Capital Restructuring

Capital restructuring refers to a significant change in a company's capital structure — the mix of debt and equity financing — undertaken to improve financial stability, optimise the cost of capital, resolve financial distress, or better align the balance sheet with the company's current and future business needs. Capital restructuring can involve debt restructuring (renegotiating loan terms, converting debt to equity, or reducing outstanding borrowings through asset sales), equity restructuring (rights issues, buybacks, bonus issues, capital reduction), or a combination of both. In India, capital restructuring is often undertaken by companies facing debt servicing stress — as seen in infrastructure, power, and real estate sectors following the credit cycle of 2015 to 2019. The RBI's framework for stressed asset resolution — including mechanisms like the Insolvency and Bankruptcy Code (IBC) — provides structured pathways for capital restructuring of financially distressed companies. For equity investors, capital restructuring signals range from very positive (debt reduction through profitable asset sales) to very negative (equity dilution from distressed debt-to-equity conversions that wipe out existing shareholder value).