Financial pattern of manufacturing sector & Its impact on financial performance: A review of Indian companies

Indian corporate sector has experienced a paradigm shift over the last two decades with the initiation of certain measures of financial liberalisation. As a result of these policy changes, the ratio of Indian FDI outflows to Indian FDI inflows has increased significantly since 2000. An increasing trend in the purchases of firms or assets abroad is also observed since 2000, for various reasons. Against this background, an attempt has been made in this paper to analyse the financing pattern of Indian corporate in the manufacturing sector. This paper further seeks to identify the pattern of resource mobilisation of Indian firms acquiring firms abroad. Indian private corporate sector mobilised large share of resources through external sources although there is an increasing trend in the share of internal financing since 2000. Borrowings are the major source of external financing. Share of resources mobilised through capital market has sharply declined since mid-1990s. Indian acquiring firms mobilised large funds through external sources although the share of retained profit was quite substantial unlike in case of the manufacturing sector. They could also consistently raise resources through capital market throughout period. However, borrowings constituted the major contributor to external financing. These firms were also raising resources from abroad and therefore we could argue that it is not primarily their financial muscles which enable firms to engage in acquisitions abroad.