A Study on Capital Structure Optimization in Housing Finance with Reference to Tata Capital
DOI:
https://doi.org/10.64751/Keywords:
Capital structure, housing finance, Tata Capital, WACC, debt-equity ratio, NBFC, leverage, cost of capital, interest coverage ratio, housing finance India.Abstract
Capital structure optimization is a critical strategic decision for housing finance companies, determining the balance between debt and equity financing that maximizes firm value while minimizing the weighted average cost of capital (WACC). Tata Capital Housing Finance Limited, a wholly owned subsidiary of Tata Capital Limited and part of the Tata Group conglomerate, operates as one of India's prominent housing finance companies with a loan book exceeding Rs. 80,000 crore and a diversified borrowing profile spanning bonds, term loans, and securitization. This study analyses the capital structure of Tata Capital Housing Finance over the five-year period FY 2019-20 to FY 2023-24, examining debt-equity ratio trends, cost of capital components, leverage ratios, interest coverage, and the impact of capital structure decisions on return on equity and profitability. Primary data was gathered through structured interviews with 15 financial professionals and NBFC sector experts in Hyderabad. Secondary data was sourced from Tata Capital's published financial statements, National Housing Bank disclosures, RBI NBFC regulatory publications, and CRISIL research reports. Findings reveal that Tata Capital Housing Finance maintains a debt-equity ratio of approximately 6.5:1, consistent with NHB regulatory norms, with WACC declining from 9.8% (FY20) to 8.4% (FY24) through strategic diversification of borrowing sources and tenure. Recommendations focus on increasing long-term bond issuance, optimizing the securitization programme, and leveraging the Tata Group brand for cost-efficient capital market access.
