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Finance Structure

In: Business and Management

Submitted By biranchip17
Words 2640
Pages 11
Submitted to Prof. Kousik Guhathakurta By Bharat Subramony PGP/16/012 Ranjan Kumar Sharma PGP/16/040 Utkarsh Rastogi PGP/16/056

A-1. There appears to be a significant trend in the Capital Structure of Indian Inc. as reported by the Reserve Bank of India, which can be seen from the table below. By aggregating the data from the RBI reports provided from 2001 to 2010, we can extrapolate and determine its asymptotic value of the Debt-Equity ratio, which signifies the Capital structure to an approximate value of 40. Industry | 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | 2006-07 | 2007-08 | 2008-09 | 2009-10 | Target | Debt-Equity ratio in % | 67.3 | 61.1 | 55.5 | 51.3 | 46.8 | 47.3 | 45.6 | 44.3 | 43.6 | 40 |

Although there is some inconsistency in the values reported by RBI for the same accounting period, in different reports, with some generalization, of the values, the approximate Debt-Equity ratio can be inferred by careful observation of the reports. Based on such moderations, the above table has been generated. The following graph helps us to realize the short-term target ratio of D-E for Indian Inc. as 40%, while it turns out to be close to 30%, assuming a long-term period of 25-30 years.

If we chart the trend of the Debt-Equity ratio based on the size of the firms, we get the following table Scale | 2002-03 | 2003-04 | 2004-05 | 2005-06 | 2006-07 | 2007-08 | 2008-09 | 2009-10 | < 25 cr | 126 | 128.5 | 113.2 | 73.4 | 45.1 | 28.9 | 32.3 | 30.6 | 25-50 cr | 107.1 | 95.7 | 84.5 | 74.5 | 65.6 | 53.2 | 48.5 | 54.7 | 50-100 cr | 90.3 | 83.9 | 60.1 | 55.7 | 52.3 | 51.9 | 41.1 | 39.5 | 100-500 cr | 76.7 | 71.6 | 64.6 | 59.7 | 56.6 | 52.4 | 49.6 | 46.3 | 500-1000 cr | 55.2 | 57.5 | 53.2 | 50.4 | 51.6 | 53.6 | 54.6 | 51.3 | > 1000 cr | 47.8 | 44 | 35.4 | 39.7 | 43.3 | 42.5 | 44.1 | 42.4 |

A-2. Some of the…...

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