Auto-component industry is a very crucial one for Indian economy. According to the
IBEF report in the year 2020-21, the Indian auto-component Industry is a very vital Industry that
contributed around 7.1% to total India’s GDP and contributed 49% to India’s manufacturing GDP.
This Industry employed more than 50 lakh people directly and indirectly in 2018-19. The study
compares two vital theories of capital structure namely, the Trade-off theory and Pecking order
theory. The study’s objective is to examine the capital structure determinants of the Auto-component
Industry as per the theories. The variables, namely Asset Tangibility, Firm size, Growth, Profitability,
Liquidity, Non-Debt Tax shield (NDTS) and Age, are analyzed for the study. The sample was collected
by employing a Simple random sampling method. The analysis was made using a panel data model
for a sample of 108 Auto-component companies during 2010-11 to 2020-21. The findings are
compared with the conjecture of the capital structure theories: Trade-off theory and Pecking order
Theory. The study revealed that determinants have substantial explanatory power on capital
structure of Indian Auto-component companies. The theoretical implication shows that Indian
Auto-component Industry does not follow one particular capital structure theory; rather, it shows
evidence of both capital structure theories.

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