Impact of Capital Structure on Firm Profitability: Evidence from Selected Indian Companies

This paper investigates the relationship between capital structure and firm profitability in selected Indian companies across five key sectors — Automobile (Tata Motors), FMCG (Hindustan Unilever/HUL), Information Technology (TCS), Pharmaceuticals (Sun Pharma), and Infrastructure (L&T) — covering the period 2018 to 2024. Using secondary data drawn from annual reports, NSE/BSE databases, and CMIE Prowess, the study examines how the Debt-Equity Ratio (DER) influences Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS). A supplementary primary survey of 50 respondents enriches empirical findings with perceptual insights. Pearson correlation (r = −0.623 for DER–ROA) and multiple regression analysis (β₁ = −8.31, p < 0.001) confirm a statistically significant negative relationship between leverage and profitability. Equity-dominated firms (TCS: ROE 45.6%, ROA 23.8%) consistently outperform highly leveraged peers (Tata Motors: ROE 7.2%, ROA 3.8%). The study concludes that a balanced, sector-calibrated capital structure is critical for sustainable profitability in the Indian corporate environment.