CAPITAL STRUCTURE, LEVERAGE, AND SOLVENCY IN INDIA'S IRON AND STEEL SECTOR: EVIDENCE FROM FIVE COMPANIES OVER A DECADE

Abstract

This paper investigates capital structure decisions, leverage dynamics, and solvency performance across five major Indian iron and steel companies — Tata Steel Limited (TSL), Vedanta Limited, NMDC Limited, Jindal Steel and Power Limited (JSPL), and Steel Authority of India Limited (SAIL) — over the decade FY 2013–14 to FY 2022–23. Employing a quantitative analytical framework based on secondary data from audited annual reports, the study computes and analyses Long-Term Debt-Equity Ratio, Total Debt-Equity Ratio, Interest Coverage Ratio (ICR), and Net Assets to Net Worth Ratio. Statistical tools include descriptive analysis, Two-Way ANOVA, and OLS regression trend analysis. Key findings reveal a sector-wide structural transformation toward lower leverage over the decade, most pronounced post-2019. JSPL recorded the most dramatic financial restructuring in the sample: total D/E fell from 2.06 (FY 2014–15) to 0.33 (FY 2022–23), constituting one of the most compelling corporate deleveraging episodes in recent Indian industrial history. NMDC maintained a virtually debt-free balance sheet throughout (total D/E never exceeding 0.08), while SAIL's leverage trajectory was the most troubling — D/E peaking at 1.27 in 2019–20. The study establishes that leverage is the primary amplifier of commodity-cycle risk in this sector and derives a leverage-performance relationship that has significant implications for corporate strategy, lending policy, and industrial governance.