INSTITUTE OF PROFFESSIONAL EDUCATION AND RESEARCH

2022-2023

MASTER OF BUSINESS ADMINISTRATION (MBA)

SEMESTER-2

Section-7

ASSIGNMENT-4

ASSIGNMENT ON

ASSIGNMENT BY: CA PAWAN POPLI

Submitted By: Group 4
Shivani Jain
Vishal
Aditya Dubey
Prashant Patel

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 Capital structure
Capital structure means a mix of a company’s 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 funds. 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. A company’s proportion
of short and long-term debt is considered when analyzing capital structure.
When people refer to capital structure they are most likely referring to a
firm’s debt-to-equity ratio, which provides insight into how risky a
company is. Usually a company more heavily financed by debt poses
greater risk, as firm is relatively highly levered.
The capital structure is reflected to represent the proportionate relationship
between the different forms of finance, such as preference share capital,
debentures long-term debt and equity share capital including reserve and
surplus and short term debts.
Capital structure planning has the object of profit maximization ensure the
minimum cost of capital and the maximum rate of return to the equity share
holders. The amount of capital, a firm needs, is not the only financial
consideration. A financial manager determines the proper capital structure
for his firm.
According to Geresten beg “capital structure of a company refers to the
compensation or make up of its capitalization and it includes all long term
capital resources viz., loans, reserve, shares and bond.” The term
capitalization is a quantitative aspect of the financial planning of an
enterprise while capital concerned with quantitative aspect.

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Capitalization refers to the total amount of securities issued by a company
where as capital structure refers to the kinds of securities and the
proportionate amounts that makeup capitalization. The capital structure of a
company may consist of any of the following forms:
Equity share capital
Equity and preference shares
Equity shares and debentures
Equity shares, preference shares and debentures

Capital Structure of APL Apollo Tubes Ltd.

APL Apollo Tubes Ltd. is a public company that manufactures steel tubes
and pipes. Its capital structure shows the authorized capital, issued capital,
and paid-up equity capital of the company over the period. According to the
company's annual report, the company has reduced its debt-equity ratio
from 0.97 in 2019-20 to 0.63 in 2020-21, indicating a lower reliance on
debt financing and a stronger financial position. The company has also
improved its net working capital days from 14 in 2019-20 to 2 in 2020-21,
reflecting a better liquidity and cash flow management.
APL Apollo's competitors include other companies that manufacture steel
tubes and pipes, such as USUI, Nippon Steel, Tata Steel Europe, Valin
Steel and others. APL Apollo is the largest producer of electric resistance
welded (ERW) steel pipes and sections in India, with a capacity of 2.6
million tonnes per annum. It has a market share of about 50% in the
domestic ERW market. APL Apollo has a diversified product portfolio,
catering to various sectors such as infrastructure, construction, housing,
automotive, engineering and agriculture. APL Apollo has also expanded its
presence in international markets such as Europe, Africa, America and
Asia. Compared to its competitors, APL Apollo has strong brand
recognition, a wide distribution network, a cost-efficient production process
and a focus on innovation and quality.

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APL Apollo Tubes Ltd. has changed its capital structure over the past 10
consecutive years as follows:
Authorized
Period Instrument Issued Capital -PAIDUP-
Capital
Capital
Shares Face
From To (Rs. cr) (Rs. cr) (Rs.
(nos) Value
Cr)
2021 2022 Equity Share 75.0 50.1 250280500 2.0 50.1
2020 2021 Equity Share 45.0 25.0 124896000 2.0 25.0
2019 2020 Equity Share 45.0 24.9 24869015 10.0 24.9
2018 2019 Equity Share 45.0 23.9 23850381 10.0 23.9
2017 2018 Equity Share 45.0 23.7 23729805 10.0 23.7
2016 2017 Equity Share 25.0 23.6 23589955 10.0 23.6
2015 2016 Equity Share 25.0 23.4 23438636 10.0 23.4
2014 2015 Equity Share 25.0 23.4 23438636 10.0 23.4
2013 2014 Equity Share 25.0 23.4 23438636 10.0 23.4
2012 2013 Equity Share 25.0 22.3 22323636 10.0 22.3
2011 2012 Equity Share 25.0 21.3 21296683 10.0 21.3
2010 2011 Equity Share 25.0 20.3 20296683 10.0 20.3
2009 2010 Equity Share 25.0 20.3 20296683 10.0 20.3
2008 2009 Equity Share 25.0 20.3 20296683 10.0 20.3
2007 2008 Equity Share 16.0 10.7 10677000 10.0 10.7
2006 2007 Equity Share 10.0 3.2 3198000 10.0 3.2
2005 2006 Equity Share 5.0 3.1 3118099 10.0 3.

The table shows that the company has increased its authorized capital,
issued capital and paid-up equity capital over the years, indicating a growth
in its equity base and expansion of its business operations. The table also
shows that the company has reduced its debt-equity ratio in the last two
years, indicating a lower reliance on debt financing and a stronger financial
position.
Debt-equity mix is the ratio of debt to equity in a company's capital
structure. It indicates the extent to which a company relies on debt or equity
to finance its operations and growth. A higher debt-equity ratio implies
more risk, as it means the company has a higher proportion of debt relative
to its equity. A lower debt-equity ratio implies less risk, as it means the
company has a higher proportion of equity relative to its debt. However, the
optimal debt-equity mix depends on various factors, such as the industry,

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the cost of capital, the tax rate, the growth opportunities and the financial
flexibility of the company.
To analyse the changing pattern of debt-equity mix for APL Apollo Tubes
Ltd., we can use the table from the previous response and plot a chart of its
debt-equity ratio over time:
The chart shows that the company's debt-equity ratio has fluctuated
between 0.63 and 1.07 in the past 10 years, with a downward trend in the
last two years. This suggests that the company has reduced its dependence
on debt financing and increased its equity base in recent years. This could
be due to various reasons, such as lower interest rates, higher profitability,
and better cash flow management, lower tax benefits of debt or higher
growth prospects. A lower debt-equity ratio could also improve the
company's credit rating and reduce its financial distress risk.

Sharing Holding Patterns

CATEGORY NO. OF SHARES % CHANGE QOQ

Promoters Pledge 8,63,96,000 0

FII 7,13,17,437 1.4

DII 3,07,40,890 0.66

MF 2,13,94,918 0.36

Others 8,88,76,487 -2.06

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 NO. OF SHARES
Promoters Pledge FII DII MF Others

30% 29%

7%

10% 24%

Interpretation:
This table gives an idea about the capital structure of the company. It
includes equity share holder fund and secured and unsecured loans. From
the table we can see that the capital shows an increasing trend. This shows
the real financial position of the company. The company issued more equity
shares in the year 2020, 2021 and 2022. The company has a good amount
of reserve fund. The debt of the company also increases in each year.

CONCLUSION
The assignment was conducted at Apollo tyres ltd with an emphasis on
capital structure analysis of the company Apollo tyres ltd is one of the
major player in the Indian tyre industry. The capital structure planning is
very important for the success of a business. There should be a proper mix
of debt and equity. The company maintains the appropriate mix of equity
and outsiders fund so as to reduce the cost of capital, ensure the availability
of finance and increase the wealth of the share holders. Capital structure
refers to the mix of long term sources of funds, such as debentures , long
term debt, preference share capital and Equity share capital. Including

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reserves and surpluses that is retained earnings. Some companies do not
plan their capital structure, and it develops as a result of the financial
decisions taken by the financial manager without any formal planning.
With planned capital structure, these companies may fail to economies the
use of their funds.
The choice of a firms capital structure is a marketing problem it is
essentially concern with how the firm decides to divide its cash flows in to
two components a fixed component that is earmarked to meet the
obligations towards debt capital and a residual component that belongs to
equity shareholders.