1. INTRODUCTION:

Growth of a country depends on the adequate infrastructure facilities. A good infrastructure facility improves the standard of living. Governments of different countries all over the world take leading role in development of infrastructure. There has been a debate on whether the exclusive domain of the governments to create infrastructure result in monopolies and consequential inefficiencies in the usage of the resources and money.

This debate has led to the opening of certain spheres of infrastructure to private sector in different forms. The private sector is using this opportunity to build infrastructure in many areas which are opened for their operation. It is three decades since India has opted for different models for developing infrastructure in India. Post 1991, Government of India (GOI) has allowed private players to contribute to the development of infrastructure. Over the years, Government has allowed foreign direct investment (FDI) in different sectors of the economy, including infrastructure sectors. While the percentage of the FDI remained low in the initial years of liberalization, it revised the FDI percentage from time to time. Allowing the private participation is a good move taken by Governments which helps in the overall development. While it is a good move to attract private capital to develop infrastructure in the country, GOI should also understand the financing patterns of the companies involved in the development of infrastructure. The financial performance analysis in developed countries has been undertaken by Beaver (1977), Bird and McHugh (1977), Buckmaster and Saniga (1990), Osteryoung and Richard 1992) and they report that earnings on assets and equity are important to understand the profitability of an enterprise. Gnanavelu (1996) found that to increase profitability there is a need for good financial performance and minimum borrowing. Cinca et.al. (2005) argues that size of a firm and the location of the firm impact the financial ratio structure. Blessing and Onoja (2015) found that combined leverage and operating leverage have impact on profitability. Manjunatha and Gujjar (2018a; 2018b) analyzed and found that net income of the organization is not enough to determine its efficiency unless profit margin, asset turnover, financial leverage are taken into consideration. In most of the developing countries there has been a debate on the level of efficiency of the state, public sector, and listed companies. Results of these findings have been debated again and again by many authors in the developed countries. For assessing the financing patterns of infrastructure companies, we have compute ratios based on the annual financial statements of companies in different infrastructure groups and interpret these ratios to understand how the companies in different sectors chose their finances. We have used 20 different ratios to understand the dimensions of financing patterns. In this paper, we analyze the financing patterns of infrastructure sectors in India. The paper is organized in four parts. Part 1 is the introduction; Part 2 presents objectives and methodology; Part 3 analyses the results; Part 4 presents the summary and conclusions. References and tables are given after Part 4.

2. OBJECTIVES AND METHODOLOGY:

2.1 We have set following objectives based on the evidence of review of literature

· To test the financing patterns of companies of selected infrastructure sectors in India.

2.2 Null hypothesis:

H_o: The financing pattern of selected infrastructure sectors is not significantly different.

Negation of above hypothesis is alternate hypothesis.

We perform one-way analysis of variance (ANOVA) for different sectors to find out whether or not there is a significant difference in the financing patterns of different sectors. The final results of this ANOVA are presented in Table 5.

2.3 Data and Sample:

We use the financial data of 306 core infrastructure companies from four sectors. We analyse the sector-wise aggregate results of 132 companies in construction sector, 68 companies in steel sector, 38 companies in cement sector. The performance measures computed from financial statements from the years 1999-2000 to 2017-2018 are aggregated for each sector and the results are presented. We use 20 different ratios to understand the dimensions of financing patterns. The analysis of financing pattern is presented by pooling the data of all the companies in each sector. Therefore, the analysis presented is for the sector as a whole. We present the results of financing pattern for four sectors in Tables 1 to 4. The aggregated results are presented to avoid too many tables if the data of each company is presented and analysed. One of the limitations of this type of analysis is that the individual companies loose their identity in the analysis. If separate analysis is presented for each company in nine different sectors, the data becomes unwieldy to present and analyse. Therefore, sector wise analysis is made for nine sectors. The financing pattern of a company refers to the composition of the long and short-term sources of funds. The use of fixed interest bearing debt, preference capital, equity share capital, reserves and surplus reflect the financing pattern. An enterprise financing pattern that maximises the value of firm is an optimal capital structure. It is also referred to as the appropriate composition of the debt and equity.

3. RESULTS AND ANALYSIS:

To assess the financing pattern of infrastructure companies, we compute the ratios based on the annual financial statements of companies in different infrastructure sectors and interpret these ratios to understand how the companies in different sectors choose their finances. We use 20 different ratios to understand the dimensions of financing patterns.

Table 1 presents the financing patterns of construction sector companies. The long term debt to equity ratio (LTDE) of this sector shows the mean and median values of 1.10 and 0.49 respectively. The coefficient of variation (CV), a measure of variation in the ratios over the years and across the companies, is more than the mean and median values which is an indication that there is a large variation in the LTDE in the companies in this sector. This large variation is clearly indicated by a maximum value of 15.96 and minimum value of - 13.40. The negative value indicates that there are companies whose equity is negative as the debt cannot be negative. This ratio indicates that some of the companies have used very high doses of debt even while the average is within the acceptable limits.

Table 1: Financing Patterns of Companies in Construction Industry (N=132 Companies)

N	Ratios	Mean	Med	CV	Q1	Q3	Max	Min
1	Long Term Debt to Equity (networth Ratio)	1.10	0.49	2.38	0.13	1.31	15.96	-13.40
2	Total debt-Equity ratio	2.60	1.89	1.49	1.20	3.23	28.02	-14.18
3	Total Debt (Ex CL) to Debt+Equity (DER)	-0.68	0.22	-22.43	-0.45	1.31	44.46	-155.31
4	Total Debt (Ex CL) to Total Assets ratio (DAR)	-0.15	-0.18	-1.66	-0.32	0.03	0.61	-1.04
5	Capital Gearing Ratio	0.48	0.23	3.68	0.09	0.56	14.43	-9.80
6	Proprietary ratio (FA/Shareholders Equity)	1.03	0.56	2.14	0.18	1.27	19.30	-7.48
7	Funded Debt to NWC	0.57	0.39	7.91	0.00	1.31	20.25	-28.04
8	Leverage ratio	0.33	0.30	0.82	0.14	0.54	1.13	-0.79
9	Long Term Debt to Total Capitalisation (Book Value)	0.68	0.80	1.73	0.61	0.98	4.43	-9.90
10	Long term debt to Total Asset	0.18	0.14	0.82	0.07	0.28	0.71	0.00
11	Total Assets to Equity Share Holders Equity	5.93	3.91	2.86	2.70	6.04	120.34	-100.39
12	Short Term Debt to Total Debt (inc CL)	1.55	1.40	0.36	1.21	1.76	4.77	0.71
13	Current Liabilities to Total Assets	0.43	0.42	0.40	0.32	0.54	1.21	0.10
14	Current Liabilities to Equity	2.25	1.61	1.56	1.04	2.89	23.37	-14.80
15	Quick Assets to Total Assets	0.31	0.25	0.71	0.14	0.41	0.98	0.00
16	Current Assets to Total Assets	0.48	0.48	0.56	0.28	0.71	0.99	0.00
17	Net fixed Assets to Total Assets (COVA)	0.17	0.14	0.81	0.06	0.25	0.78	0.00
18	Working Capital to Total Assets	0.05	0.06	4.64	-0.08	0.17	0.81	-0.96
19	Retained Earnings to Total Assets	0.22	0.21	0.80	0.14	0.30	0.74	-0.90
20	Sales to Total Assets	0.56	0.45	0.77	0.23	0.83	2.40	0.00

Notes: Med = Median, CV= coefficient of variation, Q1= first quartile, Q3= third quartile, Max= Maximum value, Min = Minimum value, N = number of companies/ratios considered for analysis. The same explanation of terms holds for all the tables in this paper.

In total debt to equity (DER), we see that the mean value is 2.6, median value is 1.89 and CV is 1.49. While the volatility in this ratio is not very high as indicated by the lower value of CV, the mean and median values for all companies is high indicating the doses of debt is disproportionately high as substantiated by the maximum value of 28.02 and minimum value of -14.18.

Total debt to total of debt and equity (TDDE) has a mean value of -0.68 and median value of 0.22. The negative mean value shows that the equity is eroded of these companies. The total debt to total assets (DAR) has negative mean as well as median values indicating that the fictitious assets on average constitute larger portion than the fixed and current assets. Since total debt cannot be negative, only the denominator can be negative for this ratio. This shows that companies in this sector have unwritten off expenses and accumulated losses. Capital gearing ratio (CGR) shows the amount of fixed income securities relative to the total capital of the company. Higher CGR can be beneficial for the companies when they have ROI more than the returns on the fixed income securities. But in this sector, since the mean value of the earning is negative, higher CGR is a disadvantage. Proprietary ratio (PR) explains the degree of fixed assets that are financed by the shareholders of the company. A ratio of 1 indicates that the whole of fixed assets is financed by the shareholders and a ratio of less than 1 indicates that a part of the fixed assets is financed by the debt capital. Using debt to finance fixed assets is beneficial for companies if they are able to generate enough income to repay the debt. In case of construction industry, we have noted that the companies have on average incurred losses and therefore, a ratio of more than 1 implies that the companies would not be able to service the debt. A maximum value of 19.30 clearly shows that there are companies which have used a high level of debt to finance the fixed assets. A minimum value of -7.48 shows that the shareholders equity is completely eroded in these companies and this type of company has depended on the debt to finance the fixed assets.

Funded Debt to NWC (FDNWC) shows the extent to which interest-bearing securities are used to finance working capital of the companies. In construction industry, the mean and median values of this ratio are less than 1 which indicates that on average the working capital is more than the funded debt. Maximum and minimum values of this ratio for construction sector are 20.25 and -28.04 respectively. These values show that one of the companies in this sector has very low working capital relative to the funded debt and another company has disproportionately high negative working capital which has resulted in negative value for this ratio in construction industry.

Leverage ratio which indicates the ratio of total liabilities to shareholders equity. This ratio shows how a company has used the doses of debt to finance its assets and operations. A high leverage ratio is good for those companies which have higher ROI than the cost of capital but bad for the companies which have lower ROI than the cost of capital. In case of construction sector companies, this ratio is not very high, but the companies have problem because their incomes are not sufficient to services their debts. Long term debt to total capitalization (LTDTC) shows the contribution of long-term debt to finance the total of fixed, current and fictitious assets. The book value of these assets is computed as the difference between the total of fixed and current assets and the fictitious assets. In case of this sector, the maximum value is 4.43 and the minimum value is -9.90, the mean and median values are 0.68 and 0.80 respectively.

Long term debt to total assets ratio (LTDTAR) shows the extent to which long term debts are

used for financing the assets of the companies. The values of this ratio are low indicating the debt is not at very high level compared to the total of the asset side of the balance sheet. However, it has to be viewed in conjunction with other ratios, as the denominator of this ratio is computed as the total of the asset side of the balance sheet. Viewed with other ratios like the DER and DAR, the ratio does not show comfortable position.

The ratio of total assets to equity shareholders equity (TAESER) shows the contribution of the equity shareholders to finance the assets of companies. This ratio is very high for the construction sector which indicates that the contribution of the equity shareholders is very low and even negative as indicated the negative minimum value. Short term debt to total debt ratio is computed as the ratio of short-term debt including current liabilities to the long-term liabilities. A ratio of more than 1 is dangerous as the short-term debt is more than the long-term debt and a ratio of less than 1 indicates a better position of a company. This ratio is more than 1 in this sector which indicates that the companies have used more short-term debt to finance the fixed and current assets and this is dangerous, speciously when companies are not able to earn good returns to service the debts. Current liabilities to total assets ratio (CLTAR) shows the extent to which current liabilities are used for financing the assets of companies. Although the mean and median values are less 1, the maximum value of 1.21 shows that there are companies in this sector which have not only used current liabilities to finance all the assets but have also used current liabilities to finance a part of fictitious assets. This is a dangerous signal for those companies. Current liabilities to equity ratio (CLER) show the extent of current liabilities relative to the equity. For a company which is running well, we expect that the equity must be higher than the current liabilities and therefore, this ratio should be lower than 1. In case of this sector, this ratio is higher by all indicators and shows that higher amount of current liabilities is used for financing the operations of companies.

Quick assets to total assets ratio (QATAR) shows how far the companies are able to use the most liquid assets to finance their operations. If the company’s operations are well run, we expect that this ratio should be substantially lower. The value of this ratio for this sector is reasonably good and not disturbing. However, this ratio has to be read in conjunction with other ratios to get an idea of whether this is good. Since the other ratios are not indicating the comfortable position, this ratio is also showing that using more of quick assets to finance the assets is not good. Current assets to total assets (CATAR) shows how much of the sources of finances have been used for financing the current assets. If the companies are run well, we expect that the total assets should be much higher than the current assets. In case of this sector, the mean, median and maximum values are 0.48, 0.48 and 0.99 respectively. This indicates that on average almost 50 percent of the total sources of finance are used for financing current assets. The maximum value of 0.99 indicates that almost the entire sources of finance are used to finance the current assets and this are certainly a dangerous situation.

Net fixed assets to total assets (NFATA) which is an indicator of collateral value of assets (COVA), shows how far an entity can use fixed assets as collateral to borrow money from external sources. Higher values indicate comfortable position and lower value indicates that the company is not able to leverage fixed assets to borrow money. All the indicators show that companies are not able to use much of fixed assets as collateral to borrow money, when needed. Working capital to total assets ratio (WCTAR) shows how much of the various sources of finance have been used for working capital relative to the total assets. This ratio should be low for a well-run company. Both the mean and median values indicate that the ratios are low, but the coefficient of variation (CV) shows that there is high variation in these companies. This is substantiated by a maximum value of 0.81 and minimum value of -0.96. The maximum value of 0.81 shows that 81 percent of the sources of finance is used for financing the working capital. The minimum value of -0.96 shows that the working capital is negative since current liabilities exceed current assets. This is dangerous signal for the companies. Retained earnings to total assets ratio (RETAR) shows the extent to which companies are able to plough back the earning to finance the expansions of the companies. A low value indicates that the companies either did not have enough earnings to plough back the earnings or the companies distributed more earnings to the shareholders. In case of this sector, the companies did not have enough earning to plough back the earnings which can be used for financing the assets of companies.

Sales to total assets (STAR) ratio indicates the capacity of the companies to generate sales using assets of the companies. Higher values indicate good position and vice versa. In case of this sector, the values are not high and therefore, we interpret that the companies have not been able to generate sales by using assets. Maximum value of 2.40 shows that one of the companies has been able to generate sales to the extent of 2.40 times the total assets by using the total assets, while the minimum value of 0.00 indicates that there is a company in this sector which has not been able to generate any sales. In the latter case, the assets of company have remained idle. Idle assets will call for additional financing which can only worsen the financial positions of the companies.

Table 2 presents the financing patterns of steel sector companies, the different ratios in this sector indicate that the companies have used debt to finance their undertaking. When we compare the long term debt to equity and total debt to equity ratios, the latter has very high values which indicate that the total debt is substantially more than the long term debt. Further, the short term debt is used for financing the assets of companies. The retained earnings are low compared to the total assets showing that the companies in this sector have not been successful in generating income to plough back the earnings. The contribution of equity shareholders to finance the total assets is low indicating that the companies’ assets as well as operations are financed by the debt. Working capital to total capital is negative which is a clear indication that the current liabilities have exceed the current assets substantiating the fact that the current liabilities are used to finance fixed assets.

Table 2: Financing Patterns of Companies in Steel Industry (N = 68 Companies)

N	Ratios	Mean	Med	CV	Q1	Q3	Max	Min
1	Long Term Debt to Equity Ratio	0.60	0.33	3.43	0.08	0.65	15.37	-4.87
2	Total debt-Equity ratio	1.70	1.31	2.31	0.75	2.27	20.04	-13.35
3	Total Debt (Ex CL) to Debt+Equity (DER)	10.65	-0.05	8.48	-0.62	0.73	743.80	-22.28
4	Total Debt (Ex CL) to Total Assets ratio (DAR)	-0.10	-0.09	-1.98	-0.20	-0.03	0.48	-0.69
5	Capital Gearing Ratio	0.21	0.11	2.24	0.03	0.37	1.36	-1.80
6	Proprietary ratio (FA/Shareholders Equity)	1.05	0.77	4.09	0.58	1.48	17.14	-26.21
7	Funded Debt to NWC	1.62	0.41	9.12	-0.15	1.55	102.36	-46.87
8	Leverage ratio	0.49	0.33	1.48	0.20	0.49	4.58	-0.16
9	Long Term Debt to Total Capitalisation (Book Value)	0.61	0.90	2.01	0.56	1.07	2.22	-5.51
10	Long term debt to Total Asset	0.18	0.15	0.74	0.09	0.22	0.70	0.00
11	Total Assets to Equity Share Holders Equity	4.42	3.25	1.33	2.15	4.04	38.09	-6.69
12	Short Term Debt to Total Debt( inc CL)	1.64	1.60	0.33	1.33	1.80	4.50	0.84
13	Current Liabilities to Total Assets	0.46	0.41	0.57	0.31	0.55	1.89	0.09
14	Current Liabilities to Equity	1.55	1.23	2.44	0.67	2.17	19.53	-13.25
15	Quick Assets to Total Assets	0.28	0.30	0.64	0.12	0.40	0.69	0.01
16	Current Assets to Total Assets	0.43	0.43	0.58	0.20	0.66	0.88	0.00
17	Net fixed Assets to Total Assets (COVA)	0.34	0.31	0.49	0.24	0.44	0.89	0.00
18	Working Capital to Total Assets	-0.03	0.00	-11.23	-0.14	0.17	0.49	-1.49
19	Retained Earnings to Total Assets	0.19	0.23	1.40	0.10	0.31	0.61	-1.02
20	Sales to Total Assets	1.22	1.10	0.53	0.75	1.56	4.19	0.06

Table 3 Financing Pattern of Companies in Cement Industry (N =38 Companies)

N	Ratios	Mean	Med	CV	Q1	Q3	Max	Min
1	Long Term Debt to Equity (networth Ratio)	1.42	0.28	2.40	0.04	0.90	18.21	-0.41
2	Total debt-Equity ratio	4.50	0.72	4.18	0.46	1.34	116.45	-1.33
3	Total Debt (Ex CL) to Debt+Equity (DER)	-5.61	-0.26	-5.79	-0.70	-0.01	1.10	-200.32
4	Total Debt (Ex CL) to Total Assets ratio (DAR)	-0.03	-0.06	-5.00	-0.10	0.03	0.43	-0.42
5	Capital Gearing Ratio	0.56	0.12	2.62	0.00	0.39	7.98	-0.25
6	Proprietary ratio (FA/Shareholders Equity)	4.80	1.60	3.25	1.04	2.76	97.24	-0.04
7	Funded Debt to NWC	-2.14	0.21	-18.17	-0.63	1.12	96.06	-210.30
8	Leverage ratio	0.34	0.27	0.81	0.16	0.45	1.04	-0.10
9	Long Term Debt to Total Capitalisation (Book Value)	0.87	0.95	0.37	0.86	0.99	1.47	-0.58
10	Long term debt to Total Asset	0.21	0.16	0.76	0.09	0.30	0.60	0.01
11	Total Assets to Equity Share Holders Equity	4.30	2.65	1.13	2.05	3.92	26.50	-0.26
12	Short Term Debt to Total Debt (inc CL)	1.54	1.43	0.36	1.20	1.69	3.33	0.64
13	Current Liabilities to Total Assets	0.26	0.21	0.71	0.18	0.29	1.22	0.04
14	Current Liabilities to Equity	4.13	0.59	4.55	0.40	0.86	116.66	-1.11
15	Quick Assets to Total Assets	0.14	0.13	0.64	0.08	0.18	0.43	0.00
16	Current Assets to Total Assets	0.18	0.17	0.58	0.12	0.23	0.48	0.00
17	Net fixed Assets to Total Assets (COVA)	0.53	0.53	0.25	0.44	0.60	0.75	0.18
18	Working Capital to Total Assets	-0.09	-0.07	-2.45	-0.12	-0.02	0.30	-1.07
19	Retained Earnings to Total Assets	0.28	0.34	1.02	0.17	0.45	0.73	-0.69
20	Sales to Total Assets	0.69	0.68	0.36	0.54	0.84	1.19	0.04

Table 4: Financing Pattern of Companies in Power Industry (N=68 Companies)

N	Ratios	Mean	Med	CV	Q1	Q3	Max	Min
1	Long Term Debt to Equity (networth Ratio)	2.34	0.94	2.77	0.29	1.84	47.56	-7.83
2	Total debt-Equity ratio	2.66	1.17	2.92	0.32	2.61	50.71	-17.61
3	Total Debt (Ex CL) to Debt+Equity (DER)	0.65	0.60	2.66	0.23	0.82	11.89	-5.80
4	Total Debt (Ex CL) to Total Assets ratio (DAR)	0.24	0.33	1.26	0.04	0.45	0.77	-0.56
5	Capital Gearing Ratio	1.09	0.13	3.49	0.02	0.59	28.97	-3.59
6	Proprietary ratio (FA/Shareholders Equity)	2.60	1.66	2.62	0.76	3.17	21.91	-27.06
7	Funded Debt to NWC	-4.54	-0.42	-5.31	-7.09	2.61	70.76	-126.10
8	Leverage ratio	0.55	0.57	0.54	0.33	0.75	1.29	0.00
9	Long Term Debt to Total Capitalisation (Book Value)	1.35	1.00	2.53	0.97	1.00	28.34	-0.20
10	Long term debt to Total Asset	0.41	0.46	0.57	0.23	0.60	0.87	0.00
11	Total Assets to Equity Share Holders Equity	7.07	3.57	2.10	2.23	7.63	80.23	-38.99
12	Short Term Debt to Total Debt (inc CL)	3.76	3.00	0.72	1.89	5.08	14.21	0.50
13	Current Liabilities to Total Assets	0.21	0.15	0.71	0.10	0.28	0.57	0.02
14	Current Liabilities to Equity	1.50	0.61	2.59	0.25	1.59	24.11	-7.77
15	Quick Assets to Total Assets	0.16	0.12	0.86	0.08	0.19	0.74	-0.03
16	Current Assets to Total Assets	0.18	0.13	0.82	0.09	0.23	0.74	0.00
17	Net fixed Assets to Total Assets (COVA)	0.50	0.49	0.44	0.32	0.67	0.91	0.05
18	Working Capital to Total Assets	-0.03	-0.03	-4.47	-0.08	0.03	0.38	-0.44
19	Retained Earnings to Total Assets	0.14	0.15	1.53	0.01	0.25	0.84	-0.60
20	Sales to Total Assets	0.56	0.17	4.79	0.11	0.34	22.14	0.00

Table 5: ANOVA Results of Financing Pattern of Selected Infrastructure Sectors

SUMMARY
Groups	Count	Sum	Average	Variance
Constuction	28	65.15167	2.326845	20.19581
Steel	28	33.06654	1.180948	4.034303
Cement	28	30.90053	1.10359	6.600812
Pharma	28	1254.53	44.80464	14802
Power	28	-23.3301	-0.83322	200.9763
Tele	28	-151.79	-5.42106	2226.406
Road Ways	28	-73.3164	-2.61844	165.3866
Railways	28	6.040197	0.215721	0.377024
Airways	28	68.98299	2.463678	130.1776
ANOVA
Source of Variation	SS	df	MS	F	P-value	F crit
Between Groups	51826.85	8	6478.357	3.32107	0.001268	1.97663
Within Groups	474016.1	243	1950.683
Total	525842.9	251

Source: Computed by the researcher by using ANOVA for 9 different sectors and 20 different ratios of financing pattern.

Table 3 presents the financing patterns of cement sector companies. The different ratios in this sector indicate that the companies have used debt to finance their undertaking. When we compare the long term debt to equity and total debt to equity ratios, the latter has very high values which indicate that the total debt is substantially more in the overall long term debt. Further, the short term debt is used for financing the assets of companies. The retained earnings are low compared to the total assets showing that the companies in this sector have not been successful in generating income to plough back the earnings. The contribution of equity shareholders to finance the total assets is low indicating that the companies’ assets as well as operations are financed by the debt. Working capital to total capital is negative which is a clear indication that the current liabilities have exceed the current assets substantiating the fact that the current liabilities are used to finance fixed assets. Total assets to equity shareholders equity and current liabilities to total assets ratios are also very high and show that assets of companies are financed by resorting to more doses of debt than what companies in this industry should have borrowed. Working capital to total assets ratio is also negative which shows that the current liabilities are used for financing the long term assets like the fixed assets. Further, the earnings capacity of the companies is also low which is indicated by the negative values of the ratios based on the shareholders’ equity.

Table 4 shows the financing patterns of power sector companies. The long term debt to equity ratio in this sector show that mean, median, maximum and minimum values are 2.34, 0.94, 47.56 and -7.86 respectively. Similarly mean, median, maximum and minimum values of total debt to equity ratios are 2.66, 1.17, 50.71 and -17.61 respectively. Although the debt equity ratios seem to indicate that the overall doses of debt are very high, the nature of the industry is such that more debt is required to finance their operations. Looking at this nature, the debt financing seem to be in reasonable range. However, the maximum and minimum values indicate that there are companies in this sector which have borrowed indiscriminately and this has caused the financial distress for the companies as indicated by the negative values of the equity. When we compare the long term debt to equity and total debt to equity ratios, the latter has reasonable values which indicate that the total debt is not substantially more in the overall long term debt. Further, the short term debt is not used for financing the assets of companies unlike in the construction, steel and cement sectors. The retained earnings are low compared to the total assets showing that the companies in this sector have not been successful in generating income to plough back the earnings. The contribution of equity shareholders to finance the total assets is low indicating that the companies’ assets as well as operations are financed by the debt. Total assets to equity shareholders equity and current liabilities to total assets ratios are also very high and show that assets of companies are financed by resorting to more doses of debt than what companies in this industry should have borrowed. Working capital to total assets ratio is also negative which shows that the current liabilities are used for financing the long term assets like the fixed assets. Further, the earnings capacity of the companies is also low which is indicated by the negative values of the ratios based on the shareholders’ equity. However, unlike the construction, steel and cement industry, the overall ratios in this sector are not disturbing although there is the presence of extreme values as indicated by the different maximum and minimum values of the ratios.

Table 5 shows testing of hypothesis. The interpretation is based on the P value of the result. The results are based on 20 different ratios that are selected to represent various dimensions of financing fixed assets, current assets, intangible assets and fictious assets. Since the P-value is less than 0.05, we reject the null hypothesis that there is no significant difference in the financing pattern of different sectors of infrastructure industry in India. The rejection of null hypothesis leads to the conclusion that there is a significant difference in the financing pattern of different infrastructure sectors.

4. SUMMARY AND CONCLUSION:

In this paper, we analyse the financing patterns of four infrastructure sectors. The financing pattern in the construction, steel, cement and power sectors companies in India shows that companies have used more debt, that too short term debt, to finance their assets as well the operations. Using the debt to finance per se, may not be bad provided the companies are able to generate surplus to pay the periodic interest on debt and also repay the debt. This is not the case in the construction companies. We see that the net worth of the companies is eroded and they are not able to generate enough cash to service the debt. The different ratios indicate that the companies have fallen in debt trap. The presence of the extreme values seems to have affected the overall mean and median values of the different ratios in this industry. Further, the analysis shows that there is a significant difference in the financing pattern of different infrastructure sectors. The results of this study are very relevant to investors, investment advisors and policy makers. Policy makers can use the results of this study to design policies for infrastructure sector to avoid overcome excessive usage of debt which may lead to financial distress of companies. The researchers can compare the results of the study with other foreign infrastructure companies to understand how Indian infrastructure companies are operating compared to the companies in their country. Further study may be undertaken to analyse the individual companies in each sector to know the financing pattern. Interfirm comparison in each sector of infrastructure industry can be carried out to anlyse the patterns of financing.

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Received on 15.02.2021 Modified on 12.03.2021

Asian Journal of Management. 2021; 12(2):221-227.

DOI: 10.52711/2321-5763.2021.00034