THE INDIAN INSTITUTE OF PLANNING & MANAGEMENT

NEW DELHI

THESIS SYNOPSIS

SUBMITTED TO:

PROF. SUMANTA SHARMA

 THESIS SYNOPSIS
Name: M. Pradeep Kumar
Section: FN-1
Batch: PGP/SS/2008-10
Phone Number: 8800366999
Email Address deep.kumar87@gmail.com

Thesis Topic: TO STUDY THE CAPITAL STRUCTURE OF WIPRO IN

COMPARISON TO INDUSTRY STANDARD.

Specialization Finance & Marketing

Introduction:
Capital structure refers to the way a corporation finances its assets through some combination of
equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure'
of its liabilities. The Modigliani-Miller theorem, proposed by Franco Modigliani and Merton
Miller, forms the basis for modern thinking on capital structure, though it is generally viewed as
a purely theoretical result since it assumes away many important factors in the capital structure
decision. The theorem states that, in a perfect market, how a firm is financed is irrelevant to its
value. This result provides the base with which to examine real world reasons why capital
structure is relevant, that is, a company's value is affected by the capital structure it employs.
Some other reasons include bankruptcy costs, agency costs, taxes, and information asymmetry.
This analysis therefore will be conducted to look at whether there is in fact an optimal capital
structure: the one which maximizes the value of the firm.

Research Objectives:
The aim of this research study is to study the capital structure of Wipro in relation to industry
standard. The research study will achieve the following research objectives:
• To study variation of capital structure across the top firms in IT industry
• To study the financing patter in the industry
• To determine the optimal capital structure for Wipro which maximizes the value of the firm

Hypothesis:
The following hypotheses will be tested in this study:
H1: Firms in same industries have the different financial structures
H2: optimal capital structure is difficult to maintain for large companies

Research Methodology:
I will use quantitative research approach in this study as it requires more of the quantitative
discussions.
Data Collection:-I will use both primary as well as secondary sources to collect the data as
follows,
• Primary Research:-Direct contact to officials employed in Wipro and other companies
in IT and conducts the interviews through primary research tool (Questionnaire).
• Secondary Research: - Journals of finance, literature, news articles, books etc.

Scope of the work:

The variation of capital structure across the top firms of different industry classes is turning out
to be significant only for three years in the pre-liberalization period, whereas the same variation
is consistently significant in all the years of the post-liberalization period. In case of the bottom
firms, the significant variation in capital structure of firms is much similar to that of the top firms
in the pre-liberalization period. But a shift is observed in the results of the post liberalization
period, showing almost absence of any significant variation in the financial leverage ratio. Since
the study is focusing only towards Wipro, therefore the result cannot be interpreted for other
industry players.

Justification of Choosing the topic:

In analyzing the inter- industry variation in capital structure of Indian firms, it is evident that the
capital structure of firms are systematically different across industry classes so far as the debt
financing as a proportion of total capital is concerned. Both firm size and industry-classification
contribute to the existing variation in capital structure across industry classes but nature of the
industry seems to dominate. More specifically, it is the differences in external fund requirement
based on technology differences that play a leading role in determining the inter-industry
variation in capital structure. This signals that there exists a linkage between product market and
capital market. I have chosen this topic to get the broader understanding of capital structure
which will help in nourishing my skills in the field of finance.

Details of external Guide:

Name: Mr. S. Ramachandra Murthy

Designation: Deputy Manager

Phone no: 9717746864