Means of Corporate Financing in Indian Market

By

ACKNOWLEDGEMENT

This thesis would not have been possible without support of many people. I owe my greatest intellectual debt to my supervisor, whose encouragement, guidance, and sup- port at every stage of my research enabled me to develop an understanding of the subject. On a personal level, I owe my heartiest thanks to my parents.

DECLARATION

I adjudge that the entire content of this dissertation is entirely my own work; the content used in this dissertation has not been submitted before in any educational institution and represents my own opinion.

Signed __________________ Date _________________

ABSTRACT

In this research study, aim is to find out the means of corporate financing in the Indian market. Investments in the Indian corporate sector contribute significantly to the edge of contribution to economic growth. In the last ten years the level of investment in India has increased dramatically, from 25% of GDP in 2000 to more than 35% in 2006. Capital investment decisions comprise the long-term selection of projects should be invested in, the question of whether these projects with equity and / or borrowings will be financed and if and when dividends to shareholders will be paid. The short-term decisions of the Corporate Finance as working capital management referred to and deal with the management of working capital (current asset) and the short-term liabilities (current liabilities), with the liquidity management , optimization of capital tied up in stock and the short-term debt and investments particularly attention. Corporate Finance is a part of financial management, which has a slightly broader in scope and applies in addition to private sector entities and to all other forms of organizations. Thus, it can be concluded that there are different means of corporate financing in the Indian market, these means are differently suitable for large and small corporations.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background of the Research1

Bond Issue4

Credit Ordinary4

The Operations of Discount5

Basic forms of corporate financing6

Equity financing and self-financing6

Credit financing and reserves6

Financial instruments7

Maximizing shareholders wealth7

Indian market8

Research aims and objectives10

Aim10

Objectives10

Research questions10

Dissertation Layout10

CHAPTER 2: LITERATURE REVIEW12

Theoretical framework12

Capital Structure Theories18

Theory X and Theory Y20

Model of Hersey and Blanchad20

Financing21

Types of corporate finance23

Internal financing23

External financing23

Difference between Internal and External Financing23

Examples24

External or debt financing25

Combined external funding26

Loan external funding26

Importance of Examining Capital Structure27

Investment & Capital Structure in an Imperfect Market28

Choice between Public Debt and Bank Loan28

Funding sources29

CHAPTER 3: METHODOLOGY34

Research approach34

Research design34

Secondary Research Methods34

Qualitative research method37

Targeted Geographical location41

Validity and Reliability41

Literature Search42

Keywords Used42

CHAPTER 4: ANALYSIS AND DISCUSSION43

Analysis43

Corporate financing in India43

For large companies internal financing are less important44

Banking system remains essential44

Domestic stock markets are increasingly popular45

ECB 2009 low, recovery expected in 201046

Discussion46

Ways of corporate financing in Indian market46

Indian Corporate bond market49

Indian Corporate bonds50

Companies use options of borrowing in foreign countries51

Immense potential for structured finance in Indian market52

Indian equity market53

Disadvantages55

Benefits57

Disadvantages57

Difficulty of financing in India57

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS60

Limitations67

Recommendations67

REFERENCES69

CHAPTER 1: INTRODUCTION

This chapter included the introduction of the research study that provided the overview of the study. This part is divided into background, the research problem, the aims and objectives, research questions, layout of the overall ...