Capital structure

Definition:The capital structure is a mix of a companys long term debt, specific short term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of fund. Debt comes in the form of bond issues or long term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure. Factors determining capital structure:1. Trading on Equity 2. Degree of control 3. Flexibility of financial plan 4. Choice of investors 5. Capital market condition 6. Period of financing 7. Cost of financing 8. Stability of sales.

Year Authorized capital (in cr) Issued & paid up capital(in cr)

2007-08 150 144.68

2008-09 150 144.68

2009-10 150 144.68

2010-11 300 289.37

2011-12 300 289.37

350 300 250 200 Authorized capital 150 100 150 50 0 2007-08 2008-09 2009-10 2010-11 2011-12 150 150 144.68 144.68 144.68 300 300 Issued & paid up capital 289.37 289.37

Interpretation:The authorized capital of the company was 150 crores in the year 2007-08, 2008-09 and 200910. The issued and paid up capital was 144.68 crores. Then the company increased its

authorized capital to 300 crores in the year 2010-11. The issued and paid up capital now is 289.37 crores of the company. The company increased its authorized capital which is good sign of the growth of the company.

Long term debt Debt Equity Ratio = ------------------------- * 100 Shareholders fund

Year Long term debt(in cr) Shareholders fund(in cr) Debt Equity Ratio (in %)

2007-08 6.95 1587.59 0.44

2008-09 ---1869.69 ----

2009-10 129.8 2928.34 4.43

2010-11 23.53 4910.22 0.48

2011-12 97.48 6041.07 1.61

Debt Equity ratio

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-2012 0.44 0.48 1.61 Debt Equity ratio 4.43

Interpretation:The debt equity ratio shows the relationship between long term debt and the shareholders fund. This ratio is very low except in the year 2009-10 which was 4.43%. In the year 2008-09 there was no long term debt of the company. As the debt equity ratio is less it means that the company uses owners capital and reserves and surplus for the capital.

Profit after tax (PAT) Return on shareholders fund = ------------------------------- * 100 Shareholders fund

Year PAT (in cr) Shareholders fund(in cr) Return on shareholders fund (in %)

2007-08 755.78 1587.59 47.61%

2008-09 654.5 1869.69 35.01%

2009-10 1702.73 2928.34 58.15%

2010-11 3339.73 4910.22 68.02%

2011-12 3004.05 6041.07 49.73%

Return on Shareholder's fund

80 70 60 50 40 30 20 10 0 2007-08 2008-09 2009-10 2010-11 2011-12 47.61 35.01 58.15 49.73 68.02

Return on Shareholder's fund

Interpretation:The return on shareholders fund ratio shows the relationship between profit after tax (PAT) and the shareholders fund. The more return on shareholders fund is good for the company. From the above graph we can say that the return is continuously increasing from last few years. In the year 2010-11 it was more than 68%. This shows that the company earns more return on shareholders fund.