A Capital Injection refers to the infusion of funds into a company or institution, typically to support operations, strengthen the balance sheet, or rescue it from financial distress.
Forms of capital injection includes equity capital, debt capital, government bailouts or grants and intercompany funding.
A Capital Injection refers to the infusion of funds into a company or institution, typically to support operations, strengthen the balance sheet, or rescue it from financial distress. This can come from investors, governments, banks, or parent companies and may take the form of equity, debt, or grants.
Capital injections are made when a company:
Is facing a cash crunch
Needs to meet regulatory capital requirements
Wants to expand or scale operations
Has suffered unexpected losses or downturns
Is strategically restructuring
A startup receives a ₹5 crore capital injection from its existing investors to extend its runway by 12 months.
A public sector bank in India receives a capital injection from the Government of India to improve its capital adequacy ratio.
Capital Injection is often associated with financial recovery or reinforcement.
Investment typically implies voluntary capital deployment for growth or profit.
Capital injection is sometimes reactive (to save or stabilize) while investments are proactive (to grow or expand).
Improves liquidity and solvency
Builds investor confidence
Helps meet regulatory capital norms
Prevents business shutdown or loss of jobs
Can dilute ownership (in case of equity)
May lead to increased debt burden
May give an impression of financial weakness
Government injections may come with restrictions or conditions
The Government of India has periodically infused capital into public sector banks to meet Basel III norms and improve lending capacity.
Startups often raise bridge rounds as capital injections to survive between funding cycles.
During COVID-19, emergency capital injections supported companies in aviation, tourism, and healthcare.