Impact of Capital Structure on Profitability and Market Price of Large Cap and Mid Cap Indian Pharmaceutical Companies

The paper evaluates the impact of capital structure on profitability and market price of large cap and mid cap Indian pharmaceutical companies. The pharmaceutical companies listed in NSE and NSE midcap index were selected for the study. The secondary data was considered from 2013 to 2017. The study examines the validity of Modigliani Miller irrelevance theory of capital structure in large cap and mid cap pharmaceutical companies. It was found that market price had no significant correlation with debt equity ratio of large cap pharmaceutical companies. Ajanta pharma had shown significant negative correlation between debt equity ratio and market price. Capital structure was found to have varying impacts on profitability of different companies. Capital structure had no significant impact on profitability ratios of four large cap firms. Aurobindo and Ajanta pharma had shown a significant positive correlation between debt equity ratio and ROE. Biocon had shown a significant negative correlation between debt equity ratio and gross profit and operating profit.