Case Studies on Financing decisions of Real companies

Financing Decisions involve determining the optimal mix of debt and equity—the capital structure—to fund a company’s assets and operations. The goal is to minimize the overall cost of capital while balancing risk and return. These decisions include choosing funding sources, timing, and instruments to maximize shareholder wealth and ensure financial stability.

1. One97 Communications (Paytm) – Funding and IPO

One97 Communications, the parent of Paytm, made several financing decisions to support rapid growth. It raised funds from venture capital firms like Sapphire Ventures and SAIF Partners early on to expand services. Later major investors such as Ant Group (Alibaba), SoftBank and Berkshire Hathaway invested hundreds of millions of dollars, pushing the company’s valuation into billions of dollars. In 2021, One97 executed one of India’s largest IPOs, raising significant capital by issuing fresh equity and selling shares to the public. These financing choices helped Paytm scale, enter new markets, and build digital payment infrastructure across India.

2. Apple Inc. – Capital Structure and Debt Decisions

Apple’s financing decisions show how a large global company manages capital structure. Although Apple generates large profits and holds big cash reserves, it has issued long‑term debt through bonds to take advantage of low interest rates. This debt was used in part to fund share buybacks and dividends without repatriating foreign cash. By balancing debt and equity, Apple aimed to lower its overall cost of capital, return value to shareholders, and maintain financial flexibility. Such strategic financing reflects careful decisions about when to use debt versus equity in its capital structure.

3. First Brands Group – Working Capital Financing Risk

First Brands Group (a real U.S. auto parts company) used complex financing arrangements to support working capital, including selling receivables (factoring) and inventory‑based loans. The company classified these financings in ways that obscured its true level of leverage. When economic conditions changed and transparency issues emerged, the firm faced severe liquidity problems and filed for bankruptcy. This case highlights risks in financing decisions, especially when firms rely on high‑cost or opaque funding. It shows why clear reporting and prudent financing choices are critical for long‑term survival.

4. Sahara India Pariwar – Bond Financing Issue

Sahara India Pariwar attempted to raise huge funds by issuing bonds and redeemable preference shares. However, the Securities and Exchange Board of India (SEBI) ruled that these funds should have been raised through proper public offer methods according to law. The company was ordered to refund money to investors with interest, and huge repayments became a financing burden. This case shows how regulatory compliance affects financing decisions. Not following legal frameworks can lead to costly penalties and liquidity challenges.