Optimising Capital Structure and Cost of Capital for Mid-sized Indian Manufacturing Firms

Objective: To recommend an optimal capital structure for a mid-sized Indian manufacturing company to minimise its weighted average cost of capital (WACC) and enhance financial performance.

Problem & Context: Many mid-sized Indian manufacturing firms face challenges in balancing debt and equity to fund growth while managing risks and costs. High interest rates, volatile markets, and regulatory changes make it crucial for these firms to optimise their capital structure and reduce their cost of capital to remain competitive.

Approach/Methodology: The team will select a real or representative Indian manufacturing firm, collect financial data (from company reports, CMIE Prowess, etc.), analyse different capital structure scenarios using financial models, and benchmark against industry peers. Application of frameworks like Modigliani-Miller, trade-off theory, and pecking order theory will guide the analysis.

Deliverables & Analysis: Key deliverables include a detailed analysis of existing capital structure and WACC, scenario modelling for alternative structures, risk assessment, and concrete recommendations. Outputs will include sensitivity analysis, peer comparison, and a final actionable plan for management.

Business Impact: The findings will inform management decisions on financing strategy, help reduce financing costs, and support sustainable growth initiatives, directly impacting shareholder value.