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57291144 47409641-airtel

  1. 1. Corporate Financial Analysis Report BHARTI AIRTEL
  2. 2. Corporate Financial Analysis Report Bharti AirtelReport Submitted By Group 2 – Batch 19 - BGroup Members: 1. AdeeyaPrabhakaran (FK-2181) 2. AnirbanSarkar (FK-2053) 3. JojiIssac P (FK-2167) 4. Josna Joseph (FN-158) 5. Keerthi T C (FK-2204) 6. Krishna Chaitanya M (FN-171) 7. Krishna Chandran R (FK-2070) 8. Mirian Leah Roy (FN-141) 9. G J SrinivasSai (FK-2196) 10. VivekAvanoor (FO-75) 11. Vineeth A (FN-120)2 | Page
  3. 3. Corporate Financial Analysis Report Bharti Airtel TABLE OF CONTENT3 | Page
  4. 4. Corporate Financial Analysis Report Bharti Airtel OBJECTIVEThe basic objective of doing the report is to analyse the financial statements of a Bharti Airtel,analyse the environment in which it is operating and evaluate its performance over the last threeyears and compare the performance with the industry peer groups. Hence a thoroughEnvironment Industry & Company analysis is done to understand the external factorsinfluencing the company. The financial report analyses and interprets using tools likecomparative analysis, common size analysis and ratio analysis. Using these tools theperformance of the company over the last three years is evaluated.4 | Page
  5. 5. Corporate Financial Analysis Report Bharti Airtel Introduction To The IndustryThe history of telecommunication industry started with the first public demonstration of Morse’selectric telegraph, Baltimore to Washington in 1844. In 1876 Alexander Graham Bell filed hispatent application and the first telephone patent was issued to him on 7th of March. In 1913,telegraph was popular way of communication. AT&T commits to dispose its telegraph stocksand agreed to provide long distance connection to independence telephone system. In 1956,the final judgment limited the Bell System to Common Carrier Communications andGovernment projects but preserving the long-standing relationships between the manufacturing,researches and operating arms of the Bell System. In this judgment AT&T retained belllaboratories and Western Electric Company. This final judgment brought to a close the justicedepartments seven –year-old antitrust suit against AT&T and Western Electric which soughtseparation of the Bell Systems Manufacturing from its operating and research functions. AT&Twas still controlling the telecommunication industry.In 1982 , AT&T was requested to divestiture its stock ownership in Western Electric;terminationof exclusive relationship between AT&T and Western Electric; divestiture by Western Electric of5 | Page
  6. 6. Corporate Financial Analysis Report Bharti Airtelits fifty percent interest in Bell Telephone Laboratories, AT&T ‘s telecommunication researchand development facility, is a jointly owned subsidiary in which AT&T and Western Electric eachown 50% of the stock; separation of telephone manufacturing from provision of telephoneservice and the compulsory licensing of patents owned by AT&T on a non-discriminatory basis.It was telecommunication act of 1996 that true competition was allowed. The act of 1996opened the market to all competitors. AT&T being the first telecommunication company pavedthe road for the telecommunication industry as well as set the policy and standards for others tofollow.Beginning of telecommunication in IndiaThe era of telecommunication in India started from the year of 1851 with the initiative from govt.of India near the city of Calcutta now known as Kolkata. However the rapid growth in telecomindustry came into picture after the year of 2002-03 onwards as the more number of serviceproviders came into existence. Since 2002-03 there is rapid change in the technology andincrease in numbers of subscribers in the Indian telecom industry till now. The following are themilestones in the Indian telecom industry. • 1851 First operational land lines were laid by the government near Calcutta. • 1881 Telephone services introduced in India. • 1883 Merger with postal system. • 1923 Formation of Indian radio Telegraph Company. • 1932 Merger of ETC and IRT into Indian Radio and Cable Communication Company. • 1947 Nationalization of all foreign telecommunication companies to form the posts, telephone and telegraph, a monopoly run by the government’s ministry of communications. • 1985 Department of telecommunication established an exclusive provider of domestic and long-distance services that would be its own regulator. • 1986 Conversion of dot into two wholly government – owned companies the VSNL for international telecommunication and MTNL for services in metropolitan areas.6 | Page
  7. 7. Corporate Financial Analysis Report Bharti Airtel • 1997 Telecom regulatory authority created.Telecommunication is important not only because of its role in bringing the benefits ofcommunication to every corner of India but also in serving the new policy objectives ofimproving the global competitiveness of the Indian economy and stimulating and attractingforeign direct investment. Indian Telecom industry is one of the fastest growing telecom marketsin the world. In telecom industry, service providers are the main drivers; whereas equipmentmanufacturers are witnessing growth and decline in successive quarters as sales is dependenton order undertaken by the companies. Today the Indian telecommunications network with over375 Million subscribers is second largest network in the world after China. India is also thefastest growing telecom market in the world with an addition of 9- 10 million monthlysubscribers. The teledensity of the Country has increased from 18% in 2006 to 33% inDecember 2008, showing a stupendous annual growth of about 50%, one of the highest in anysector of the Indian Economy. The Department of Telecommunications has been able toprovide state of the art world-class infrastructure at globally competitive tariffs and reduce thedigital divide by extending connectivity to the unconnected areas. India has emerged as a majorbase for the telecom industry worldwide. Thus Indian telecom sector has come a long way inachieving its dream of providing affordable and effective communication facilities to Indiancitizens. As a result common man today has access to this most needed facility. The reformmeasures coupled with the proactive policies of the Department of Telecommunications haveresulted in an unprecedented growth of the telecomsector. There is a cut-throat competition inthe Telecom industry as more and more advanced technology is developed in very short time.Once the people get addicted to 2G technology by the time new players come up with latesttechnology called 3G and EDGE. The thrust areas presently are: • Building a modern and efficient infrastructure ensuring greater competitive environment • With equal opportunities and level playing field for all stakeholders. • Strengthening research and development for manufacturing, value added services. • Efficient and transparent spectrum management • To accelerate broadband penetration • Universal service to all uncovered areas including rural areas.7 | Page
  8. 8. Corporate Financial Analysis Report Bharti Airtel • Enabling Indian telecom companies to become global players.Day by day, both the Public Players and the Private Players are putting in their resources andefforts to improve the telecommunication technology so as to give the maximum to theircustomers.Recent things to watch in Indian telecom sector are: • 3G and BWA auctions • MVNO • Mobile Number Portability • New Policy for Value Added Services • Market dynamics once the recently licensed new telecom operators start rolling out • Services. • Increased thrust on telecom equipment manufacturing and exports. • Reduction in Mobile Termination Charges as the cost per line has substantially reduced • Due to technological advancement and increase in traffic.Indias telecom sector has shown massive upsurge in the recent years in all respects ofindustrial growth. From the status of state monopoly with very limited growth, it has grown in tothe level of an industry. Telephone, whether fixed landline or mobile, is an essential necessityfor the people of India. This changing phase was possible with the economic development thatfollowed the process of structuring the economy in the capitalistic pattern.Removal ofrestrictions on foreign capital investment and industrial de-licensing resulted in fast growth ofthis sector. At present the countrys telecom industry has achieved a growth rate of 14 per cent.Till 2000, though cellular phone companies were present, fixed landlines were popular in mostparts of the country, with government of India setting up the Telecom Regulatory Authority ofIndia, and measures to allow new players country, the featured products in the segment camein to prominence. Today the industry offers services such as fixed landlines, WLL, GSMmobiles, CDMA and IP services to customers. Increasing competition among players allowed8 | Page
  9. 9. Corporate Financial Analysis Report Bharti Airtelthe prices drastically down by making the mobile facility accessible to the urban middle classpopulation, and to a great extend in the rural areas. Even for small shopkeepers and factoryworkers a phone connection is not an unreachable luxury. Major players in the sector are • BSNL • MTNL • Reliance • Bharti Teleservices • Vodafone • Tata Teleservices • Idea • Aircel • Videocon • MTSWith the growth of telecom services, telecom equipment and accessories manufacturing hasalso grown in a big way. Indian Telecom sector, like any other industrial sector in the country,has gone through many phases of growth and diversification. Starting from telegraphic andtelephonic systems in the 19th century, the field of telephonic communication has nowexpanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3GTechnology in mobile phones. Day by day, both the Public Players and the Private Players areputting in their resources and efforts to improve the telecommunication technology so as to givethe maximum to their customers.The wireless subscriber crossed the 261 million subscribermark at the end of the financial year in comparison to the subscriber base of 165.11 million atthe end of March, 2009. It added 95.9 million subscribers in the financial year 2008-09registering an annual growth rate of about 58.12%. The total subscriber base of wirelessservices has grown from 33.69 million in March, 05 to 261.07 million in March, 09 which isshown in fig.Growth of telecom industry in India9 | Page
  10. 10. Corporate Financial Analysis Report Bharti AirtelIndian telecom industry continued to register significant growth in 2008-09. Indian telecomnetwork, with about 414 million connections in February 2009, is the third largest in the world,while it is credited with the second largest wireless network in the world. At the current pace, thetarget of 500 million connections by 2010 is well within reach. The Government of India hasreiterated its commitment to reach out to the remote and uncovered areas and to augment thebroadband facilities in rural areas.Economic Survey 2008-09 GrowthSource: Department of Telecommunications10 | P a g e
  11. 11. Corporate Financial Analysis Report Bharti AirtelFinancial Year 2010 • FY10 saw the continuance of strong growth for the Indian telecom market, which witnessed a 45% YoY increase in its subscriber base during the 12-month period. At the end of March 2010, the countrys total telecom subscriber base (fixed plus mobile) stood at about 621 m. The tele-density level stood at about 53% by the end of the fiscal. • Growth remained robust in the GSM mobile space. GSM added 87 m subscribers during the year. After a strong 50% YoY increase in subscriptions during FY09, the GSM industry recorded another good performance during FY10, growing subscriber base by 22% YoY to about 479 m. • During FY10, Indias mobile subscriber base grew by 49% YoY, from 392 m to 584 m, while the fixed subscriber base declined by about 3%, from 37.9 m to about 36.9 m.11 | P a g e
  12. 12. Corporate Financial Analysis Report Bharti AirtelProspects • As far as the fixed line business goes, the low penetration levels in the country and the increasing demand for data based services such as the Internet will act as major catalysts in the growth of this segment. The PSUs will however continue to retain their dominant position. This is on account of high capital investments required in setting up a nationwide network. As a result, the private sector players will have to rely on key business centres and pockets of high urbanisation for their growth. • Increasing choice and one of the lowest tariffs in the world have made the cellular services in India an attractive proposition for the average consumer. The segments subscriber base has grown by over 49% YoY in FY10. As per Pricewaterhouse Coopers, Indias mobile subscriber base is expected to exceed 1 billion by 2014 and will be driven by additions in the rural areas. Indias rural tele-density for mobile subscribers currently stands at 32.7%. • During FY10, the Government completed the auction of 3G as well as the Broadband Wireless Access (BWA) spectrum auctions. The final price for a pan India 3G spectrum stood at a whopping 16,751 Crores. As a result, there was no single operator with a pan India license. The maximum circles that an operator got 3G spectrum was for 13 circles. For BWA, the final auction price for a pan India license was 12,848 Crores. There emerged a new competitor in this field with Reliance backed Infotel being the only operator to win a pan India BWA license. • During the year the Telecom Regulatory Authority of India (TRAI) also proposed new guidelines for charging spectrum fee and for mergers and acquisitions in the sector. On the face of it these guidelines appear to be more detrimental for the sector rather than helpful. If applied, these guidelines would increase the financial burden for the GSM operators by making them pay higher spectrum charges as well as humongous fee for holding higher quantities of spectrum. The guidelines also pose hurdles for mergers and acquisition activities, which are essential for reducing the overheated competition in the sector which currently has about 15 operators.12 | P a g e
  13. 13. Corporate Financial Analysis Report Bharti Airtel • During the current fiscal, a lot of focus will be given to new policy initiatives in the industry. The telecom regulator TRAI has set October 31st as the date for implementing mobile number portability (MNP) which allows subscribers to switch networks without changing the number. This would definitely lead to an increase in churn in the sector with each operator vying for subscriber attention to their own networks. In addition to this, the government is supposed to allocate 3G spectrum later during the year. Therefore, by the end of this fiscal, the operators would start rolling out 3G services in some circles at least. An Introduction to the Company - Bharti AirtelIncorporated on July 7, 1995, Bharti Airtel Ltd is a division of BhartiEnterprises. The businessesof Bharti Airtel are structured into two main strategic groups - Mobility and Infotel. The Mobility13 | P a g e
  14. 14. Corporate Financial Analysis Report Bharti Airtelbusiness provides GSM mobile services in all23 telecommunications circles in India, while theInfotel business group provides telephone services and Internet access over DSL in 15 circles.The company complements its mobile, broadband, and telephone services with national andinternational long-distance services. The company also has a submarine cable landing stationat Chennai, which connects the submarine cable connecting Chennai and Singapore. BhartiTele-Ventures provides end-to-end data and enterprise services to corporate customers byleveraging its nationwide fibre-optic backbone, last mile connectivity in fixed line and mobilecircles, VSATs, ISPand international bandwidth access through the gateways and landingstation. Allof Bharti Tele-Ventures services are provided under the Airtel brand.As ofSeptember 2005, Bharti Tele-Ventures was the only company to providemobile services in all23 telecom circles in India.By the end of October 2005, Bharti Tele-Ventures was serving morethan 14.74 million GSM mobile subscribers and 1.10 million broadband and telephone (fixedline) customers.The equity shares of Bharti Tele-Ventures are currently listed on theNationalStock Exchange of India Ltd (NSE) and the Stock Exchange, Mumbai (BSE). As ofSeptember 30, 2005, the main shareholders of Bharti Tele-Ventures were: Bharti Telecom Ltd(45.65%), a subsidiary of Bharti Enterprises;Singapore Telecom (15.69%), through itsinvestment division Pastel Ltd; and, Warburg Pincus (5.65%), through its investment companyBrentwood Investment Holdings Ltd). Other shareholders with more than a 1% stake were: CitiGroup Global Markets Mauritius Pvt Ltd (2.99%); Europacific Growth Fund (2.04%); MorganStanley & Co International Ltd (1.93%); CLSA Merchant Bankers Ltd A/C Calyon (1.33%); LifeInsurance Corporation of India (1.34%); and, The Growth Fund of America Inc. (1.11%). SunilBharti Mittal, the founder-chairman of Bharti Enterprises (which owns Airtel), is today, the mostcelebrated face of the telecom sector in India. He symbolises the adage that success comes tothose who dream big and then work assiduously to deliver it. Sunil Bharti Mittal began hisjourney manufacturing spare parts for bicycles in the late 1970s. His strong entrepreneurialinstincts gave him a unique flair for sensing new business opportunities. In the earlyyears,Bharti established itself as a supplier of basic telecom equipment. His true calling came in themid-1990s when the government opened up the sector and allowed private players to providetelecom services.Bharti Enterprises accepted every opportunity provided by this new policy toevolve into Indias largest telecommunications company and one of Indias most respected14 | P a g e
  15. 15. Corporate Financial Analysis Report Bharti Airtelbrands. Airtel was launched in 1995 in Delhi. In the ensuing years, as the Airtel networkexpanded to several parts of India, the brand came to symbolise the very essence of mobileservices. Product Airtel provides a host of voice and data products and services, including high-speed GPRS services. Airtel also offers a wide array of post-paid and prepaid mobile offers,with a range of tariff plans that target different segments. A comprehensive range of value-added, customised services are part of the unique package from Airtel. The companysproducts reflect a desire to constantly innovate. Some of these are reflected in the fact thatAirtel was the first to develop a single integrated billing system Airtel comes to you from BhartiAirtel Limited - a part of the biggest private integrated telecom conglomerate, Bharti Enterprises.Bharti is the leading cellular service provider, with an all India footprint covering all 23 telecomcircles of the country. It has over 21 million satisfied customers. Bharti Enterprises has been atthe forefront of technology and has revolutionized telecommunications with its world classproducts and services. Established in 1976, Bharti has been a pioneering force in the telecomsector with many firsts and innovations to its credit. Bharti has many joint ventures with worldleaders like Singtel (Singapore Telecom); Warburg Pincus, USA; Telia, Sweden; Asianinfrastructure find, Mauritius; International Finance Corporation, USA and New York LifeInternational, USA. Bharti provides a range of telecom services, which include Cellular, Basic,Internet and recently introduced National Long Distance. Bharti also manufactures and exportstelephone terminals and cordless phones. Apart from being the largest manufacturer oftelephone instruments in India, it is also the first company to export its products to the USA.Airtels journey to leadership began in Delhi in 1995. Since then, Airtel has established itselfacross India in sixteen states covering a population of over 600 million people. Airtel will sooncover the entire country through a process of acquisitions and green field projects. With apresence in over 1,400 towns, Airtel today has the largest network capacity in the country. Inthe last nine years Airtel has achieved many firsts and unique records: it was the first to launchnationwide roaming operations, it was the first to cross the one million and the five millioncustomer marks. It was also the first to launch services overseas. There are other firstscredited to Airtel - many of them in the area of innovative products and services. Today, Airtelinnovates in almost everything that it presents to the market. An excellent example is EasyCharge - Indias first paperless electronic recharging facility for prepaid customers. As evidence15 | P a g e
  16. 16. Corporate Financial Analysis Report Bharti Airtelof its fine record, Airtel has also been conferred with numerous awards. It won the prestigiousTechies Award for being the best cellular services provider for four consecutive years between1997 and 2000 - a record that is still unmatched. And in 2003, it received the Voice & DataAward for being Indias largest cellular service provider, amongst others. As part of itscontinuingexpansion, Airtel has invested over Rs. 1,065 billion in creating a new telecominfrastructure. In 2003/04, Bharti Tele-Ventures earned a gross profit of Rs. 16 billion onrevenues of Rs. 50 billion. Telecom giant Bharti Airtel is the flagship company of BhartiEnterprises. The Bharti Group has a diverse business portfolio and has created global brands inthe telecommunication sector. Bharti has recently forayed into retail business as Bharti RetailPvt Ltd. under a MoU with Wal-Mart for the cash & carry business. It has successfully launchedan international venture with EL Rothschild Group to export fresh agri- products exclusively tomarkets in Europe and USA and has launched Bharti AXA Life Insurance Company Ltd under ajoint venture with AXA, world leader in financial protection and wealth management. Airtelcomes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecomservices provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception hasbeen at the forefront of technology and has steered the course of the telecom sector in thecountry with its world class products and services. The businesses at Bharti Airtel have beenstructured into three individual strategic business units (SBU’s) – Mobile Services, AirtelTelemedia Services &Enterprise Services. The mobile business provides mobile & fixedwireless services using GSM technology across 23 telecom circles while the Airtel TelemediaServices business offers broadband & telephone services in 94 cities. The Enterprise servicesprovide end-to-end telecom solutions to corporate customers and national &international longdistance services to carriers. All these services are provided under the Airtel brand. Bharti Airtelis one of Indias leading private sector providers of telecommunications services based on anaggregate of 71.77 million customers as on June 2008, consisting of 69.38 million GSM mobilecustomers and 2.39 Bharti Telemedia Customers. Bharti Airtel Limited, a group company ofBharti Enterprises, is India’s leading integrated telecom services provider with an aggregate of71.77 million customers as of end of June 2008, consisting of 69.38 million mobile customers.Bharti Airtel has been rated among the best performing companies in the world in the BusinessWeek IT 100 list 2007. Bharti Airtel is structured into three strategic business units - Mobile16 | P a g e
  17. 17. Corporate Financial Analysis Report Bharti Airtelservices, Telemedia services and Enterprise services. The mobile business provides mobile &fixed wireless services using GSM technology across 23 telecom circles. The Telemediabusiness provides broadband and telephone services in 94 cities and is foraying into the IPTVand DTH segments. The Enterprise business provides end-to-end telecom solutions tocorporate customers and national and international long distance services to carriers. All theseservices are provided under the Airtel brand. Airtel’s high-speed optic fibre network currentlyspans over 78,540 kilometres covering all the major cities in the country. The company has twointernational landing stations in Chennai that connects two submarinecable systems - i2i toSingapore and SEA-ME-WE-4 to Europe.Company shares are listed on The Stock Exchange,Mumbai (BSE) and The National Stock Exchange of India Limited (NSE).VisionBy 2010 Airtel will be the most admired brand in India: • Targeted by top talent • Loved by more customers • Benchmarked by more businessesWe at Airtel always think in fresh and innovative ways about the needs of our customers andhow we want them to feel. We deliver what we promise and go out of our way to delight thecustomer with a little bit moreMission • Recruit & Maintain Calibre Working Staff • Provides Customer Specific Software Solution • Continues Improvement in Software Quality • Not remain as Only Software Solution Provider, but be as Continues Service Provider • To empower stakeholders in services and inventories to deal with associatedQuality Policy17 | P a g e
  18. 18. Corporate Financial Analysis Report Bharti AirtelWe will deliver error free service to our customer by doing our jobs rightand first time everytime.Market share and revenues of the telecom companiesA total of 391.76 wireless subscribers were split between top wireless telecom operators. BhartiAirtel leads the way with 93.92 million followed by Reliance (GSM + CDMA).18 | P a g e
  19. 19. Corporate Financial Analysis Report Bharti Airtel19 | P a g e
  20. 20. Corporate Financial Analysis Report Bharti AirtelOf the 391.76 wireless subscribers GSM has a market share of 76% and here is how they aresplit:20 | P a g e
  21. 21. Corporate Financial Analysis Report Bharti Airtel21 | P a g e
  22. 22. Corporate Financial Analysis Report Bharti Airtel Introduction to Financial AnalysisFinancial statements are a picture of a companys financial health. Outside investors andstakeholders use financial statements to determine how well a business is doing and if theyshould invest money into its operations. Most investors expect companies to have strongfinancials to mitigate potential investment risk.The section of report embodies the calculationand analysis of selected variables taken into reflection for the report purpose. The analysis usesraw data available on the concerned website. The raw data encompasses Yearly Results,balance sheet and income statement of the company. After calculation, analysis of individualtool is being done. Analysis is performed by using software known as Microsoft Excel.Income StatementThe income statement reports all sales, cost of goods (COGS) and expenses. A generalaccounting rule is that COGS should be 75 percent or less of gross sales; expenses, 20 percentor less; and income, 5 percent of gross sales. This general guideline ensures that companiesare not overpaying for COGS or other expenses listed on the income statement. A trend ofincome statements (measured over months or quarters) should be reviewed to see if sales orexpenses are rising or falling throughout the previous periods.Balance SheetThe corporate balance sheet contains all assets and liabilities of a company. The assets shouldbe reviewed to see if large amounts of inventory or accounts receivable (A/R) are listed in theasset section. High inventory indicates slow sales or obsolete goods still owned by thecompany; large amounts of A/R indicate slow collections by the company, slowing down cashflow. High liabilities mean that a company has several debt obligations that it must meet eachaccounting period. If current liabilities are especially high, it means that the company is avoidingpayments to suppliers due to slow cash flow.Cash Flows22 | P a g e
  23. 23. Corporate Financial Analysis Report Bharti AirtelA cash flow statement fills in the gaps regarding the incomes statement and balance sheetreviews; it shows how well a company generates cash flows from operations and financingactivities. Strong cash flows help a company pay for the goods and services it needs to run thebusiness. Sluggish cash flow indicates a company may have poor internal accountingoperations and is unable to collect cash or pay vendors on time.Financial RatiosAnother way to review corporate financial statements is to use financial ratios to calculate howwell the company is performing. A few common financial ratios are as follows: Current ratio =current assets / current liabilities. Measures how well a company can pay liabilities with onlyshort-term assets. A/R turnover = net sales / total accounts receivable. Measures how well acompany receives payment on A/R through the accounting period. Gross profit margin = grossprofit / total sales. Measures how much profit a company earns on sales for the accountingperiod. Debt ratio = total debt / total assets. Measures how much leverage is used to purchaseoperating assets.ComparisonWhen using financial ratios, investors and stakeholders must compare an individual companysratios against competitors or industry standards. This comparison will indicate if a company isoperating at a level that will provide growth opportunities from future operations. If the numbersare weak compared to the industry, the company may be forced out of its industry as aninefficient producer in the marketplace.Tools used for Analysis • Ratio Analysis • Comparative Analysis • Common Size AnalysisThe used of Financial analysis are the following:(A) Management use of Ratio Analysis23 | P a g e
  24. 24. Corporate Financial Analysis Report Bharti Airtel • Helps in Decision making • Helps in Financial forecast and planning • Helps in Communicating • Helps in Co-ordination • Helps in Control(B) Utility to shareholders and investors(C) Utility to Creditors(D) Utility to Employees(E) Utility to GovernmentTraditional ratio analysis, a process used for many years by many financial analysts and ProjectManagers, looks at financial information in terms of liquidity, activity, profitability, and debtmanagement, considering each measurement by itself. This analysis method helps the analystdevelop an assessment of the company at the time of the statements analysed. Non-traditionalratio analysis considers the relationships between financial data from an interpretiveperspective, permitting the analyst or Project Manager to make judgments or decisions relatedto operations. Non-traditional ratio analysis recognizes that some information is as indicative offuture performance as it is of past performance.Financial analysis incorporates some of thetools used by analysts and Project Managers to assess the financial status and the financialcondition of a company. Such analysis, utilizing financial ratios and analytical logic, providesinformation for assessment and is used by a wide range of interested parties. Sources ofcomparative information are identified and use of the analytical tools is explained in depth.Everyone in business wishes they had a crystal ball and could anticipate future challenges andopportunities, allowing them to take appropriate and effective Project Managerial action.Through the careful application of the tools of financial analysis, the Project Manager can gaininsight that is close to that crystal ball.Financial analysts, in conducting a financial analysis, generally compute and interpret severalratios, which are drawn from financial statements, followed by a written interpretation of theresults of the computations. Ratios can be represented in one of the followingways:Comparative analysis, often called cross-sectional analysis or industry analysis, may24 | P a g e
  25. 25. Corporate Financial Analysis Report Bharti Airtelprovide some meaningful benchmarks for performance. Trend analysis, also known as historicalAnalysis, compares a company against itself over time. Ratios may be a combination of both ofthe above. Ratios are grouped as follows:Liquidity—assessing the ability to meet maturing obligationsActivity—assessing the effective utilization of assetsProfitability—assessing operating performanceDebt—assessing the management of borrowed funds, sometimes known as “coverage” ratiosSpecifically, we will look at a group of ratios that have been described as Effect Ratios:[*] theCurrent Ratio, the Quick Ratio, Net Working Capital, Accounts Receivable to Working Capital,Inventory to Working Capital, Debt to Assets, Debt to Equity, Short-Term Debt to Equity, andShort-Term Debt to Total Liabilities. We will also look at period-to-period change in thesemeasurements. These ratios highlight the application of financial analysis tools and the types ofinformation that such an analysis provides. As we will see, they also give the analyst or ProjectManager a good idea of where to look for additional information.In addition to ratios and relationships within the two key financial statements, many ratios relatean element of the Income Statement to an element of the Balance Sheet. These ratios are alsovery valuable tools for assessing management and for identifying actions or situations that willaffect future results. Among these ratios is Return on Assets, Return on Equity, AverageCollection Period, Inventory Turnover, Fixed Asset Turnover, Total Asset Turnover, and Salesto Net Worth.25 | P a g e
  26. 26. Corporate Financial Analysis Report Bharti Airtel Comparative Analysis of Bharti AirtelComparative Analysis of Income Statement of Bharti Airtel for the years 2008-2010 Increase Increase Increas Increase/ /Decreas /Decreas e/Decre Decrease Mar Mar Mar Mar e in e in ase in in 10 09 09 08 Amount Percent Amount Percentag s age s e Income Operating 35,609. 34,04 34,04 25,76 8,287.2 1,561.22 4.59 32.17 income 54 8.32 8.32 1.11 1 Expenses Material 281.6 11.35451 281.6 732.05317 313.63 31.98 33.85 247.8 consumed 5 8 5 58 Manufactu 11,882. 8,627. 37.73305 8,627. 7,339. 17.551686 ring 3,255.28 1288.12 41 13 84 13 01 13 expenses26 | P a g e
  27. 27. Corporate Financial Analysis Report Bharti Airtel Personnel 1,401.6 1,397. 0.294803 1,397. 1,297. 7.6786759 4.12 99.66 expenses 6 54 73 54 88 95 Selling 2,404.9 2,210. 8.798288 2,210. 1,842. 19.968412 194.48 367.92 expenses 1 43 12 43 51 65 Administra 5,982.6 8,608. 30.49931 8,608. 4,588. 87.598860 tive 2,625.39 4019.5 4 03 285 03 53 64 expenses Expenses 269.2 8.935933 269.2 293.31 24.06 - - - capitalised 5 15 5 Cost of 21,691. 20,85 4.010397 20,85 15,10 836.39 5753.76 38.10 sales 93 5.54 24 5.54 1.78 Operating 13,917. 13,19 5.494141 13,19 10,65 724.83 2533.44 23.77 profit 61 2.78 49 2.78 9.34 Other 235.9 36.87020 235.9 266.9 recurring 148.98 87.01 30.92 11.58 9 636 9 1 income Adjusted 14,066. 13,42 4.749727 13,42 10,92 637.83 2502.53 22.90 PBDIT 60 8.77 64 8.77 6.24 Financial 434.1 34.73604 434.1 393.4 283.35 150.81 40.73 10.35 expenses 6 201 6 3 Depreciati 3,890.0 3,206. 21.32689 3,206. 3,166. 683.80 39.7 1.25 on 8 28 6 28 58 Other 178.8 16.22860 178.8 266.0 207.84 29.02 87.25 32.79 write offs 2 98 2 7 Adjusted 9,685.3 9,609. 0.789010 9,609. 7,100. 75.82 2509.34 35.34 PBT 2 50 87 50 16 Tax 1,177.8 321.7 266.0482 321.7 632.4 856.09 310.65 49.12 charges 7 8 32 8 327 | P a g e
  28. 28. Corporate Financial Analysis Report Bharti Airtel Adjusted 8,507.4 9,287. 8.401093 9,287. 6,467. 780.27 2819.99 43.60 PAT 5 72 056 72 73 Nonrecurri 1,497. - 164.7295 1,497. 162.8 969.48 1334.87 -819.59 ng items 74 2,467.22 258 74 7 Other non- cash 10.03250 50.78 46.15 4.63 46.15 60.67 -14.52 -23.93 adjustmen 27 ts Reported 9,426.1 7,743. 21.72449 7,743. 6,244. 1,682.31 1499.65 24.02 net profit 5 84 33 84 19 Earnings before 27,928. 19,54 42.92466 19,54 11,77 8,387.93 7762.93 65.91 appropriati 98 1.05 37 1.05 8.12 on - Equity 379.6 379.6 379.79 -0.14 0.036876 - - - dividend 5 5 07 Preferenc - - - - - - - - e dividend - Dividend 64.54 64.52 -0.02 0.030998 64.52 - - - tax 14 Retained 27,484. 19,09 43.92212 19,09 11,77 8,387.76 7318.77 62.14 earnings 65 6.89 55 6.89 8.12Interpretation:Operating income – 4% increase in 09-10 32% increase in 08-09Operating profit - 5% increase in 09-10. 24% increase in 08-09.Net profit - 22% increase in 09-10. 24% increase in 08-09.28 | P a g e
  29. 29. Corporate Financial Analysis Report Bharti AirtelCost of Sales - 4% increase in 09-10. 38% increase in 08-09.While there has been marginal increase in operating income, operating profit and net profit in2009-10, it is less than 2008-09. This is possibly because of entry of new players in mobileconnections in India. But what Airtel has done well is that they have reduced cost of sales,which somewhat compensates the competitive pressure. Manufacturing expenses have alsoincreased due to their acquisition of Zain telecom in Africa. They have also acquired 60% stakein Warid telecom in Bangladesh, and thus is expanding its business in Asia. Its wirelessoperating margin would get negatively affected due to increase in spectrum charges in 3g, butthat is still uncertain. Depreciation charges increased a lot from 2009 to 2010, but consideringthe company’s aggressive mode, these minor obstacles will not hinder them much. Overall, it isa good but not the best performance by the market leader.29 | P a g e
  30. 30. Corporate Financial Analysis Report Bharti AirtelComparative Analysis of Balance Sheet of Bharti Airtel for the years 2008-2010 Increase/D Increase/D Mar Mar Increase/D ecrease in Mar Mar Increase/D ecrease In 10 09 ecrease Percentag 09 08 ecrease Percentag e e Sources of funds Owners fundEquity 1,898 1,898 1,898 1,897share 0.53 0.03 0.33 0.02 .77 .24 .24 .91capitalShareapplica 186.0 116.2 116.2 69.87 37.55 57.63 58.59 101.67 tion 9 2 2moneyPrefere nce - - - - sharecapitalReserv 34,65 25,62 25,62 18,28 es & 9,022.81 26.04 7,343.56 40.16 0.19 7.38 7.38 3.82surplus Loan funds -Secure 39.43 51.73 -12.3 31.194521 51.73 52.42 -0.69 -1.32d loans 930 | P a g e
  31. 31. Corporate Financial Analysis Report Bharti AirtelUnsec - 4,999 7,661 7,661 6,517 ured -2662.43 53.254031 1144 17.55 .49 .92 .92 .92loans 9 41,77 35,35 15.364807 35,35 26,80 Total 6418.49 8545.77 31.88 3.97 5.48 32 5.48 9.71 Uses of funds Fixed assetsGross 44,21 37,26 37,26 28,11 6,945.83 15.71 9,151.05 32.55block 2.53 6.70 6.70 5.65 Less :revalua 2.13 2.13 0.00 0.00 2.13 2.13 0.00 0.00 tionreserve Less :accum 16,18 12,25 12,25 9,085 ulated 3,934.22 24.30 3,168.34 34.87 7.56 3.34 3.34 .00depreci ation Net 28,02 25,01 25,01 19,02 3,011.61 10.75 5,982.71 31.44 block 2.84 1.23 1.23 8.52Capitalwork- 1,594 2,566 2,566 2,751 in- -971.93 -60.95 184.41 6.70 .74 .67 .67 .08progre ssInvest 15,77 11,77 11,77 10,95 3,995.56 25.33 -824.91 7.53ments 3.32 7.76 7.76 2.85Interpretation:Reserves ans Surplus – 26% increase in 09-10. 40% increase in 08-09Investments – 25% increase in 09-10 7% increase in 08-09Secured loans – 31% decrease in 09-10 1.32% decrease in 08-0931 | P a g e
  32. 32. Corporate Financial Analysis Report Bharti AirtelUnsecured loans – 53% decrease in 09-10As obvious, reserves have decreased and investments have increased in 2010. The domestic telecom sector has been negatively impacted due to irrational pricing, forcing telecomoperatorswith strong balance sheets like Airtel, to go for acquisitions in emerging markets. Net block hasdecreased from 31% to 10% increase over the years, also because of this. Investors, hencehave to take a long term perspective rather than short term gains. If a company has decided togo global with emerging markets, then such fluctuations are bound to occur. But profit will comein future. It is a strong balance sheet because they have paid their most of the loans in 09-10 ascompared to 08-09. Although unsecured loans have an increase in 08-09, but they decreased itin 09-10, which shows the company has strong reserves to go for investments as well as paythe due loans. Hence the company has a strong performance inspite of competitive pressure.32 | P a g e
  33. 33. Corporate Financial Analysis Report Bharti AirtelComparative Analysis of Balance Sheet of Airtel with Competitors Bharti Reliance Idea Tata Spice Airtel Comm Cellular Comm Comm Mar 10 Mar 10 Mar 10 Mar 10 Mar 09 Sources Of Fund Total Share Capital 1,898.77 1,032.01 3,299.84 285 689.93 Equity Share Capital 1,898.77 1,032.01 3,299.84 285 689.93Share Application Money 186.09 0 44.45 0 0Preference Share Capital 0 0 0 0 0 Reserves 34,650.19 49,466.88 8,112.95 6,995.78 -872.54 Revaluation Reserves 2.13 0 0 0 0 Net worth 36,737.18 50,498.89 11,457.24 7,280.78 -182.61 Secured Loans 39.43 3,000.00 5,988.61 1,281.76 1,219.59 Unsecured Loans 4,999.49 21,478.28 537.81 1,357.15 838.97 Total Debt 5,038.92 24,478.28 6,526.42 2,638.91 2,058.5633 | P a g e
  34. 34. Corporate Financial Analysis Report Bharti Airtel Total Liabilities 41,776.10 74,977.17 17,983.66 9,919.69 1,875.95 Application Of Funds Gross Block 44,212.53 39,838.17 22,834.40 6,820.94 3,244.11 Less: Accum. 16,187.56 9,225.69 7,907.34 2,316.14 1,522.31 Depreciation Net Block 28,024.97 30,612.48 14,927.06 4,504.80 1,721.80Capital Work in Progress 1,594.74 1,683.52 462.58 386.15 103.56 Investments 15,773.32 31,898.60 2,755.13 2,501.30 0.05 Inventories 27.24 298.34 46.7 1.25 6.44 Sundry Debtors 2,104.98 1,738.63 430.12 632.29 52.02Cash and Bank Balance 54.89 81.92 129.13 102.9 53.41 Total Current Assets 2,187.11 2,118.89 605.95 736.44 111.87 Loans and Advances 6,276.12 17,886.79 3,533.15 4,042.38 297.29 Fixed Deposits 761.86 0.26 151.31 7.96 179.19 Total CA, Loans & 9,225.09 20,005.94 4,290.41 4,786.78 588.35 Advances34 | P a g e
  35. 35. Corporate Financial Analysis Report Bharti Airtel Deferred Credit 0 0 0 0 0 Current Liabilities 12,183.25 5,836.53 4,313.76 2,084.67 523.18 Provisions 658.75 3,386.84 137.76 174.67 14.64 Total CL & Provisions 12,842.00 9,223.37 4,451.52 2,259.34 537.82 Net Current Assets -3,616.91 10,782.57 -161.11 2,527.44 50.53Miscellaneous Expenses 0 0 0 0 0 Total Assets 41,776.12 74,977.17 17,983.66 9,919.69 1,875.94Interpretation:Intense pressure from competitors especially from Reliance, in terms of net worth andthe amount of reserves. But in terms of debt and liabilities pay off to assets, Airtel stillmaintains its top position. Hence its aggressive expansion strategy will make it difficultfor other players to catch up with it.Comparative Analysis of Income Statement of Airtel with Competitors35 | P a g e
  36. 36. Corporate Financial Analysis Report Bharti Airtel Bharti Reliance Idea Tata Spice Airtel Comm Cellular Comm Comm Mar 10 Mar 10 Mar 10 Mar 10 Mar 09 Sales Turnover 35,609.54 13,554.60 11,850.24 3,218.04 1,580.48 Excise Duty 0 0 0 0 0 Net Sales 35,609.54 13,554.60 11,850.24 3,218.04 1,580.48 Other Income 1,118.46 2,455.17 383.83 359.95 56.93 Stock Adjustments -34.91 0 0 0 0.02 Total Income 36,693.09 16,009.77 12,234.07 3,577.99 1,637.43 Expenditure Raw Materials 278.72 50.39 0.02 11.56 0.58 Power & Fuel Cost 0 144.27 942.27 0 135.78 Employee Cost 1,401.66 672.39 561.17 418.44 83.66 Other Manufacturing 11,882.41 7,850.49 5,187.63 1,592.11 532.67 Expenses Selling and Admin 6,856.42 1,974.73 1,823.48 265.01 449.97 Expenses36 | P a g e
  37. 37. Corporate Financial Analysis Report Bharti AirtelMiscellaneous Expenses 1,482.39 668.9 91.58 180.31 498.41 Preoperative Exp -293.31 0 0 0 0 Capitalised Total Expenses 21,608.29 11,361.17 8,606.15 2,467.43 1,701.07 13,966.34 2,193.43 3,244.09 750.61 -120.57 Operating Profit PBDIT 15,084.80 4,648.60 3,627.92 1,110.56 -63.64 Interest 283.35 1,253.84 982.44 251.02 405.88 PBDT 14,801.45 3,394.76 2,645.48 859.54 -469.52 Depreciation 3,890.08 1,511.24 1,366.61 574.73 372.57 Other Written Off 207.84 0 184.59 0 178.49 Profit Before Tax 10,703.53 1,883.52 1,094.28 284.81 -1,020.58 Extra-ordinary items -50.78 0 91.61 304.53 6.64 PBT (Post Extra-ord 10,652.75 1,883.52 1,185.89 589.34 -1,013.94 Items) Tax 1,177.87 1,404.59 115.08 106.16 1.28 Reported Net Profit 9,426.15 478.93 1,053.66 483.18 -1,019.5637 | P a g e
  38. 38. Corporate Financial Analysis Report Bharti Airtel Total Value Addition 21,329.56 11,310.78 8,606.12 2,455.87 1,700.49 Preference Dividend 0 0 0 0 0 Equity Dividend 379.79 175.44 0 0 0 Corporate Dividend Tax 64.55 29.14 0 0 0 Per share data (annualised) Shares in issue (lakhs) 37,975.30 20,640.27 32,998.38 2,850.00 6,899.25Earnings Per Share (Rs) 24.82 2.32 3.19 16.95 -14.78 Equity Dividend (%) 20 17 0 0 0 Book Value (Rs) 96.24 244.66 34.59 255.47 -2.65Interpretation:Airtel beats its competitors by a long margin when it comes to sales turn over. This has resultedin a huge gain in total income since excise duty was zero for all companies. However, due to itshuge employee base, its employee expenses are also the highest. Hence, its total expenses38 | P a g e
  39. 39. Corporate Financial Analysis Report Bharti Airtelhave also reported the highest among its competitors. But since its net profit is way ahead fromother players due to its huge customer base, so Airtel maintains its number one position intelecom sector in India. Also, earnings per share has a very good value of Rs 24, which beatsthe others comfortably. So, although expenses have increased but still the market share is verygood.39 | P a g e
  40. 40. Corporate Financial Analysis Report Bharti Airtel Common Size Analysis of Bharti AirtelThe common-size statement is a financial document that is often utilized as a quick and easyreference for the finances of a corporation or business. Unlike balance sheets andother financial statements, the common-size statement does not reflect exact figures for eachline item. Instead, the structure of the common size statement uses a common base figure, andassigns a percentage of that figure to each line item or category reflected on the document.A company may choose to utilize financial statements of this type to present a quick snapshotof how much of the company’s collected or generated revenue is going toward each operationalfunction within the organization. The use of a common-size statement can make it possible toquickly identify areas that may be utilizing more of the operating capital than is practical at thetime, and allow budgetary changes to be implemented to correct the situation.The common size statement can also be a helpful tool in comparing the financial structures andoperation strategies of two different companies. The use of percentages in the common sizestatements removes the issue of which company generates more revenue, and brings the focuson how the revenue is utilized within each of the two businesses. Often, the use of a common-size statement in this manner can help to identify areas where each company is utilizingresources efficiently, as well as areas where there is room for improvement.40 | P a g e
  41. 41. Corporate Financial Analysis Report Bharti AirtelCommon Size Analysis of Income Statement of BhartiAirtel from 2008 to 2010 31-Mar- 31-Mar- 31-Mar- 10(12) 09(12) 08(12) Profit / Loss A/C Rs mn %OI Rs mn %OI Rs mn %OI Net Sales (OI) 356095.41 100.00 340142.90 100.00 257035.10 100.00 Material Cost 0.00 0.00 0.00 0.00 0.00 0.00Increase Decrease Inventories 203.22 0.06 124.05 0.04 338.50 0.13 Personnel Expenses 14371.32 4.04 14336.41 4.21 13341.85 5.19 Manufacturing Expenses 157121.92 44.12 151721.48 44.61 99228.29 38.60 Gross Profit 184398.94 51.78 173960.96 51.14 144126.45 56.07 Administration Selling and 45881.01 12.88 42262.13 12.42 37596.00 14.63 Distribution Expenses EBITDA 138517.93 38.90 131698.83 38.72 106530.45 41.4541 | P a g e
  42. 42. Corporate Financial Analysis Report Bharti Airtel Depreciation Depletion and 40979.21 11.51 33850.99 9.95 34326.53 13.35 Amortisation EBIT 97538.72 27.39 97847.84 28.77 72203.92 28.09 Interest Expense -5679.98 -1.60 21483.82 6.32 6077.57 2.36 Other Income 3773.79 1.06 5251.35 1.54 3599.07 1.40 Pre-tax Income 106992.49 30.05 81615.37 23.99 69725.42 27.13 Provision for Tax 12730.94 3.58 4176.98 1.23 7283.50 2.83Extra Ordinary and Prior Period 0.00 0.00 0.00 0.00 0.00 0.00 Items Net Net Profit 94261.55 26.47 77438.38 22.77 62441.92 24.29 Adjusted Net Profit 94261.55 26.47 77438.38 22.77 62441.92 24.29 Dividend - Preference 0.00 0.00 0.00 0.00 0.00 0.00 Dividend - Equity 3797.89 1.07 3796.48 1.12 0.00 0.00Interpretation:Although manufacturing expenses have increased over the years due to expansion from 08-10,Airtel has managed to report 26% profits of net sales in 2010, as compared to 24% in 2008 and22% in 2009. This is good for the company as it means that it has successfully managed toincrease its customer base profitably. Manufacturing expenses have increased from 38% to44%, due to high prices, but that is compensated by net profit. Interest expense has lessenedwhich is a good sign. Overall, the income statements for three years account for a gradualimprovement in the performance of the company.42 | P a g e
  43. 43. Corporate Financial Analysis Report Bharti AirtelCommon Size Analysis of Balance Sheet of Bharti Airtel for the years 2008-2010 31-Mar-10 %BT 31-Mar-09 %BT 31-Mar-08 %BT Equity Capital 18987.65 3.48 18982.40 3.87 18979.07 4.87 Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00 Share Capital 18987.65 3.48 18982.40 3.87 18979.07 4.87 Reserves and Surplus 346523.22 63.44 256295.07 52.19 182859.52 46.89 Loan Funds 50389.23 9.23 77136.47 15.71 65703.42 16.85 Current Liabilities 121799.93 22.30 131179.82 26.71 119090.69 30.54 Provisions 6587.54 1.21 6344.00 1.29 2098.76 0.54 Current Liabilities and Provisions 128387.48 23.51 137523.82 28.00 121189.45 31.08 Total Liabilities and Stockholders’ 546181.02 100.00 491099.93 100.00 389946.48 100.00 Equity (BT) Tangible Assets Net 258471.17 47.32 230440.88 46.92 168836.10 43.30 Intangible Assets Net 21778.47 3.99 19692.71 4.01 21470.38 5.51 Net Block 280249.64 51.31 250133.58 50.93 190306.48 48.80 Capital Work In Progress Net 15947.36 2.92 25666.69 5.23 27510.79 7.0643 | P a g e
  44. 44. Corporate Financial Analysis Report Bharti Airtel Fixed Assets 296197.00 54.23 275800.28 56.16 217817.26 55.86 Investments 157733.19 28.88 117777.58 23.98 109528.53 28.09 Inventories 272.44 0.05 621.51 0.13 568.61 0.15 Accounts Receivable 21049.77 3.85 25500.49 5.19 27764.57 7.12 Cash and Cash Equivalents 8167.41 1.50 22516.03 4.58 5029.39 1.29 Other Current Assets 663.74 0.12 1197.13 0.24 997.27 0.26 Current Assets 30153.37 5.52 49835.15 10.15 34359.84 8.81 Loans & Advances 62097.46 11.37 44414.95 9.04 28238.82 7.24 Miscellaneous Expenditure Other 0.00 0.00 0.87 0.00 2.03 0.00 Assets Total Assets (BT) 546181.02 100.00 491099.93 100.00 389946.48 100.00Interpretation:Short Term Solvency: By comparing the current Asset and Current Liabilities of the company itappears that the company is not able to pay the day to day obligations. But from the Reserve(Rs 34650.19 Crores) has increased to 82.94% of Total Assets with the company. Thecompany may use this reserve to pay the day to day obligations.The debt (Secured &Unsecured Loans) is decreasing; this may be due to the fact that the company is able togenerate cash through the sale of services. From the increase in the Reserve fig., it may beassumed that the Airtel is making huge profits.Long Term Solvency: While comparing the fixed Asset and the Long Term Liabilities, as long asthe Airtel makes profit the company is able to attract more shareholders. Company isdecreasing or selling some of the fixed assets, this may be due to the efficient use of IndusTowers.Company shows a negative balance in the Current Asset but while comparing the44 | P a g e
  45. 45. Corporate Financial Analysis Report Bharti Airtelperformance from 2008 to 2010, the Airtel is able to have a good position in Current Assets inthe year 2010.The overall profitability of Airtel is better when comparing the previous years, this may be due tothe Sales of services, increase in customer base (an increase of 65%), reduction in operatingexpenses by the use of Indus Tower ( sharing the towers with other major players) etc.45 | P a g e
  46. 46. Corporate Financial Analysis Report Bharti AirtelCommon size Analysis Balance Sheet of Bharti Airtel with Idea for the year 2010 Bharti Airtel Idea Cellular Mar 10 % Mar 10 % 12 mths 12 mths Sources of Funds Total Share Capital 1,898.77 3,299.84 Equity Share Capital 1,898.77 4.55 3,299.84 18.35 Share Application Money 186.09 0.445 44.45 0.247 Preference Share Capital 0 0 Reserves 34,650.19 82.94 8,112.95 45.11 Revaluation Reserves 2.13 0 Net worth 36,737.18 87.93 11,457.24 63.71 Secured Loans 39.43 0.094 5,988.61 33.3 Unsecured Loans 4,999.49 11.96 537.81 2.99 Total Debt 5,038.92 12.06 6,526.42 36.29 Total Liabilities 41,776.10 99.9 17,983.66 100 Mar 10 Mar 10 12 mths 12 mths Application of Funds Gross Block 44,212.53 105.83 22,834.40 126.97 Less: Accum. Depreciation 16,187.56 38.75 7,907.34 43.96 Net Block 28,024.97 67.08 14,927.06 83 Capital Work in Progress 1,594.74 3.81 462.58 2.57 Investments 15,773.32 37.76 2,755.13 15.32 Inventories 27.24 0.065 46.7 0.259 Sundry Debtors 2,104.98 5.04 430.12 2.39 Cash and Bank Balance 54.89 0.132 129.13 0.71 Total Current Assets 2,187.11 5.23 605.95 3.36 Loans and Advances 6,276.12 15.02 3,533.15 19.64 Fixed Deposits 761.86 1.82 151.31 0.84Total CA, Loans & Advances 9,225.09 22.08 4,290.41 23.86 Deferred Credit 0 046 | P a g e
  47. 47. Corporate Financial Analysis Report Bharti Airtel Current Liabilities 12,183.25 29.16 4,313.76 23.98 Provisions 658.75 1.57 137.76 0.767 Total CL & Provisions 12,842.00 30.74 4,451.52 24.71 Net Current Assets -3,616.91 -8.66 -161.11 -0.896 Miscellaneous Expenses 0 0 Total Assets 41,776.12 100 17,983.66 100 Contingent Liabilities 3,921.50 9.38 1,960.75 10.9 Book Value (Rs) 96.24 0.23 34.59 0.192Interpretation:Share capital of Idea is more than Airtel, but Airtel has more Reserves than Idea. This isbecause the introduction of new circles has caused an overshoot in the expense of Idea,thereby reducing the profit. Short Term Solvency of Airtel when compared to Idea is poor asIdea can pay the day to day obligations, but both service sectors lack to cover the currentliabilities.Idea has more fixed Assets than Airtel this may be due to the introduction of newcircles to provide better services to the exiting/ new customers.47 | P a g e
  48. 48. Corporate Financial Analysis Report Bharti Airtel RATIO ANALYSISRatio analysis is the powerful tool of financial statements analysis. A ratio is defined as theindicated quotient of two mathematical expressions and as the relationship between two ormore things. The absolute figures reported in the financial statement do not provide meaningfulunderstanding of the performance and financial position of the firm. Ratio helps to summarieslargequantities of financial data and to make qualitative judgment of the firm’s financialperformance.Ratio analysis helps to appraise the firms in the term of their profitabilityand efficiency ofperformance, either individually or in relation to other firmsinsame industry. Ratio analysis isone of the best possible techniques availabletomanagement to impart the basic functions likeplanning and control. As futureis closely related to the immediately past, ratio calculated on thebasis historicalfinancial data may be of good assistance to predict the future. E.g. On thebasisof inventory turnover ratio or debtor s turnover ratio in the past, the level ofinventory anddebtors can be easily ascertained for any given amount of sales.Similarly, the ratio analysismay be able to locate the point out the various ariaswhich need the management attention inorder to improve the situation. E.g. Current ratio which shows a constant decline trend may beindicate the need forfurther introduction of long term finance in order to increase theliquidityposition. As the ratio analysis is concerned with all the aspect of the firm’sfinancialanalysis liquidity, solvency, activity, profitability and overallperformance, it enables theinterested persons to know the financial andoperational characteristics of an organization andtake suitable decision.Current Ratio:Current Ratio is the indicator of the firm’s commitment to meet its short-term liability. CurrentAssets mean assets that will either be used up or converted into cash within a year’s time.Current liabilities mean liabilities payable within a year or during the operating cycle, whicheveris longer.48 | P a g e
  49. 49. Corporate Financial Analysis Report Bharti Airtel Year Ratio (Times) 2008 0.57 2009 0.69 2010 0.72Interpretation:There is no hard or fast rule, conventionally, a current ratio of 2:1 (current assets twice thecurrent liabilities) is considered satisfactory. The logic underlying the convention rule is thateven with a dropout of 50% in value of current assets a firm can meet its obligations, i.e., 50%margin of safety is assumed to be sufficient to ward off the worst situation. Generally the levelsof current ratio vary from industry to industry depending on specific industry characteristics.Also firm differs from the industry ratio because of its policy. In Bharti Airtel Limited, the currentratio is 0. 72 times i.e. the current asset is less than current liabilities. The current liability is highbecause of sundry creditors. This is due to strategic partner.Chart showing the Current Ratio of Bharti Airtel Limited for the year ended 2008 – 201049 | P a g e
  50. 50. Corporate Financial Analysis Report Bharti AirtelQuick Ratio:The Quick ratio is also termed as “Acid-Test Ratio”. This ratio is ascertainedby comparing theliquid assets (i.e., assets which are immediately convertible in to cash without much loss) tocurrent liabilities. Prepaid expenses and stock are not taken as liquid assets. This may beexpressed as:Quick Ratio = Liquid Assets ----------------------- Current Liabilities Year Ratio (Times) 2008 0.55 2009 0.65 2010 0.7250 | P a g e
  51. 51. Corporate Financial Analysis Report Bharti AirtelInterpretation:Generally Quick Ratio of 1:1 is considered satisfactory as a firm can easily meet all currentclaims. It varies from industry to industry depending on specific industry characteristics. Alsodiffer from the industry ratio because of its policy.In Bharti Airtel Limited, the Quick Ratio isbelow the standard no of 1:1 in all the years during the period of study (2008 – 2010). It isbecause of strategic partnership with Ericsson.Chart showing the Quick Ratio of Bharti Airtel Limited for the year ended 2008 – 2010Gross Profit Ratio:These ratios express the relationship between gross profit and net sales.Gross Profit= Sales – Cost of goods sold (Including Operating Expenses) – Depreciation –Amortization Gross ProfitGross Profit Ratio = -------------------- X 100 Net Sales Year Percentage51 | P a g e
  52. 52. Corporate Financial Analysis Report Bharti Airtel 2008 29.08 2009 29.33 2010 27.97Interpretation:In interpreting the gross profit ratio at is important to observe any trend, but in makingcomparison between companies at is vital to appreciate that the gross profit ratio variesconsiderably from industry to industry. In telecom Gross profit is very high considering Lowoperating cost and high depreciation on capex led by them. Gross profit of 45-50% is highestamong all the industries. In Bharti Airtel, the Gross Profit Ratio is high during the year 2008 andlow during the year 2010. As major expense is towards depreciation which is fixed cost.Company will loss more with decrease in business. It is visible from above trend. Gross Profitratio will increase with increase in business due to benefit of scale. In interpreting the grossprofit ratio at is important to observe any trend, but in making comparison between companiesat is vital to appreciate that the gross profit ratio varies considerably from industry to industry. Intelecom Gross profit is very high considering Low operating cost and high depreciation oncapex led by them. Gross profit of 45-50% is highest among all the industries. In Bharti Airtel,the Gross Profit Ratio is high during the year 2008 and low during the year 2010. As majorexpense is towards depreciation which is fixed cost. Company will loss more with decrease inbusiness. It is visible from above trend. Gross Profit ratio will increase with increase in businessdue tobenefit of scale.Chart showing the Gross Profit Ratio of Bharti Airtel Limited for the year ended 2008– 201052 | P a g e
  53. 53. Corporate Financial Analysis Report Bharti AirtelNet Profit Ratio:This ratio helps in determining the efficiency with which affairs of the businessare beingmanaged. An increase in ratio over previous period indicates improvement in the operationalefficiency of the business provided the gross profit ratio is constant. Net Profit after taxNet Profit Ratio = --------------------------------- X 100 Net Sales Year Percentage 2008 23.99 2009 22.58 2010 26.4053 | P a g e
  54. 54. Corporate Financial Analysis Report Bharti AirtelInterpretation:In interpreting the Net Profit Ratio at is important to bear in mind that suchratio varies from firmto firm. When we compare the gross and the net profit margins we can gain a good impressionof their non-production and non-directcosts such as administration, marketing and financecosts. The Net Profit Ratio provides clear picture of how efficiently the firm maintains controlover its total expenses. The Net Profit Ratio of Bharti Airtel Limited is high during the year 2010&low during the year 2008. The net profit ratio has gone up to 26.40% in 2010 compared to2008 & 2009, respectively. It indicates the efficiency of the management in increasing the profit.As mentioned above the benefit is for increase in scale of business. Fixed cost will get observedover more revenue hence there will be increase in Net profit ration with increase in revenue.Chart showing the Net Profit Ratio of Bharti Airtel Limited for the year ended 2008 – 2010Operating Ratio:54 | P a g e
  55. 55. Corporate Financial Analysis Report Bharti AirtelThis ratio is complementary of Net Profit Ratio. In case Net Profit is 20 %, it means OperatingRatio is 80 %. Cost of goods sold + Operating ExpensesOperating Ratio = --------------------------------------------------------------------- X 100 Net Sales Year Percentage 2008 41.37 2009 38.74 2010 38.89Interpretation:Operating Ratio monitor the various expenses incurred related to sales. A highoperating ratiowould indicate low profitability, while a low ratio is an indication for high profitability. TheOperating Ratio should be low to leave a portion of sales to give fair return to the investors. Thesmaller the ratio, the greater the organizations ability to generate profit if revenues decrease.When using this ratio, however, investors should be aware that it doesnt take into account debtrepayment or expansion Bharti Airtel Limited has 60 % margin on operating expenses. TheOperating Ratio is 41.37 % in 2008 which is less than the margin. This shows the Airtel has wellmanaged the operating cost.Chart showing the Operating Ratio of Bharti Airtel Limited for the year ended 2008– 201055 | P a g e
  56. 56. Corporate Financial Analysis Report Bharti AirtelDebtor Turnover Ratio:Debtors constitute an important constituent of current assets and therefore the quality ofdebtors to a great extent determines a firm’s liquidity. Debt collection period indicates the extentto which the debts have been collected in time. It gives the average debt collection period. SalesDebtor Turnover Ratio = -------------------------------- Closing Debtors Year Ratio (Times) 2008 12.2856 | P a g e
  57. 57. Corporate Financial Analysis Report Bharti Airtel 2009 12.78 2010 15.73Interpretation:Receivable Turnover Ratio which indicates the number of times that theaverage outstanding netreceivables is turned over, or converted into cash through collections during the year.Receivables turnover is the period required for one complete cycle; from the time receivablesare recorded through collection, to the time new receivables are recorded. On the other hand, alonger credit period granted to creditors would adversely affect the firm’s liquidity position. Thedebtor turnover ratio has increased in all the years during the period under study. Though it hasincreased, still with the growth in the business &receivables, it indicates that the company’sstrength in debtor management. The operation of debtors is through channel partners in post-paid. The debtor is zero in prepaid operation because they are paid through demand draft. Theoperation of prepaid is through Distributors – Retailers – Customers.Chart showing the Debtors Turnover Ratio of Bharti Airtel Limited for the year ended 2008 –201057 | P a g e
  58. 58. Corporate Financial Analysis Report Bharti AirtelInventory Turnover Ratio:This ratio is also known as stock turnover ratio establishes the relation between the cost ofgoods sold during the year and average inventory held during the year. It calculates as follows: Cost of goods soldInventory Turnover Ratio = ------------------------------- Average Inventory Year Ratio (Times) 2008 453.06 2009 547.83 2010 1307.05Interpretation:58 | P a g e
  59. 59. Corporate Financial Analysis Report Bharti AirtelThe liquidity of inventories is measured by the number of times per year thatinventory isconverted into cost of goods sold. Hence it is a device to measure the efficiency of the inventorymanagement. Inventory turnover ratio rates vary tremendously by the nature of the business.In Bharti Airtel Limited, average inventory holding period is one day. In telecom inventory willonly include sim inventory which will be nominal incomparison to revenue. . Capex inventory willbe grouped under fixed assets. Inventory analysis clearly indicates the trend.Chart showing the Inventory Turnover Ratio of Bharti Airtel Limited for the yearended 2008 –2010Fixed Assets Turnover Ratio:A high fixed assets turnover ratio indicates efficient utilization of fixed assetsin generating sales.A firm whose plant and machinery are old may show higher fixed assets turnover ratio than thefirm which has purchased them recently. SalesFixed Assets Turnover Ratio = -------------------------------- Net Fixed Asset59 | P a g e
  60. 60. Corporate Financial Analysis Report Bharti Airtel Year Ratio (Times) 2008 1.03 2009 1.00 2010 0.81Interpretation:This ratio measures the efficiency in utilization of fixed assets. The ratio ofsales to fixed assetsmeasures the turnover of plant and machinery. A high fixed assets turnover ratio indicatesefficient utilization of fixed assets in generating sales. There has been constant decrease infixed assets turnover ratio of Bharti Airtel Limited though absolute figure of sales have down up.There is an decrease year after year. In 2010, it has increased by 19 %. The sales include thecapital work in not progress. It means decrease in the investment in fixed assets has broughtabout commensurate loss.Chart showing the Fixed Assets Turnover Ratio of Bharti Airtel Limited for the yearended 2008– 201060 | P a g e
  61. 61. Corporate Financial Analysis Report Bharti AirtelDebt Equity Ratio:The Debt Equity Ratio is determined to ascertain the soundness of the long term financialpolicies of thecompany. It is also known as “External – Internal” Equity Ratio. It may becalculated as follows: External EquityDebt Equity Ratio = ------------------------------- Shareholders Fund Year Ratio (Times) 2008 0.33 2009 0.28 2010 0.1461 | P a g e
  62. 62. Corporate Financial Analysis Report Bharti AirtelInterpretation:Either too high or too low a ratio may be disadvantageous. Too high suggests thatmanagement is not taking advantages of opportunities to maximize its profitthrough borrowings. Too low suggests undue exposure to risks of bankruptcy and toa fixed burden of interest expenses in the event of period of relatively low profit. Asa rule of thumb, debt equity ratio of less than 1 is taken as acceptable, but this isnot based on any scientific analysis. In Bharti Airtel Limited, the Debt Equity Ratio isalmost close to 1 which is good for company. The debt is 0.92 times in total equity.The management has taken advantage of the opportunities to maximize profitthrough borrowings.Chart showing the Debt Equity Ratio of Bharti Airtel Limited for the year ended2008 – 2010Earnings perShare:62 | P a g e
  63. 63. Corporate Financial Analysis Report Bharti AirtelThe profitability of the firm from the point of view of ordinary shareholders can be measured interms of number of equity shares. This is known as Earningsper Share. It is calculated asfollows: Net Profit after TaxEarnings per Share = ----------------------------------------------- No. of Equity Shares outstanding Earnings Per Share (Amount in Year Rs) 2008 32.9 2009 40.79 2010 24.82Interpretation:This is well known and widely used indicator of profitability because it can easily be comparedto the previous EPS figure. The earnings per share represent average amount of net incomeearned by single equity share. Earnings per share are generally considered to be the singlemost important variable in determining a shares price. It is also a major component of the price-to-earnings valuation ratio. The Earnings Per Share of Bharti Airtel Limited is has beenconsistently increasing in 2009and it decreased in 2010. This shows the equity share capital isbeing effectively used in 2009 but not in 2010. This is also getting impacted with No-dividendpolicy of Bharti. Bharti has never declared dividend so shareholder is not getting benefited withthe deprecation in EPS.Chart showing the Earnings Per Share of Bharti Airtel Limited for the year ended 2008 – 201063 | P a g e
  64. 64. Corporate Financial Analysis Report Bharti AirtelFindings in Ratios:- • The current ratio is 0. 72 times i.e. the current asset is less than current liabilities. The current liability is high because of sundry creditors. • Quick Ratio of 1:1 is considered satisfactory as a firm can easily meet allcurrent claims. It varies from industry to industry depending on specificindustry characteristics. Also differ from the industry ratio because of itspolicy.In Bharti Airtel Limited, the Quick Ratio is below the standard noof 1:1 in all the years during the period of study (2008 – 2010). • The Net Profit Ratio of Bharti Airtel Limited is high during the year2010 & low during the year 2008. The net profit ratio has gone up to26.40% in 2010 compared to 2008 & 2009, respectively. It indicates theefficiency of the management in increasing the profit. As mentionedabove the benefit is for increase in scale of business. • The debtor turnover ratio has increased in all the years during the periodunder study. Though it has increased, still with the growth in thebusiness & receivables, it indicates that the company’s strength in debtormanagement. The operation of debtors is through channel partners inpost-paid.64 | P a g e
  65. 65. Corporate Financial Analysis Report Bharti Airtel • There has been constant decrease in fixed assets turnover ratio of BhartiAirtel Limited though absolute figure of sales have down up. There is andecrease year after year. In 2010, it has increased by 19 %. The salesinclude the capital work in not progress. It means decrease in theinvestment in fixed assets has brought about commensurate loss. • The Debt Equity Ratio is almost close to 1 which is good for company.The debt is 0.92 times in total equity. The management has takenadvantage of the opportunities to maximize profit through borrowings. • The Earnings Per Share of Bharti Airtel Limited is has been consistentlyincreasing in 2009and it decreased in 2010. This shows the equity sharecapital is being effectively used in 2009 but not in 2010. Ratio Analysis of Bharti Airtel with CompetitorsDebt-Equity Ratio:Interpretation:65 | P a g e
  66. 66. Corporate Financial Analysis Report Bharti AirtelThe data in Table reveals that IDEA has achieved the highest Debt-Equity Ratio every year forthe data taken for the period of 2007 to 2009 and is followed by RELIANCE between 2008-09.TATA alone has registered the lowest ratio. Even the three year average Debt-Equity Ratio ofIDEA is significantly higher (1.656667) than that of RELIANCE (0.6166667), AIRTEL (0.406667)and TATA (0.11). Thus, it is inferred that IDEA has the least proportion of debt fund in its totalcapital and hence is the most efficient telecommunication company among all other companies.IDEA has the highest portion of its self-owned funds in the capital structure followed byRELIANCE, AIRTEL and TATA.Long Term Debt-Equity RatioInterpretation:The data in Table reveals that IDEA has achieved the highest Long Term Debt-Equity Ratioevery year for the data taken for the period of 2007 to 2009 and is followed by RELIANCEbetween 2008-09. TATA alone has registered the lowest ratio. Even thethree year averageLong Term Debt-Equity Ratio of IDEA is significantly higher (1.323333) than that of RELIANCE(0.45666667), AIRTEL (0.376667) and TATA (0.066667). Thus, it is inferred that IDEA has theleast proportion of debt fund in its total capital and hence is the most efficient66 | P a g e
  67. 67. Corporate Financial Analysis Report Bharti Airteltelecommunication company among all other companies. IDEA has the highest portion of itsself-owned funds in the capital structure followed by RELIANCE, AIRTEL and TATA.Current Ratio:Interpretation:The data in Table reveals that RELIANCE has achieved the highest Current Ratio every yearfor the data taken for the period of 2007 to 2009 and is followed by TATA, IDEA andAIRTEL.AIRTEL alone has registered the lowest ratio. Even the three year average CurrentRatio of RELIANCE is significantly higher (1.423333) than that of TATA (1.273333), IDEA(0.753333) and AIRTEL (0.52). Hence we can say that RELIANCE has enough resources topay its debts over the next 12 months as compared with the other companies.Fixed Asset Ratio:Interpretation:67 | P a g e
  68. 68. Corporate Financial Analysis Report Bharti AirtelThe data in Table reveals that AIRTEL has achieved the highest Average Fixed AssetRatio forthe data taken for the period of 2007 to 2009 and is followed by TATA, RELIANCE and IDEA.The three year average Fixed Asset Ratio of AIRTEL is significantly higher (0.926667) than thatof TATA (0.773333), RELIANCE (0.73) and IDEA (0.626667). The table shows that AIRTEL hasshown increase in the Fixed Asset Ratio year by year as compared to any other samplecompany. Moreover RELIANCE has year by year decrease in its Fixed Asset Ratio. It meansthat AIRTEL has less money tied up in fixed assets and RELIANCE has over-invested in plant,equipment, or other fixed assets. However the changes in this ratio for IDEA and TATA showsthat they are not efficient to use their fixed assets.EPS (Earnings per Share):Interpretation:The data in Table reveals that AIRTEL has achieved the highest Average EPS for thedata takenfor the period of 2007 to 2009 and is followed by RELIANCE, TATA and IDEA. The three yearaverage EPS of AIRTEL is significantly higher (31.54) than that of RELIANCE (14.963333),TATA (14.3133333) and IDEA (3.04333333). However both AIRTEL and RELIANCE has shownconstant growth in EPS respectively between years 2007 to 2009 which is shown in the table.The EPS of IDEA is the lowest in all years as well as its average is the lowest as compared withother sample companies. The higher the ratio means the better is the share price of thecompany and the shareholders can earn more from their shares. Hence the AIRTEL is moreefficient than other companies.68 | P a g e
  69. 69. Corporate Financial Analysis Report Bharti AirtelMAJOR FINDINGS: • The average Debt-Equity Ratio of IDEA is significantly higher (1.656667) thanthat of RELIANCE (0.6166667), AIRTEL (0.406667) and TATA (0.11). • Average Long Term Debt-Equity Ratio of IDEA is significantly higher (1.323333)than that of RELIANCE (0.45666667), AIRTEL (0.376667) and TATA(0.066667). • The average Current Ratio of RELIANCE is significantly higher (1.423333) thanthat of TATA (1.273333), IDEA (0.753333) and AIRTEL (0.52). • The average Fixed Asset Ratio of AIRTEL is significantly higher (0.926667) thanthat of TATA (0.773333), RELIANCE (0.73) and IDEA (0.626667). • The average EPS of AIRTEL is significantly higher (31.54) than that ofRELIANCE (14.963333), TATA (14.3133333) and IDEA (3.04333333). Hencemaking AIRTEL one of the most efficient companies in the terms of generatingearnings.69 | P a g e
  70. 70. Corporate Financial Analysis Report Bharti Airtel REFERENCES 1. www.moneycontrol.com 2. www.airtel.in 3. www.equitymaster.com 4. www.angelsecurities.in 5. www.icicidirect.com70 | P a g e

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