Chapter Thirteen

Sources of Capital

IN THIS CHAPTER, WE COVER the various aspects of capital markets and sources of funding. The chapter continues with an overview of the capital structure decision that is one of the typical core areas of focus of the Treasurer. Debt and equity markets are explored at length, and hybrids of the two are also introduced. We also present a case study with two interesting situations—one is that the entity moves from a debt-free capital structure to one with debt, and the second is that the entity itself is an educational institution, whose capital allocation and usage is not very different in concept from that of a corporate.


We introduce the capital market discussion with an overview of the various markets and their players in Figure 13.1.

FIGURE 13.1 Players in Capital Markets


The issuers are the entities that are raising capital. The investors can come from many categories, the biggest of them being:

  • Sovereign wealth funds
  • Mutual funds
  • Private equity funds
  • Pension funds
  • Hedge funds
  • Insurance companies
  • High-net-worth individuals (HNIs)
  • Banks
  • Financial institutions
  • Retail investors

The intermediaries make the transactions happen, facilitating the entire process end to end. They are:

  • Brokers or agents. Act as intermediaries for deal closure
  • Investment banks. Manage and execute the deals in the market
  • Guarantors and credit support ...

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