FACTORS EFFECTING CAPITAL STRUCTURE OF TATA MOTORS

CAPITAL STRUCTURE

The objective of any company is to mix the permanent sources of funds used by it in a manner that will maximize the company market price. The Proper mix of funds is referred to as the optimal capital structure. Whenever the company needs to raise finance, it involves a capital structure decision because it has to decide the amount of finance to be raised as well as the sources from which it is to be raised.

FACTORS AFFECTING THE CAPITAL STRUCTURE

Leverage The use of fixed charges sources of funds such as Preference shares, Debentures and term loans along with Equity capital in the capital structure is described as financial leverage or trading on equity.

Other factors that to be consideredCost of capital Cash flow Projections of the company Size of the Company Dilution of Control Floatation Costs

COMPANY PROFILE
Tata is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the worlds fourth largest truck manufacturer, and the worlds second largest bus manufacturer. Tata Motors Limited is Indias largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8 billion) in 2007-08.

CAPITAL STRUCTURE OF TATA MOTORS

Financial Year 2006-07

Figure (in Crores)

Authorized Capital: 450 Issued Capital: 385 Paid-up Capital: 385 Share Premium: 1936.4 Cash Dividend: 578.07 Nominal Value/ Face Value is Rs. 10 per share. No Bonus Share and Right Share were issued in 2006-07.

FACTORS AFFECTING THE CAPITAL STRUCTURE OF TATA MOTORS

Growth and stability of sales Competitive structure/ stability of profit margin Cash flow ability Cost of capital Control Size of the company Floatation cost Development of capital market Growth opportunities Level of economic development

CONCLUSION
We can conclude that the factors affecting the Capital Structure of Tata Motors are Cash flow ability, Cost of capital, Development of capital market, Growth opportunities, Level of economic development.