitled "Unravelling the Financial Puzzle: Exploring Capital
Structure Strategies and Outcomes" is the investigatory project work in
“CORPORATE FINANCE” successfully completed by GROUP 4 of Section 9 MBA,
Student of GALGOTIAS UNIVERSITY, under the supervision of, Mr. “PRADEEP
CHAUDHARY” Sir for the fulfilment of requirements for the course completion
in pursuance of School of Business 2023-25.

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 INTRODUCTION
Capital structure refers to the mix of debt and equity that a company uses to
finance its operations and growth. It is a critical aspect of corporate finance
because it influences a company's risk profile, cost of capital, and overall financial
health. Understanding and managing capital structure is essential for ensuring
the long-term sustainability and competitiveness of a business.

Components of Capital Structure -

1. Equity Capital:
• Common Stock: Represents ownership in a company and entitles
shareholders to voting rights and dividends.
• Preferred Stock: A type of equity that typically does not confer
voting rights but offers a fixed dividend, paid out before common
stock dividends.
• Retained Earnings: Profits that a company reinvests in its business
rather than distributing to shareholders as dividends.
2. Debt Capital:
• Short-term Debt: Includes obligations like commercial paper and
short-term loans, which must be repaid within a year.
• Long-term Debt: Includes bonds and long-term loans that mature
in
• more than a year. This type of debt usually carries fixed interest
payments.
3. Hybrid Instruments:
Instruments like convertible bonds or preferred shares with features of
both debt and equity.

Significance of Capital Structure -

1. Cost of Capital:

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 The cost of capital is the weighted average of the costs of debt and equity
financing. A well-optimized capital structure minimizes the cost of capital,
enhancing the firm’s value.
Debt is generally cheaper than equity due to tax benefits (interest
payments on debt are tax-deductible), but excessive debt increases
financial risk.
2. Financial Flexibility:
A balanced capital structure provides flexibility to raise capital in various
forms, enabling a company to respond to opportunities and threats
effectively.
3. Risk Management:
Debt increases financial leverage, which can amplify returns on equity
during good times but also increases the risk of bankruptcy during
downturns. Managing the level of debt is crucial to maintaining financial
stability.
4. Control Considerations:
Issuing new equity may dilute existing shareholders' ownership, whereas
taking on debt does not affect ownership but requires regular interest
payments. Companies must balance these aspects to retain control while
funding their needs.
5. Market Conditions:
The capital structure can be influenced by prevailing market conditions,
such as interest rates and investor sentiment. Companies might prefer
debt when interest rates are low and equity when the stock market is
performing well.
6. Growth and Investment Opportunities:
Access to capital enables companies to invest in growth opportunities,
such as new projects, acquisitions, and expansion initiatives. The right
capital structure ensures that these investments are funded in a way that
maximizes shareholder value.

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 DATA COLLECTION AND EMPIRICAL ANALYSIS:
BALANCE SHEET AND RELAVENT ANALYSIS OF 5 COMPANIES FROM
NIFTY 500 –

1. TVS MOTORS
MAR 24 MAR 23 MAR 22 MAR 21
BALANCE SHEET OF TVS MOTOR COMPANY (in
Rs. Cr.)
MAR 20

12 mths 12 mths 12 mths 12 mths

12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 47.51 47.51 47.51 47.51

47.51

TOTAL SHARE CAPITAL 47.51 47.51 47.51 47.51

47.51

Reserves and Surplus 7,683.53 6,000.34 4,774.53 4,123.44

3,570.58

TOTAL RESERVES AND SURPLUS 7,683.53 6,000.34 4,774.53 4,123.44

3,570.58

TOTAL SHAREHOLDERS FUNDS 7,731.04 6,047.85 4,822.04 4,170.95

3,618.09

NON-CURRENT LIABILITIES

Long Term Borrowings 986.91 1,211.54 1,167.14 1,035.58

904.63

Deferred Tax Liabilities [Net] 187.05 198.20 197.87 195.45

158.05

Other long term Liabilities

350.38

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 344.57 325.58 93.76 85.79

Long Term Provisions

205.87 148.60 116.30 92.60
175.88

TOTAL NON-CURRENT LIABILITIES 1,724.40 1,936.00 1,839.19 1,441.09

1,241.07

CURRENT LIABILITIES

Short Term Borrowings 526.53 1,033.04 433.43 70.80

1,070.00

Trade Payables 3,991.44

5,112.17 2,886.39
3,921.60
4,130.56

Other Current Liabilities 824.50 746.40 664.45 516.77 454.12

Short Term Provisions 143.60 97.18 76.24 83.65

98.54

TOTAL CURRENT LIABILITIES 6,606.80 6,008.54 5,186.50 4,585.41

4,494.16

TOTAL CAPITAL AND LIABILITIES 16,062.24 13,992.39 11,847.73 10,197.45

9,353.32

ASSETS

NON-CURRENT ASSETS

Tangible Assets 4,701.99 3,260.17 2,939.80 2,745.54

2,723.21

Intangible Assets 0.00 366.82 264.81 176.73

335.72

Capital Work-In-Progress 0.00 274.12 246.22 112.56

126.56

Other Assets
0.00 0.00
0.00 0.00
0.00

FIXED ASSETS 4,701.99 4,223.62 3,731.10 3,289.01

3,185.37

Non-Current Investments 6,828.07 5,491.95 4,585.75 3,314.52

2,605.88

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 Deferred Tax Assets [Net]
0.00 0.00
0.00 0.00
0.00

Long Term Loans And Advances

0.00 0.00
0.00 0.00
0.00

Other Non-Current Assets

314.36 168.60 147.13 340.48
609.32

TOTAL NON-CURRENT ASSETS 11,844.42 10,324.89 8,485.45 6,750.66

6,131.73

CURRENT ASSETS

Current Investments 163.19 191.92 130.23 0.00

0.00

Inventories
1,370.80 1,122.68 1,151.81 1,038.93
1,236.36

Trade Receivables
1,302.14 950.69 869.98 1,281.36
955.07

Cash And Cash Equivalents

530.96 401.29 929.81 419.17
241.96

Short Term Loans And Advances

0.00 0.00 0.00 0.00
0.00

OtherCurrentAssets
850.73 757.39 495.19
482.13
1,042.19

TOTAL CURRENT ASSETS 4,217.82 3,667.50 3,362.28 3,446.79

3,221.59

TOTAL ASSETS 16,062.24 13,992.39 11,847.73 10,197.45

9,353.32

OTHER ADDITIONAL INFORMATION

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 CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 0.00 558.56 586.65 552.55

375.27

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00 0.00

0.00

Stores, Spares And Loose Tools

0.00 0.00 0.00 0.00
0.00

Trade/Other Goods
0.00 0.00 0.00 0.00
0.00

Capital Goods 0.00 0.00 0.00 0.00

0.00

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 0.00 2,770.83 2,705.36 1,186.82

1,723.00

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

--
Dividend Remittance In Foreign Currency -- -- -- --

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods -- 7,588.22 7,320.60 4,669.17

4,579.00

Other Earnings
-- -- --
-- --

BONUS DETAILS

Bonus Equity Share Capital -- 23.75 23.75 23.75

23.75

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- 1.00 1.03 80.95

33.23

Non-Current Investments Unquoted Book Value

-- 5,490.95 4,584.72 3,233.57 2,572.65

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 CURRENT INVESTMENTS

--
Current Investments Quoted Market Value -- -- -- --

Current Investments Unquoted Book Value 191.92 130.23

--
--
--

• DEBT TO EQUITY RATIO OF TVS FOR MARCH 2024

Shareholder’s equity = 7731.04 Cr

Short Term Debt = 526.53 Cr
Long Term Debt = 986.91 Cr
D/E = 526.53 Cr + 986.91 Cr / 7731.04 Cr
D/E = 1513.44 Cr / 7731.04 Cr
D/E = O.1957

• INTEREST COVERAGE RATIO OF TVS FOR MARCH 2024

Interest coverage Ratio of TVS for March 2024 is 2.93%

2. MARUTI SUZUKI
MAR 24 MAR 23 MAR 22 MAR 21
BALANCE SHEET OF MARUTI SUZUKI
INDIA (in Rs. Cr.)
MAR 20

12 mths 12 mths 12 mths 12 mths

12 mths

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 EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 157.20 151.00 151.00 151.00

151.00

TOTAL SHARE CAPITAL 157.20 151.00 151.00 151.00

151.00

Reserves and Surplus 83,824.80 60,231.00 53,935.00 51,215.80

48,286.00

TOTAL RESERVES AND SURPLUS 83,824.80 60,231.00 53,935.00 51,215.80 48,286.00

TOTAL SHAREHOLDERS FUNDS 83,982.00 60,382.00 54,086.00 51,366.80

48,437.00

NON-CURRENT LIABILITIES

Long Term Borrowings 0.00 0.00 0.00 0.00

0.00

Deferred Tax Liabilities [Net]

0.00 384.70
0.00 598.40
0.00

Other Long Term Liabilities

3,229.30 2,211.30 2,164.50
2,170.30
2,609.80

Long Term Provisions

144.80 83.30 44.70
51.60
87.60

TOTAL NON-CURRENT LIABILITIES 3,374.10 2,697.40 2,294.60 2,593.90

2,820.30

CURRENT LIABILITIES

Short Term Borrowings 33.10 1,215.80 381.90 488.80

106.30

Trade Payables
11,780.40

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 14,582.40 9,761.00 10,161.70 7,494.10

Other Current Liabilities

6,009.50 4,714.60
7,106.60 3,014.80
6,140.70

Short Term Provisions

861.30 741.60
1,206.60 679.60
962.40

TOTAL CURRENT LIABILITIES 22,928.70 20,099.30 17,013.70 16,106.70

11,294.80

TOTAL CAPITAL AND LIABILITIES 110,284.80 83,178.70 73,394.30 70,067.40

62,552.10

ASSETS

NON-CURRENT ASSETS

Tangible Assets 25,029.20 17,257.00 13,367.40 14,732.80

15,374.50

Intangible Assets
349.90 224.20 335.80
0.00
547.90

Capital Work-In-Progress
2,639.10 1,192.30 1,337.40
0.00
2,808.10

Other Assets
0.00 0.00 0.00
0.00
0.00

FIXED ASSETS 25,029.20 20,701.90 16,646.70 16,446.80

17,118.60

Non-Current Investments 64,601.50 47,756.40 36,663.20 33,371.00

35,248.80

Deferred Tax Assets [Net]

112.40 341.10 202.70 0.00 0.00

Long Term Loans And Advances

0.10 0.20 0.20 0.20 0.20

Other Non-Current Assets 2,779.20 2,779.20 3,100.30 1,722.70 1,757.10

TOTAL NON-CURRENT ASSETS 92,522.40 71,578.80 56,613.10 51,540.70

54,124.70

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 CURRENT ASSETS

Current Investments 3,912.20 0.00 4,100.10 8,415.70

1,218.80

Inventories
4,283.80 3,533.10 3,050.00
4,119.60 3,214.90

Trade Receivables
3,295.80 2,030.10 1,276.60
4,601.30 1,974.90

Cash And Cash Equivalents

37.70 3,036.20 3,036.40
460.00 21.10

Short Term Loans And Advances 32.70 29.70 30.50 23.00

16.90

OtherCurrentAssets 4,636.60 3,952.90 4,051.20 2,725.00

1,980.80

TOTAL CURRENT ASSETS 17,762.40 11,599.90 16,781.20 18,526.70

8,427.40

TOTAL ASSETS 110,284.80 83,178.70 73,394.30 70,067.40

62,552.10

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 0.00 9,626.50 20,420.30 15,502.20

12,955.50

CIF VALUE OF IMPORTS

Raw Materials 0.00 3,844.30 4,001.10 2,875.00

2,487.60

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 Stores, Spares And Loose Tools 0.00 76.20 44.40 475.30 64.00

Trade/Other Goods
0.00 76.20 44.40 475.30
64.00

Capital Goods
0.00 1,101.20 803.00 672.10
917.30

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 0.00 6,717.00 7,467.20 7,855.00

9,099.00

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

--
Dividend Remittance In Foreign Currency -- -- -- --

EARNINGS IN FOREIGN EXCHANGE

--

FOB Value Of Goods -- -- -- --

Other Earnings -- 15,830.60 11,064.20 4,585.70 5,424.60

BONUS DETAILS

--
Bonus Equity Share Capital -- -- -- --

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- 1,580.00 1,484.10 1,132.30

84.30

Non-Current Investments Unquoted Book Value

-- 46,395.20 39,502.10 32,422.40
34,775.70

CURRENT INVESTMENTS

--
Current Investments Quoted Market Value -- -- -- --

Current Investments Unquoted Book Value -- -- 4,100.10 8,415.70 1,218.80

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 • DEBT TO EQUITY RATIO OF MARUTI SUZUKI FOR MARCH 2024

Shareholder’s equity = 83982.00 Cr

Short Term Debt = 33.10 Cr
Long Term Debt = Nil
D/E = 33.10 Cr / 83982.00 Cr
D/E = O.00039

• INTEREST COVERAGE RATIO OF MARUTI SUZUKI FOR MARCH 2024

Interest coverage Ratio of Maruti Suzuki for March 2024 is 116.84%

3. BAJAJ AUTO
BALANCE SHEET OF BAJAJ AUTO (in Rs. Cr.) MAR 24 MAR 23 MAR 22 MAR 21 MAR 20

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 279.18 282.96 289.37 289.37 289.37

TOTAL SHARE CAPITAL 279.18 282.96 289.37 289.37 289.37

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 Reserves and Surplus 24,581.32 25,142.90 26,379.43 24,912.89 19,636.12

TOTAL RESERVES AND SURPLUS 24,581.32 25,142.90 26,379.43 24,912.89 19,636.12

TOTAL SHAREHOLDERS FUNDS 24,860.50 25,425.86 26,668.80 25,202.26 19,925.49

NON-CURRENT LIABILITIES

Long Term Borrowings 0.00 0.00 0.00 0.00 0.00

Deferred Tax Liabilities [Net] 506.94 403.33 522.14 346.38

345.15

Other Long Term Liabilities 156.67 159.07 160.61 167.72

157.77

Long Term Provisions 0.84 1.30 1.98

0.87 80.50

TOTAL NON-CURRENT LIABILITIES 664.45 503.79 563.70 684.73 594.60

CURRENT LIABILITIES

Short Term Borrowings 834.05 0.00 0.00 0.00 0.00

Trade Payables 5,610.18 3,633.18 4,573.81 3,199.70

4,073.88

Other Current Liabilities 2,093.26 902.51 917.03 895.54

958.21

Short Term Provisions 188.21 153.75 152.37 157.97

165.95

TOTAL CURRENT LIABILITIES 8,725.70 5,198.04 4,689.44 5,643.21 4,253.21

TOTAL CAPITAL AND LIABILITIES 34,250.65 31,127.69 31,921.94 31,530.20 24,773.30

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 ASSETS

NON-CURRENT ASSETS

Tangible Assets 3,226.15 2,635.29 1,757.57 1,565.33 1,602.03

Intangible Assets 0.00 30.70 25.32 47.30 43.09

Capital Work-In-Progress 0.00 81.92 76.82 15.98 46.54

Other Assets 0.00 50.01 51.13 52.30 53.90

FIXED ASSETS 3,226.15 2,797.92 1,910.84 1,680.91 1,759.21

Non-Current Investments 19,613.02 18,503.96 18,849.63 14,602.84 15,416.20

Deferred Tax Assets [Net] 0.00 0.00 0.00 0.00 0.00

Long Term Loans And Advances 2.06 2.28 4.57 5.22 32.46

Other Non-Current Assets 1,052.24 953.12 1,162.43 1,066.10 968.47

TOTAL NON-CURRENT ASSETS 23,893.47 22,257.28 21,927.47 17,355.07 18,176.34

CURRENT ASSETS

Current Investments 4,879.48 4,419.37 4,969.13 8,028.11 2,779.75

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 Inventories 1,695.62 1,397.90 1,230.51 1,493.89 1,063.50

Trade Receivables 2,122.40 1,776.12 1,516.38 2,716.85 1,725.10

Cash And Cash Equivalents 536.62 285.75 588.34 527.36 308.27

Short Term Loans And Advances 3.21 3.62 4.17 5.74 6.11

OtherCurrentAssets 1,119.85 987.65 1,685.94 1,403.18 714.23

TOTAL CURRENT ASSETS 10,357.18 8,870.41 9,994.47 14,175.13 6,596.96

TOTAL ASSETS 34,250.65 31,127.69 31,921.94 31,530.20 24,773.30

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 0.00 1,784.80 2,172.93 1,667.21 1,803.85

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00 0.00

0.00

Stores, Spares And Loose Tools 0.00 0.00 0.00 0.00

0.00

Trade/Other Goods 0.00 0.00 0.00

0.00 0.00

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 Capital Goods 0.00 0.00 0.00 0.00
0.00

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 0.00 1,138.68 902.08 753.34 872.88

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

Dividend Remittance In Foreign Currency -- -- -- -- --

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods -- -- -- -- --

12,181.88
Other Earnings -- 16,280.38
14,461.47 11,872.37

BONUS DETAILS

Bonus Equity Share Capital -- 258.85 258.85 258.85 258.85

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- 17,271.67 16,563.73 10,140.04 4,028.29

Non-Current Investments Unquoted Book Value -- 5,332.84 3,011.82 4,969.48 13,993.62

CURRENT INVESTMENTS

Current Investments Quoted Market Value -- -- -- -- --

Current Investments Unquoted Book Value -- 4,419.37 4,154.58 7,468.64 174.07

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 • DEBT TO EQUITY RATIO OF BAJAJ AUTO FOR MARCH 2024

Shareholder’s equity = 24860.50 Cr

Short Term Debt = 834.05 Cr
Long Term Debt = Nil
D/E = 834.05 Cr / 24860.50 Cr
D/E = O.033

• INTEREST COVERAGE RATIO OF BAJAJ AUTO FOR MARCH 2024

Interest coverage Ratio of BAJAJ AUTO for March 2024 is 184.59%

4. EICHER MOTORS
MAR 24 MAR 23 MAR 22 MAR 21
BALANCE SHEET OF EICHER MOTORS (in Rs.
Cr.)
MAR 20

12 mths 12 mths 12 mths 12 mths

12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 27.38 27.35 27.34 27.33

27.30

TOTAL SHARE CAPITAL 27.38 27.35 27.34 27.33

27.30

Reserves and Surplus 15,666.20 12,859.55 10,767.23 9,677.67

8,248.04

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 15,666.20 12,859.55 10,767.23 9,677.67 8,248.04
TOTAL RESERVES AND SURPLUS

TOTAL SHAREHOLDERS FUNDS 15,693.58 12,886.90 10,794.57 9,705.00

8,275.34

NON-CURRENT LIABILITIES

Long Term Borrowings 163.46 62.96 0.00 0.00

0.00

Deferred Tax Liabilities [Net] 480.48 303.40 222.86 221.13

252.04

Other Long Term Liabilities 601.67 475.83 349.75 247.51

169.31

Long Term Provisions 173.72 101.34 38.50 22.56

21.20

TOTAL NON-CURRENT LIABILITIES 1,419.33 943.53 611.11 491.20

442.55

CURRENT LIABILITIES

Short Term Borrowings 8.82 35.84 5.98 0.00

0.00

Trade Payables 2,027.75 1,752.70 1,764.46 1,692.13

1,020.77

Other Current Liabilities 1,224.88 1,102.16 958.56 646.85

764.14

Short Term Provisions 98.45 154.37 149.87 89.73

76.21

TOTAL CURRENT LIABILITIES 3,359.90 3,045.07 2,878.87 2,428.71

1,861.12

TOTAL CAPITAL AND LIABILITIES 20,472.81 16,875.50 14,284.55 12,624.91

10,579.01

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 ASSETS

NON-CURRENT ASSETS

Tangible Assets 3,327.46 2,138.40 1,891.49 1,888.30

2,180.76

Intangible Assets 0.00 461.88 509.14 535.06

184.83

Capital Work-In-Progress 0.00 74.16 133.38 59.78

26.75

Other Assets 0.00 0.00 0.00 0.00

3.16

FIXED ASSETS 3,327.46 3,068.76 2,904.81 2,733.52

2,680.92

Non-Current Investments 11,125.96 10,059.71 5,525.26 968.71

1,413.08

Deferred Tax Assets [Net] 0.00 0.00 0.00 0.00

0.00

Long Term Loans And Advances 0.00 0.00 0.00 0.00

0.00

Other Non-Current Assets 2,144.78 247.12 356.68 174.99

148.41

TOTAL NON-CURRENT ASSETS 16,598.20 13,375.59 8,786.75 3,877.22

4,242.41

CURRENT ASSETS

Current Investments 180.92 219.89 424.70 1,076.08

2,512.50

Inventories 1,068.63 910.94 898.37 769.13

518.05

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 Trade Receivables 572.68 702.02 1,169.66 256.18
133.97

Cash And Cash Equivalents 93.12 795.89 26.62 5,798.91

2,926.38

Short Term Loans And Advances 0.00 588.94 2,671.94 459.16

0.12

OtherCurrentAssets 1,959.26 282.23 306.51 388.23

245.58

TOTAL CURRENT ASSETS 3,874.61 3,499.91 5,497.80 8,747.69

6,336.60

TOTAL ASSETS 20,472.81 16,875.50 14,284.55 12,624.91

10,579.01

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 0.00 855.77 346.65 197.98

167.35

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00 0.00

0.00

Stores, Spares And Loose Tools 0.00 0.00 0.00 0.00 0.00

Trade/Other Goods 0.00 0.00 0.00 0.00 0.00

Capital Goods 0.00 0.00 0.00 0.00 0.00

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 0.00 642.32 458.92 337.27

392.75

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

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 --
Dividend Remittance In Foreign Currency -- -- -- --

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods -- 1,694.28 1,475.92 682.82

709.47
--
Other Earnings -- -- -- --

BONUS DETAILS

Bonus Equity Share Capital -- -- -- -- --

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- -- -- --

1,345.11
--

Non-Current Investments Unquoted Book Value -- --

-- 5.13

CURRENT INVESTMENTS

Current Investments Quoted Market Value -- 219.89 424.70 1,076.08

2,512.50
--

Current Investments Unquoted Book Value -- --

--
--

• DEBT TO EQUITY RATIO OF EICHER MOTORS FOR MARCH 2024

Shareholder’s equity = 15693.58 Cr

Short Term Debt = 8.82 Cr

24 | P a g e
Long Term Debt = 173.72 Cr
D/E = 8.82 Cr + 173.72 Cr / 15693.58 Cr
D/E = 182.54 Cr / 15693.58 Cr
D/E = O.011

• INTEREST COVERAGE RATIO OF EICHER MOTORS FOR MARCH 2024

Interest coverage Ratio of EICHER MOTORS for March 2024 is 106.19%

5. HERO MOTORCORP LTD.

MAR 23 MAR 22 MAR 21

BALANCE SHEET OF HERO MOTOCORP (in Rs.
MAR 24
Cr.)
MAR 20

12 mths 12 mths 12 mths 12 mths

12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 39.98 39.97 39.96 39.96

39.95

TOTAL SHARE CAPITAL 39.98 39.97 39.96 39.96

39.95

Reserves and Surplus 17,946.20 16,629.49 15,718.51 15,139.43

14,081.01

TOTAL RESERVES AND SURPLUS 17,946.20 16,629.49 15,718.51 15,139.43

14,081.01

TOTAL SHAREHOLDERS FUNDS 17,986.18 16,705.09 15,782.92 15,198.43

14,136.40

NON-CURRENT LIABILITIES

25 | P a g e
 Long Term Borrowings 0.00 0.00 0.00 0.00
0.00

Deferred Tax Liabilities [Net] 434.82 405.37 383.29 404.09 392.83

Other Long Term Liabilities 330.58 297.36 275.85

289.63 121.67

Long Term Provisions 316.66 198.12 178.07 172.46

122.37

TOTAL NON-CURRENT LIABILITIES 1,041.11 934.07 858.72 852.40

636.87

CURRENT LIABILITIES

Short Term Borrowings 0.00 0.00 0.00 0.00

0.00

Trade Payables 5,528.15 4,704.46 4,260.34 5,204.61 3

,030.51

Other Current Liabilities 861.97 743.83 651.62 745.24

798.99

Short Term Provisions 154.14 175.69 160.42 160.37

146.56

,976.06
TOTAL CURRENT LIABILITIES 6,544.26 5,623.98 5,072.38
6,110.22 3

TOTAL CAPITAL AND LIABILITIES 25,571.55 23,263.14 21,714.02 22,161.05 18,749.33

ASSETS

NON-CURRENT ASSETS

26 | P a g e
 Tangible Assets 6,314.54 5,261.23 5,507.98 5,698.15
5,976.99

Intangible Assets 500.19 298.50 290.26

0.00 140.09

Capital Work-In-Progress 0.00 128.55 87.32 177.86 160.25

Other Assets 0.00 0.00 0.00 0.00

0.00

FIXED ASSETS 6,314.54 6,225.21 6,264.68 6,425.00

6,458.35

Non-Current Investments 8,811.58 7,372.48 4,814.66 4,308.18

3,528.17

Deferred Tax Assets [Net] 312.49 0.00 0.00 0.00

0.00

Long Term Loans And Advances 21.15 19.87 59.03 52.23

67.27

Other Non-Current Assets 315.77 608.79 460.69 422.85

406.98

TOTAL NON-CURRENT ASSETS 15,775.53 14,226.35 11,599.06 11,208.26

10,460.77

CURRENT ASSETS

Current Investments 4,274.52 3,637.88 5,837.66 6,191.49

4,694.48

Inventories 1,443.76 1,434.09 1,122.65 1,469.55

1,091.97

Trade Receivables 2,703.44 2,798.21 2,304.27 2,426.76

1,603.14

Cash And Cash Equivalents 608.93 345.50 175.12 257.15

241.86

27 | P a g e
 Short Term Loans And Advances 24.56 23.71 22.81 36.94
22.36

OtherCurrentAssets 740.81 797.40 652.45 570.90

634.75

TOTAL CURRENT ASSETS 9,796.02 9,036.79 10,114.96 10,952.79

8,288.56

TOTAL ASSETS 25,571.55 23,263.14 21,714.02 22,161.05

18,749.33

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 0.00 291.36 296.89 248.55

249.43

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00 0.00

0.00

Stores, Spares And Loose Tools 0.00 0.00 0.00 683.27 1,001.45

Trade/Other Goods 0.00 0.00 0.00 683.27

1,001.45

Capital Goods 0.00 0.00 0.00 0.00

0.00

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 0.00 457.17 374.28 239.30

233.32

REMITTANCES IN FOREIGN CURRENCIES FOR

DIVIDENDS

--
Dividend Remittance In Foreign Currency -- -- -- --

EARNINGS IN FOREIGN EXCHANGE

--
FOB Value Of Goods -- -- -- --

Other Earnings -- 1,088.24 1,445.96 866.87

761.77

28 | P a g e
 BONUS DETAILS

Bonus Equity Share Capital -- 23.96 23.96 23.96

23.96

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -- -- -- 614.74

214.87

Non-Current Investments Unquoted Book Value -- -- -- 3,693.68

3,320.36

CURRENT INVESTMENTS

Current Investments Quoted Market Value -- -- -- 55.59

135.71
-- -- 6,136.94 4,559.92

Current Investments Unquoted Book Value --

• DEBT TO EQUITY RATIO OF HERO MOTORCORPS LTD FOR MARCH 2024

Shareholder’s equity = 17986.18 Cr

Short Term Debt = Nil
Long Term Debt = Nil
D/E = 0 / 17986.18 Cr
D/E = O

• INTEREST COVERAGE RATIO OF HERO MOTORCORPS LTD FOR MARCH 2024

29 | P a g e
 Interest coverage Ratio of HERO MOTORCORPS LTD for March 2024 is 81.24%

CASE STUDY SELECTION AND ANALYSIS

1. TVS CASE STUDY

Dr. Lakshmi G, P Roshini, B Sowmya and V Shrivarthini

Abstract

30 | P a g e
This paper analysed the “Capital Structure Pattern and solvency position of TVS
Srichakra private limited”. A study on long-term solvency, assessment of
debtequity, debt to total fund and examination of the use of debt and equity
capital in TVS Srichakra Private Limited through the application of ratio analysis
has been undertaken. The time period considered for evaluating the study is five
years i.e. from 2013 to 2017. The TVS Srichakra Private Limited had shown an
inclination in strengthening long term funds consisting of both shareholders’
funds as well as long term borrowed funds in order to finance its assets
requirement. TVS Srichakra Private Limited mostly depended on equity
financing. So, the financial risk of the company is low, but it could fail to enjoy
the advantages of financial gearing. TVS Srichakra Private Limited should raise
the debt funds to bring the optimum capital structure for improving the financial
performance of the company. A higher interest coverage ratio is desirable, but
too high ratio is some of the years of the study indicate that the TVS Srichakra
Private Limited is very conservative in using debt, and it is not using debt to the
best advantage of the shareholders.
Keywords: Debt-equity ratio, Debt to total fund ratio, Interest coverage ratio and
Quantum and structure of total funds TVS Srichakra private limited
Introduction
The capital structure is how a firm finances its overall operations and growth by
using different sources of funds. Capital structure analysis is a periodic evaluation
of all components of the debt and equity financing used by a business. The intent
of the analysis is to evaluate what combination of debt and equity the business
should have. This mix varies over time based on the costs of debt and equity and
the risks to which a business is subjected. Capital structure analysis is usually
confined to short-term debt, leases, long-term debt, preferred stock, and
common stock.
Statement of Problem
A company’s capital structure is arguably one of its most important choices. From
a technical perspective, the capital structure is defined as the careful balance
between equity and debt that a business uses to finance its assets, dayto-day
operations, and future growth. From a tactical perspective however, it influences
everything from the firm’s risk profile, how easy it is to get funding, how
expensive that funding is, the return its investors and lenders expect, and its

31 | P a g e
degree of insulation from both microeconomic business decisions and
macroeconomic downturns. This study depicts the position of the company in
choosing the optimum capital structure.
Scope of the Study
The scope of study pertains to “TVS SRICHAKRA LTD”. This study is mainly a
comparison of five years of its operation and it aims to reveal the company
standard in respect of financial PERFORMANCE. Commercialization and
industrialization are key areas of progress and growth of Economy. For rapid
industrialization and commercialisation it is necessary to have quick transport
and logistics facilities. So tyre industry is a key variable for enhancing speed in
the logistic and transport industry.

2. MARUTI SUZUKI CASE STUDY –

A Study on Impact of Capital Structure on Profitability of Companies Listed in

Indian Stock Exchange with respect to Automobile Industry

Abstract:
Current research helps in understanding both positive and negative impact of
capital structure on profits of Indian automobile companies by using variables
like Return on Capital Employed, Return on Long Term Funds, Return on Net
Worth, Gross Profit Margin, Operating Profit and Return on Asset. The study
hypothesized that RoCE, RoLT and RoNW has a positive effect and GP, OP and
ROA has a negative impact on debt equity and interest coverage ratios.
i.e. capital structure of the companies. Also the study proves that the
relationship between profitability and capital structure variables are strongly
significant. Hypothesis were tested by using fixed effect and random effect
models by considering 10 years data (from 2010-2019) of 17 automobile
companies. The result of the study recommends that the firms can improve their
performance by using an optimal capital structure. Also a fair mix of debt and
equity should be established to ensure that the firm maintains capital adequacy.

32 | P a g e
Firms can thus be able to meet their financial compulsions and investments that
can promise attractive returns.
Keywords:
Capital Structure, Debt to Equity, Interest coverage, return on capital employed,
Return on long term fund, Return on net worth, Gross profit margin, Operating
profit, Fixed effect model, Random effect model, Hausman test.
INTRODUCTION
Capital structure make best use of the market worth of a company that is if a
company requiring an appropriately intended capital structures the collective
worth of the rights and proprietorship benefits of the stockholders are exploited.
Effective and efficient utilization of the capital structure bring about cost
reduction. Appropriate blend of debt and equity enables the company to invest
in profitable ventures. This is because capital structure upsurges the capability
of the business to find new affluence by generating venture chances. With
appropriate wealth gearing it also rises the self-confidence of dealers of debt.
This enables firm to utilize leverage and enjoy the benefits of tax deduction, this
leads to an increase in profitability. This is in line with a study conducted by
(Friend and Lang) who established that there was an affirmative connection
among capital structure and profitability. The findings revealed that firms that
maintained an optimal capital structure obtained cheap funds to finance their
operations which in turn generate returns and enhanced their financial
performance. Capital structure rises the nation’s amount of venture and
development by growing the company’s chance to involve in forthcoming
affluence-generating monies. This is because firms that make maximum use of
leverage face attractive growth due increasing costs savings as a result of tax
deduction. This is consistent with (Sarkar and Zapatero) who observed there was
affirmative connection among leverage and productivity of businesses. The
capital structure of a company may be simple, compound or complex. A simple
capital structure is composed of only one security base, for example, the equity
share capital issued by a company. A compound capital structure indicates a
combination of two security bases, in the form of equity and preference share
capital. The complex capital structure is a mixture of multi-security bases,
consisting of equity and performance share capital-and a series of debentures or
bonds and loans from other sources. When a firm has a high level of business

33 | P a g e
risk, it usually seeks to balance it with a lower level of financial risk by utilizing
lower levels of debt capital in its capital structure. Determination of optimal
capital structure is an important task in financial management. The term capital
structure is different from financial structure. Financial structure refers to the
way the firm's assets are financed. Capital structure is the permanent financing
of the company. Thus, capital structure is part of financial structure. In order to
extend the understanding of the capital structure and its impact on the
profitability of the company, employed the secondary data study methodology,
sample of 17 automobile companies, spanning over a period of ten years. In
doing so, we examine both; a) the impact capital structure with the firm
performance and b) the effects of independent variable on the dependent
variable. This study makes two key contributions: first, it extends the
understanding of capital structure and its factors and also the variables that
effect the profitability of the company; second, it provides a more granular
insight into the effects that industry actually face when the debt equity is taken
into consideration. In the next section we introduce the theoretical background
and literature review. This is followed by the method employed in the research.
Then present the results of the study and the hypothesis framing, followed by
the discussion. Finally, we close the paper with conclusions and managerial
implications.

3. BAJAJ AUTO CASE STUDY

CAPITAL STRUCTURE DETERMINANTS: IMPACT ON THE PROFITABILITY OF

AUTOMOBILE INDUSTRY
ABSTRACT
The study is to analyse the effect of Debt-Equity ratios on other ratio.
Components of leverage based on total debt ratios may identify significant
differences in the long and short-term forms of debt. The Indian Automobile
Industry is the seventh-largest auto producer in the world with an average
annual production of more than 15 Million vehicles. This paper is an attempt to
ascertain the impact of capital structure on the profitability of the firm. This
study is focused on Bajaj, TVS and Hero. Liquidity and growth in terms of

34 | P a g e
performance of the firm have significant influence on debt-equity ratio. Impact
of the determinants of capital structure suggested by capital structure theories
appear to be relevant for automobile firms. Apart from the impact research also
find significant differences in the determinants of long and short-term forms of
debt. It was not possible decompose short-term debt and long-term debt into its
elements due to the limitations, but the results suggest that future analysis of
capital choice decisions should be based on a more detailed level.
Key Words:
Debt-Equity ratio, Financial leverage, Capital structure, Value of the firm, Return
on capital
INTRODUCTION
Capital structure is about putting in place the structure, processes and
mechanism that ensure the firm is being directed and managed in a way to
enhances long term shareholder value through accountability of managers and
enhancing organizational performance. Because firm performance and capital
structure is a tool for socio-economic development, it has succeeded in
attracting a good amount of public interest. Moreover, when there is a good firm
performance and capital structure, there will be proper and efficient practice in
the administration of business entities. The firm may have their retained
earnings to increase their capital structure.
INDIAN AUTOMOBILE INDUSTRY
The Indian Automobile Industry is the seventh-largest auto producer in the world
with an average annual production of more than 15 Million vehicles. It is the 4th
largest automotive market by volume, by 2020. It contributes about 8% to the
country’s GDP by volume and 22% of the country’s manufacturing GDP. An age
group between 18-30 population especially middle class and an increasing
interest of the companies has made the two wheelers segment the leader of the
Indian automobile market. The two wheelers segment has 70 percent market
share. India is a growing economy and with it plays a big role in auto exports,
with high export growth expectations for the near future. Various initiatives by
the Government of India like “Make in India” and the major automobile players
in the Indian market are expected to make India a leader in the Four wheelers

35 | P a g e
and Two Wheelers market by 2020. The industry has estimated that it will sell
more than 6 Million-plus vehicles annually, by 2020.

4. EICHER MOTORS CASE STUDY

Impact of capital structure on financial performance of automobile industry in

India
ABSTRACT:
The study intended to analyse the operational performance, profitability
position, and impact of capital structure on firm’s financial performance among
Indian automobile firms. This study is based on the sample of two wheelers,
three wheelers, commercial vehicles, and passenger vehicles. This study used six
years of data from 2011-13 to 2017-18. This study has been formulated with the
potency of analytical research design. The selection of appropriate dependent
and independent variables is ascertained on the basis of the previous seminal
work in capital structure. Trend analysis, correlation, regression, and descriptive
statistics have been performed to analyse the data. Operational performance is
found at satisfactory level in terms of gross turnover, production of vehicles,
domestic sales and export. Profitability of automobile firms has been inspected
by several variables connected with the automobile firms. Capital structure has
no significant on automobile firm’s financial performance in India.
Key Words:
Operational Performance, Profitability, Capital Structure, Automobile
Companies, Financial Performance.
INTRODUCTION
Automobile industry has emerged as a rising sector in the Indian economy. Indian
market is fast emerging market for passenger car and two wheelers market in
the world. Moreover, India is the largest motor cycle manufacturer and fifth
largest in commercial vehicles manufacturer. India is a major hub for exporting
sports utility vehicles, compact cars are exported to many European countries.
Electronic and hybrid cars are new innovation in car segment. Global and Indian

36 | P a g e
automobile manufacturers are concentrating their effort to put innovation in
vehicles, technology systems and supply chain practices. Similarly, globalization
is pushing automobile firms to strengthen, to improve technology, expand
product range, access new markets and slash costs. Automobile firms widely
requires finance for its smooth functioning, mostly it requires huge longterm
capital with sufficient short-term capital.
Capital planning consideration is utmost important for determining the
profitability of the firm. Moreover, capital structure has impact on firm’s
performance in many ways. Therefore, efficiency of any firm or performance of
a firm is get influence on its market prices of equity shares. Market value of
equity shares widely depend on the earnings potential or profit earned by the
automobile firms. Moreover, firm sustainability highly relied on its profit earning
capacity. Therefore, the firm which earn low level of profit or its profit highly
fluctuates every year, may not sustain for long-term period. Therefore, firm
profitability should measure with care along with the variables like leverage, size,
age, current ratio, expenses to income ratio, growth in sales, asset turnover ratio,
inflation, and index of industrial production. Leverage plays vital role in attracting
investments to corporate field. Therefore, profitability is the test of efficiency,
effective motivational factors and a measure of control mechanism to the firm.
Similarly, effective capital structure may increase firm’s performance in all
respects.
Therefore, impact of total debt to total assets, total debt to total equity, short
term debt to total assets, long term debt to total assets, asset growth, and firm
size on firm’s performance have been taken into consideration.

37 | P a g e
 5. HERO MOTORCOPS LTD CASE STUDY

CAPITAL STRUCTURE DETERMINANTS: IMPACT ON THE PROFITABILITY

OF AUTOMOBILE INDUSTRY

ABSTRACT
The study is to analyse the effect of Debt-Equity ratios on other ratio.
Components of leverage based on total debt ratios may identify significant
differences in the long and short-term forms of debt. The Indian Automobile
Industry is the seventh-largest auto producer in the world with an average
annual production of more than 15 Million vehicles. This paper is an attempt to
ascertain the impact of capital structure on the profitability of the firm. This
study is focused on Bajaj, TVS and Hero. Liquidity and growth in terms of
performance of the firm have significant influence on debt-equity ratio. Impact
of the determinants of capital structure suggested by capital structure theories
appear to be relevant for automobile firms. Apart from the impact research also
find significant differences in the determinants of long and short-term forms of
debt. It was not possible decompose short-term debt and long-term debt into its
elements due to the limitations, but the results suggest that future analysis of
capital choice decisions should be based on a more detailed level.

Key Words:
Debt-Equity ratio, Financial leverage, Capital structure, Value of the firm, Return
on capital

INTRODUCTION
Capital structure is about putting in place the structure, processes and
mechanism that ensure the firm is being directed and managed in a way to
enhances long term shareholder value through accountability of managers and
enhancing organizational performance. Because firm performance and capital
structure is a tool for socio-economic development, it has succeeded in
attracting a good amount of public interest. Moreover, when there is a good firm

38 | P a g e
performance and capital structure, there will be proper and efficient practice in
the administration of business entities. The firm may have their retained
earnings to increase their capital structure.

INDIAN AUTOMOBILE INDUSTRY

The Indian Automobile Industry is the seventh-largest auto producer in the world
with an average annual production of more than 15 Million vehicles. It is the 4th
largest automotive market by volume, by 2020. It contributes about 8% to the
country’s GDP by volume and 22% of the country’s manufacturing GDP. An age
group between 18-30 population especially middle class and an increasing
interest of the companies has made the two wheelers segment the leader of the
Indian automobile market. The two wheelers segment has 70 percent market
share. India is a growing economy and with it plays a big role in auto exports,
with high export growth expectations for the near future. Various initiatives by
the Government of India like “Make in India” and the major automobile players
in the Indian market are expected to make India a leader in the Four wheelers
and Two Wheelers market by 2020. The industry has estimated that it will sell
more than 6 Million-plus vehicles annually, by 2020.

39 | P a g e
INTERPRETATION AND PRESENTATION
1. TVS
Data Analysis and Interpretation
Equity Ratio: The equity ratio measures the amount of leverage that a
business employs. If the outcome of the calculation is high, this implies that
management has minimized the use of debt to fund its asset requirements,
which represents a conservative way to run the entity. Conversely, a low ratio
indicates that a large amount of debt was used to pay for the assets.

Debt Equity Ratio

This ratio is calculated to measure the relative proportions of outsider’s funds
and shareholder funds invested in the company. This ratio is determined to
ascertain the soundness of long terms financial policy of that company and is
also known as external-internal equity ratio. Whether a given debt equity
ratio shows a favourable or unfavourable financial position of the concern
depends on the industry and the pattern of earnings. A low ratio is generally
viewed as favourable from long term creditor’s point of view, because a long
margin of protection provides safety for the creditor. The same low ratio may
be taken as quite unsatisfactory by the shareholders because the find
neglected opportunity for using low cost outsiders fund to acquire fixed asset
that could earn high return. Keeping in view the interest of a both

40 | P a g e
shareholders and long-term creditors, debt equity ratio of 2:1 in case of (i)
and 2:3 in case of (ii) is acceptable.

Proprietary ratio
A variant of debt to equity ratio is the proprietary ratio which shows the
relationship between shareholders’ funds and total tangible assets. This ratio
should be 1:3. One-third of the assets minus current liabilities should be
acquired by shareholders fund and the other two-thirds of the assets should
be financed by outsider’s fund. It indicates the shares of proprietary funds
against each rupee of investments and focuses the attention on the general
financial strength of the business enterprise.

2. MARUTI SUZUKI
Methodology
The process of identifying the impact of capital structure on the profitability
of the company started with searching of articles, journals. For the purpose
of the study 17 automobile companies listed in Indian Stock Exchange were
selected of which financial data were examined for getting the required data

41 | P a g e
for the study. In order to achieve the above mentioned objectives the
secondary data has been collected and implemented which are extracted
from different journal, articles, books, published and unpublished sources
and electronic databases and World Wide Web facilities. Published and
unpublished documents of the organizations to be studied were also used for
the purpose of knowing about what exactly Capital Structure means. The data
were collected from money control website and certain company’s websites
for analysis. The present study is conducted to understand the impact on
capital structure on the profitability of the automobile industry and also to
study on the factors that affects the profitability of the firm. Then statistical
tool is used for further analysis using Excel and E-Views 9.0 Student Version
Software and inferences are drawn. Suitable graphs and tables are drawn to
analyse descriptive data. Secondary data were used for the study. The
required data were collected from money control website. The Automobile
Industries i.e., Automobile- 2 & 3 Wheelers, Automobile- Auto &Truck
Manufactures, Automobile- Dealers and Distributors, Automobile LCVs/HCVs,
Automobile- Passenger Cars, Automobile Tractors, Automobile- Trucks/LCVs
which are listed in Indian Stock Exchange are selected as sampling design
from 2010- 2019.

42 | P a g e
3. BAJAJ AUTO
Research Methodology
The data for the study has been collected from various annual reports and
websites. The reference period of the study is of five years i.e. from 20132014
to 2017-2018. In order to achieve the set of objectives of the study, ratio
analysis is used. These ratios are employed in order to confirm the
relationship between the capital structure and profitability. To analyse the
data, financial as well as statistical tools has been used. The financial tools
like ratio analysis and statistical tools such as average, ANOVA, Karl Pearson’s
coefficient of correlation and regression analysis are used.
Following Hypothesis framed for the study:

43 | P a g e
H0: Null Hypothesis:
There is significant relation between Debt Equity Ratio and other selected
variables.
H1: Alternative Hypothesis:
There is no significant relation between Debt Equity Ratio and other selected
Variables.
H0: Null Hypothesis:
There is significant relation between Debt Asset Ratio and other selected
variables.
H2: Alternative Hypothesis:
There is no significant relation between Debt Asset Ratio and other selected
Variables.
H0: Null Hypothesis:
There is significant relation between long term debt ratio and other selected
variables.
H3: Alternative Hypothesis:
There is no significant relation between long term debt ratio and other
selected Variables.
For the purpose of correlation and regression Debt equity ratio, Debt asset
ratio and long terms debt ratio are Independent variable and remaining are
dependent variable which include gross profit margin, net profit margin,
returns on net worth, return on capital employed, operating profit ratio and
interest coverage ratio.

44 | P a g e
4. EICHER AUTOS
RESEARCH METHODOLOGY
This study is conducted to assess the operational performance, profitability,
and impact of capital structure on firm’s financial performance of the Indian
automobile industry. Analytical research design has been employed for the
present study. The study collected necessary secondary data concerning
financial aspects of automobile firms. The sample firms are automobile
companies such as, two-wheeler manufacturers, three-wheeler
manufacturers, utility vehicles, and light and heavy commercial vehicle
manufacturers. In order to utilize secondary data, audited annual financial
information of automobile firms is considered. This study collected various
financial information for six years time period from 2012-13 to 2017-18. This
study widely employed correlation, regression and descriptive statistics to
analyse the data.

45 | P a g e
 5. HERO MOTORCOPS LTD
Research Methodology
The data for the study has been collected from various annual reports and
websites. The reference period of the study is of five years i.e. from
20132014 to 2017-2018. In order to achieve the set of objectives of the
study, ratio analysis is used. These ratios are employed in order to confirm
the relationship between the capital structure and profitability. To analyse
the data, financial as well as statistical tools has been used. The financial
tools like ratio analysis and statistical tools such as average, ANOVA, Karl
Pearson’s coefficient of correlation and regression analysis are used.
Following Hypothesis framed for the study:
H0: Null Hypothesis:
There is significant relation between Debt Equity Ratio and other selected
variables.
H1: Alternative Hypothesis:
There is no significant relation between Debt Equity Ratio and other selected
Variables.
H0: Null Hypothesis:
There is significant relation between Debt Asset Ratio and other selected
variables.
H2: Alternative Hypothesis:

46 | P a g e
There is no significant relation between Debt Asset Ratio and other selected
Variables.
H0: Null Hypothesis:
There is significant relation between long term debt ratio and other selected
variables.
H3: Alternative Hypothesis:
There is no significant relation between long term debt ratio and other selected
Variables.
For the purpose of correlation and regression Debt equity ratio, Debt asset ratio
and long terms debt ratio are Independent variable and remaining are
dependent variable which include gross profit margin, net profit margin, returns
on net worth, return on capital employed, operating profit ratio and interest
coverage ratio.

47 | P a g e
 CONCLUSION
1. TVS
The study was undertaken to analysis the capital structure and short terms
solvency position of TVS SRICHAKARA LIMITED. The study shows that the debt
content in capital structure is less and debt has been gradually repaid during the
last years of the study. The company has advantage of trade in equity. The short
terms solvency position shows that it is weak and the company has to improve
the short terms solvency position to meet the current liabilities.
Findings

Equity share capital remained constant during the period of study. No new
issue has been made but the existing share capital is sufficient to cover the
debts of the company.

In TVs Srichakra Private Limited, Preference share capital and Debenture does
not exist. The equity ratio should be high which implies the minimum use of
debt to fund its asset requirements. The first two years of the study indicates
that the company’s long terms debt is high and it has gradually decreased
during the last three years.

The ratio shows that it is low when compared with ideal ratio. This shows that
the creditors are in a favourable condition and they are in a safe position.

The debt ratio is higher during the first two years and it has been reduced
much lesser during the latter three years. It shows that the debt has reduced
during the last three years.

In proprietary ratio, the proprietary fund of the entity from the year 2013 to
2017 shows an increasing trend from year to year. The ideal ratios 1:3.

The above ratio shows that the company’s assets are less financed by debt.
The ratio is much lesser than 1, which shows that the assets are largely
financed through share capital.

The capital gearing ratio shows that it is high during the first two studying years
showing that during these years the fixed interest bearings securities were
high.

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 The ideal current ratio is 2:1, the current ratio of the company during the years
were 1:1 (approximately).

The absolute liquid ratio shows that it is much lesser than the ideal ratio (1:2).

2. MARUTI SUZUKI
This research is an extension of previous research, where a set of capital
structure variables is considered to examine their association with the firm
performance. From the above research work the study concludes, on
comparison with existing literature we can see that most of the results of the
present study are giving the results which support some literatures. On the other
hand, a few findings of the current study also contradict some of the Contentions
of previous studies. The objective of this study was to identify the capital
structure that affects the firm performance and examine the relationship
between the attribute of capital structure and the performance of listed
automobiles companies in Indian Stock Exchange. These capital structure include
Debt Equity Ratio (DER), Interest Coverage Ratio (ICR) of the firm and profitability
include Gross Profit (GP), Operating Profit (OP), Return on Asset (RoA), Return
on Capital Employed (RoCE), Return on Long Term Funds (RoLT) and Return on
Net worth (RoNW). This study used panel data of 17 automobile companies for
the period of 10 years that is from 2010-2019 creating 170 observations of the
data. Researcher analysed the impact of capital structure variables (dependent
variables) against profitability variables (independent variable). Pooled OLS
Regression model was used to analyse the overall result of the dependent and
the independent variable after which Fixed effect model and Random effects
model after which Hausman specification test was done to check the best model
suitable for the variables selected for the purpose of the study. For dependent
variable i.e., debt equity fixed effect model was suitable and Wald test was done
for the three variables to check whether it has long term effect or short terms
effect in nature. And for dependent variable i.e., interest coverage random effect
model was suitable as it was above 5% was used to measure the relationship
between capital structure and profitability of the automobile industries.
Moreover, partial correlation technique also used to measure the relationship
between the study variables in order to support the regression results. After
testing the relationship between the variables, researcher revealed the mixed

49 | P a g e
results between capital structure variables and company profitability that means
capital structure variables indicated a negative relationship with company
profitability variables at certain stages while other capital structure variables
indicated a positive relationship with profitability variables at certain point of
time. Debt equity ratio and Interest coverage ratios were used as capital
structure indicators of automobile industries. The Fixed effect model result
indicated a significant and positive relationship with some of the independent
variables namely RoCE, RoLT and RoNW whereas it had a long terms effect on
the variables namely GP, OP and RoA which was explained by doing Wald test. In
Fixed effect model case the R-squared value is 0.728 i.e., 72.8% which means the
model is fitting good and reveals that there is 72.8% variation in debt equity ratio
was as result of profitability and the p-value is 0.00 which is less than 5% which
suggests that there is a significant relationship between the variables of capital
structure and the profitability of automobile industry over the period of study.
Overall, there is a positive effect towards the capital structure of the Automobile
industry. The Random effect model result indicated that there is no significance
and positive relationship with some of the independent variables namely GP,
ROA, RoCE, and RoNW whereas OP and RoLT had a significant relationship
between the variables of capital structure. In Random effect model case the
Rsquared value is 0.070 i.e., 7 % which means the r-squared is very less but the
overall model is fitting good and has variation in interest coverage ratio was as
result of profitability of automobile industry over the period of study.

3. BAJAJ AUTO
This paper been completed with the important objectives of, to what extend
capital structure impact on financial performance of automobile companies. To
conclude there is a positive relationship between capital structure and financial
performance or profitability. So every firm should make good capital structure
decision to earn profit and carry on their business successfully. When we focus
on debt and equity position of automobile industry, some firm had adequate
level of debt capital and equity capital and also long terms debt but they do not
maintain some specific or standardized mix of capital to earn maximum profit.
Managing capital structure thus becomes a balancing act. The trade-off a
company makes between financial flexibility and fiscal discipline is the most
important consideration in determining its capital structure and far outweighs

50 | P a g e
any tax benefits, which are negligible for most large companies unless they have
extremely low debt.
The following suggestions are recommended to increase the Company’s financial
performance based on capital structure.

1. Performance standards should be established and communicated to the

investors. This will help investors to achieve the standard and take better
investment decisions. Identifying weaknesses of investment may be best one to
improve the firm’s financial performance, because it indicates the area which
decision should be taken. Inflation and exchange rate also affect the listed
company’s performance. So, government should consider the economic growth
to control the inflation.

2. Mature companies like Bajaj Auto Limited and Hero Motor corp. with
stable and predictable cash flows as well as limited investment opportunities
should include more debt in their capital structure, since the discipline that debt
often brings outweighs the need for flexibility. Companies that face high
uncertainty because of vigorous growth or the cyclical nature of their industries
should carry less debt, so that they have enough flexibility to take advantage of
investment opportunities or to deal with negative events.

3. Corporate managers should follow a conservative investment policy in

order to enhance the performance of their companies. This implies that the
managers should maintain a higher level of investment in liquid assets relative
to noncurrent assets.

4. The study further established that the performance of the firm improves
using more current liabilities to finance their assets which can maintain
profitability. This is probably because current liabilities are less costly than
longterm debt. Additionally, the study found that increasing the proportion of
current assets in relation to total assets enhanced performance as measured by
both ROA and ROE.

4. EICHER AUTOS
The study attempts to explore the capital structure and dividend policy among
Automobile and IT industry which are listed in NSE and BSE India for a period of
5 years. Debt Equity ratio and Dividend per share are considered as dependent

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variable. Dividend per share is a major contribution for the capital structure of
the selected companies. Generally high dividend increases the market value of
the shares and vice versa. Shareholders preferred current dividend to future
income So, dividend is important. Therefore, Automobile and Information
Technology Industry occupy a considerable position by contributing significant
revenue and Employment.
SUGGESTIONS : -

• From the above study it is clear that some of Automobile companies Like
Tata Motors, Mahindra Cie, doesn’t declared dividend. Therefore,
investors can look for capital appreciation in this kind of companies.
• Hero Motor Corp and Bajaj Auto Ltd has zero debt in their capital
structure. So, these companies should maintain proportion of debt in their
capital structure to utilize tax shield benefits.
• The investors who are looking for regular dividend can invest in Force
Motors and Hero Motors Corp to get better capital appreciation.
• The debt is high in the capital structure of TVS Motors, Bharat Forge and
Tata Motors, the high debt indicates high risk so the companies should
increase their equity funds.
• From the above study it is clear that Rolta India doesn’t declare dividend
for all five years of study and Oracle Financial Service Software doesn’t
provide dividend in financial year 2019. Therefore, investors can look for
capital appreciation in this kind of companies
• The investors who are looking for regular dividend can invest in Tata
consultancy service and L&T Infotech.
• Tata Consultancy Service, Infosys and L&T Infotech has zero debt in their
capital structure so these companies should maintain proportion of debt
in their capital structure to utilize tax shield benefits.
• Rolta India and Mphasis should reduce debt from their capital structure
and give attention to increase their equity.

5 . HERO MOTORCOPS LTD

This paper been completed with the important objectives of, to what extend
capital structure impact on financial performance of automobile companies. To

52 | P a g e
conclude there is a positive relationship between capital structure and financial
performance or profitability. So every firm should make good capital structure
decision to earn profit and carry on their business successfully. When we focus
on debt and equity position of automobile industry, some firm had adequate
level of debt capital and equity capital and also long terms debt but they do not
maintain some specific or standardized mix of capital to earn maximum profit.
Managing capital structure thus becomes a balancing act. The trade-off a
company makes between financial flexibility and fiscal discipline is the most
important consideration in determining its capital structure and far outweighs
any tax benefits, which are negligible for most large companies unless they have
extremely low debt.
The following suggestions are recommended to increase the Company’s financial
performance based on capital structure.

1. Performance standards should be established and communicated to the

investors. This will help investors to achieve the standard and take better
investment decisions. Identifying weaknesses of investment may be best one to
improve the firm’s financial performance, because it indicates the area which
decision should be taken. Inflation and exchange rate also affect the listed
company’s performance. So, government should consider the economic growth
to control the inflation.

2. Mature companies like Bajaj Auto Limited and Hero Motor corp. with
stable and predictable cash flows as well as limited investment opportunities
should include more debt in their capital structure, since the discipline that debt
often brings outweighs the need for flexibility. Companies that face high
uncertainty because of vigorous growth or the cyclical nature of their industries
should carry less debt, so that they have enough flexibility to take advantage of
investment opportunities or to deal with negative events.

3. Corporate managers should follow a conservative investment policy in

order to enhance the performance of their companies. This implies that the
managers should maintain a higher level of investment in liquid assets relative
to noncurrent assets.

4. The study further established that the performance of the firm improves
using more current liabilities to finance their assets which can maintain

53 | P a g e
profitability. This is probably because current liabilities are less costly than
longterm debt. Additionally, the study found that increasing the proportion of
current assets in relation to total assets enhanced performance as measured by
both ROA and ROE.

REFERENCE
1. Management accounting by R.F.N. Pillai and Bagavathy, imprint: S. Chand
and sons, Revised edition, 2010.

2. Financial Management. Jain and Narang. Published by Tata McGraw-Hill

Education Pvt. Ltd, Second edition , In the year. 2005.

3. Annual report of TVS Srichakra Limited from the year, 2013-2017.

4. [Link].

5. [Link].

6. B. Anu, “A Study on Capital Structure of Selected Automobile Industry of

India”, May 2015, International Journal of Economics and Business Review.

7. Dr.N.S. Pandey and [Link], “Impact of Capital Structure on

Profitability of Listed Cement Industry of India”, May 2015, International
Journal of Research in Finance and Marketing.

8. Dr. Rakesh kumar, Rasik lal Jani and Mr. Satyaki J. Bhatt,”Capital Structure
Determinants-A Case Study of Automobile Industry”, March 2015,
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9. Dr. Rohit R. Manjule, “Impact of Capital structure in Indian Industry”

Volume 5, Issue 1, January-2014, International Journal of Scientific &
Engineering Research,

10. Hashemi Tilehnouei Mostafa and Shivaraj Boregowda, “A Brief Review of

Capital Structure Theories”, Oct 2014, Research Journal of Recent
Sciences.

11. Chen, Andrew and Sumon Mazumdar. 1994. Impact of Regulatory

54 | P a g e
 Interactions on Bank Capital Structure. Journal of Financial Services Research
8(4): 283-300.

12. Monga, Reema, Kahndelwal, Vaishali, “Impact of Capital structure on

Profitability with Special reference to Telecom Sector”, November 2018,
Anusandhan The Research Repository of GIBS. ISSN No. 2581-9968.

THANK YOU

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