Impact of Capital Structure on Firm Value

2752 Words12 Pages
Impact of Capital Structure on Firm Value
Financial Management Assignment

10/12/2010

Completed and Submitted by,
Aishwarya R. (06)
Anjana Pradeep (12)
Arijit Ghosh (18)
Gayathri M.A. (34)
Jyothi D. (44)
Lavanya P. (51)

CONTENTS
INTRODUCTION.......................................................3
COMPANIES CHOSEN..............................................3
LARSEN AND TOUBRO............................................3
Overview……………………………………………………………...3
Calculation of optimum D/E ratio............................5
Impact of capital structure on firm value................6
AMBUJA CEMENTS..................................................7
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of shares – 7,14,521), which was an increase of Rs.145 from the previous day.
Fall from 0.53 to 0.37
The fall in the D/E ratio has been studied in detail and has been presented with supporting charts, graphs and data.
During the year 2009-‘10, the Company allotted 52, 20,861 equity shares upon exercise of stock options by the eligible employees under the Employee Stock Option Schemes.

During the year under review, the Company on 8th October 2009 raised Rs. 1,873 crore in India through the Qualified Institutions Placement route for general corporate purposes. The Company also issued unsecured Foreign Currency Convertible Bonds (FCCBs) of USD 200 million to international investors. The FCCBs are convertible into equity shares of the Company, and if not converted, are repayable at the end of 5 years. In this year, the Company repaid a long term Rupee loan of Rs. 85 crore.

Larsen & Toubro Ltd (L&T) has raised $400 million (around Rs 1,880 crore) through qualified institutional placements (QIPs) at 1% discount and another $200 million (around Rs 940 crore) via foreign currency convertible bonds (FCCBs) for five-year tenure at 3.5% coupon and at a premium of 15%. The proceeds of the funds will be used towards power plants, ports, ship building and nuclear forging.
Shares of L&T closed at Rs 1,632.90, down 1 % on the Bombay Stock Exchange when this debt raise was publicized. L&T’s Baa2 issuer rating with Moody’s and negative
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