This study examines the effect of debt heterogeneity on the speed of capital structure adjustment (SOA) using a partial adjustment framework for 2,913 Indian-listed firms from 2011 to 2023. Firms with more diversified debt structures adjust 21–41% faster towards their target leverage, with the effect being most significant among group-affiliated firms (41–82%), consistent with internal capital markets and intergroup guarantees facilitating the adjustment. The introduction of the Insolvency and Bankruptcy Code (IBC) increases adjustment speed by 73%, highlighting the role of legal reforms in easing credit frictions. Over-leveraged firms show more rapid adjustments than others. Results remain consistent across alternative measures of debt heterogeneity and after addressing endogeneity concerns.