Profitability ratios measure a company's ability to generate earnings compared to its expenses and costs. Some examples are profit margin, return on assets, and return on equity. Higher ratios typically indicate better performance. The document then discusses various profitability ratios in more detail like gross profit margin, net profit margin, return on assets, return on equity, and return on capital employed. It provides the formulas to calculate each ratio.

1. 1

2. What Does Profitability Ratios Mean?
A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs incurred
during a specific period of time. For most of these ratios, having a higher value
relative to a competitor's ratio or the same ratio from a previous period is indicative
that the company is doing well.
Some examples of profitability ratios are profit margin, return
on assets and return on equity. It is important to note that a little bit of background
knowledge is necessary in order to make relevant comparisons when analyzing
these ratios.
Introduction
This section of the tutorial discusses the different measures of corporate profitability
and financial performance. These ratios, much like the operational performance
ratios, give users a good understanding of how well the company utilized its
resources in generating profit and shareholder value.
The long-term profitability of a company is vital for both the survivability of the
company as well as the benefit received by shareholders. It is these ratios that can
give insight into the all important "profit".
In this section, we will look at four important profit margins, which display the amount
of profit a company generates on its sales at the different stages of an income
statement. We'll also show you how to calculate the effective tax rate of a company.
The last three ratios covered in this section - Return on Assets, Return on Equity
2

3. and Return on Capital Employed - detail how effective a company is at generating
income from its resources.
Profit Margin Analysis
In the income statement, there are four levels of profit or profit margins - gross profit,
operating profit, pretax profit and net profit. The term "margin" can apply to the
absolute number for a given profit level and/or the number as a percentage of net
sales/revenues. Profit margin analysis uses the percentage calculation to provide a
comprehensive measure of a company's profitability on a historical basis (3-5 years)
and in comparison to peer companies and industry benchmarks.
Basically, it is the amount of profit (at the gross, operating, pretax or net income
level) generated by the company as a percent of the sales generated. The objective
of margin analysis is to detect consistency or positive/negative trends in a company's
earnings. Positive profit margin analysis translates into positive investment quality.
To a large degree, it is the quality, and growth, of a company's earnings that drive its
stock price.
Formulas:
3

4. Return On Assets
This ratio indicates how profitable a company is relative to its total assets. The return
on assets (ROA) ratio illustrates how well management is employing the company's
total assets to make a profit. The higher the return, the more efficient management is
in utilizing its asset base. The ROA ratio is calculated by comparing net income to
average total assets, and is expressed as a percentage.
Formula:
Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its
average shareholders' equity. The return on equity ratio (ROE) measures how much
the shareholders earned for their investment in the company. The higher the ratio
percentage, the more efficient management is in utilizing its equity base and the
better return is to investors.
Formula:
4

5. Return on Capital Employed
The return on capital employed (ROCE) ratio, expressed as a percentage,
complements the return on equity (ROE) ratio by adding a company's debt liabilities,
or funded debt, to equity to reflect a company's total "capital employed". This
measure narrows the focus to gain a better understanding of a company's ability to
generate returns from its available capital base.
By comparing net income to the sum of a company's debt and equity capital,
investors can get a clear picture of how the use of leverage impacts a company's
profitability. Financial analysts consider the ROCE measurement to be a more
comprehensive profitability indicator because it gauges management's ability to
generate earnings from a company's total pool of capital.
Formula:
5

6. Classification of Ratios
Balance Sheet Ratio P&L Ratio Balance Sheet and
Profit & Loss Ratio
Financial Ratio Operating Ratio Composite Ratio
• Current Ratio • Gross Profit Ratio • Fixed Asset
• Quick Asset Ratio • Operating Ratio Turnover Ratio,
• Proprietary Ratio • Expense Ratio Return on Total
Debt Equity Ratio • Net profit Ratio Resources Ratio
• Stock Turnover • Return on Own
Ratio Funds Ratio,
Earning per Share
Ratio, Debtors’
Turnover Ratio
Structural Classification
This is a conventional mode of classifying ratios where the ratios are classified on
the basis of information given in the financial statements, i.e. balance sheet and
profit and loss account to which the determinants of the ratios belong. On this basis,
all ratios are grouped as follows:
1. Balance Sheet Ratio: The components for computation of these ratios are
draws from balance sheet. These ratios are called financial ratios. Examples
of such ratios are: current ratio, liquid ratio, proprietary ratio, capital gear ratio,
fixed assets ratio etc.
6

7. 2. Profit and Loss Account Ratios: The figures used for the calculation of
these ratios are usually taken out from the profit and loss account. These
ratios are also called ‘income statement ratios’. Examples of such ratios
are: gross profit ratio, net profit ratio, operating ratio, expenses ratio, stock
turnover ratio etc.
3. Balance Sheet and Profit & Loss Ratio: The information required for the
computation of these ratios is normally drawn from both the balance sheet
and profit and loss account. Examples of such ratios are: return on capital
employed, return on owners’ fund, return on total investment, debtor’s
turnover ratio, creditors turnover ratio, fixed assets turnover ratio, working
capital turnover ratio etc.
FUNCTIONAL CLASSIFICATION
Now-a-days, it is the most popular mode of classifying the ratios. Accordingly, the
ratios may be grouped on the basis of certain tests which satisfy the needs of the
parties having financial interest in the business concern. For example, creditors or
banks have interest in the liquidity of the firm, debenture holders in the long-term
solvency and shareholders in the profitability of the firm. The ratios may be grouped
as per different interests or objectives as under:
1. Liquidity Ratios: These ratios are used to measure the ability of the firm to
meet its short-term obligations out of its short-term resources. Such ratios
highlight short-term solvency of the firm. Examples of such ratios are:
7

8. I. Current Ratio
II. Liquid or Quick Ratio
III. Absolute Liquidity Ratio
2. Activity or Efficiency Ratio: These ratios enable the management to
measure the effectiveness or the usages at the command of the firm.
Following ratios are included in this category:
I. Stock Turnover Ratio
II. Total Assets Turnover Ratio
III. Fixed Assets Turnover Ratio
IV. Current Assets Turnover Ratio
V. Capital turnover Ratio
3. Profitability Ratio: These ratios are intended to measure the end result of
business operations i.e. profitability. Profitability is a measure of the ability to
make a profit expressed in relation to the sales or investments, and as such
the following ratios are computed in this category
 Based on Sales
I. Gross Profit Ratio
II. Operating Ratio
8

9. III. Expenses Ratio
IV. Operating Profit Ratio
V. Net Profit Ratio
 Based on Capital or Investments
I. Return on Capital Employed
II. Return on Net Worth or Shareholders’ Fund
III. Return on Equity shareholders’ fund
IV. Return on Total Assets
1. LIQUIDITY OR SHORT-TERM SOLVENCY RATIOS
These ratios play a key role in analyzing the short-term financial position of a
business Liquidity refers to a firm’s ability to meet its current financial obligations as
they arise. Commercial banks and other short-term creditors i.e. suppliers of goods
and services are generally interested in such ratios. However, the management can
use these ratios to ascertain how efficiently it has utilizing the working capital. Some
of the principal liquidity ratios are described below:
I. Current ratio:
9

10. Current ratio is one of the important ratios used in testing liquidity of a concern. This is a
good measure of the ability of accompany to maintain solvency over a short-run. This is
computed by dividing the total current assets by the total current liabilities and is
expressed as:
Current Assets
Current ratio= ------------------------------
Current Liabilities
The current assets of a firm represent those assets, which can be in the ordinary
course of business, converted into cash within one accounting year. The current
liabilities are defines as obligation maturing within a short period (usually one
accounting year). Excess of current assets over current liabilities is known as
working capital and since these two (Current assets and current Liabilities) are
used in current ratio therefore, this ratio is also know as working capital ratio.
Idle Current Ratio: 2:1
II. QUICK RATIO
10

11. The solvency of the company is better indicated by quick Ratio. The fundamental
object of calculating this Ratio is to enable the financial management of a company
to ascertain that would happen if current creditors press for immediate payment and
either not possible to push up the sales of closing or it is sold; a heavy loss is likely
to be suffered. This problem arises because closing stock is two steps away from the
cash and their price is more or less uncertain according to market demand.
The term quick assets includes all current assets expect inventories and prepaid
expenses. It shows the relationship of quick assets and current liabilities. The Ratio
is calculated as following:
Quick Assets
Quick Ratio = -------------------------------
Current Liabilities
III. ABSOLATE LIQUIDITY RATIO
The absolute liquid ratio is the ratio between absolute liquid assets and current
liabilities is calculated by dividing the liquid assets and current liabilities. Expressed
in formula, the ratio is:
11

12. Absolute liquidity Assets
Absolute liquidity Ratio= --------------------------------------------
Current Liabilities
The term liquid assets include cash bank balance and marketable securities, if
current liabilities are to pay at once, only balance of cash and bank and marketable
securities will be utilized. Therefore, to measure the absolute liquidity of a business,
this ratio is calculated.
IDLE RATIO: 0.5:1
The idle behind the norm is that if all creditors for demand for payment, at least 50%
of their claim should be satisfied at once.
The table shown on the next page reflects the absolute liquidity ratio TTSL.
2. ACTIVITY OR EFFICIENCY RATIOS
The funds of creditors and owners are invested in various assets to generate sales
and profit. The better the management of these assets, the large the amount of
sales. Activity ratios enable the firm to know how efficiently these assets are
12

13. employed by it. These ratios indicate the speed with which assets are being
converted or turned over into sales. Hence, these ratios are also known as ‘turnover
ratios’ or ‘assets management ratios’. While calculating these ratios, a comparison
is made between sales and investment in various assets (stock, debtors, fixed
assets etc.). As such, an activity ratio is the relationship between sales or cost
of goods sold and investment in various assets of the firm. It is important to
note that these ratios are always expressed as turnover or in number of times i.e.
rate of turning over or rotation, also known as velocity. Several activity ratios can be
calculated to judge the effectiveness of assets utilization. The following are the
important and widely used ratios:
i. STOCK TURNOVER RATIO
Every firm has to maintain a certain level of inventory of finished goods so as to be
able to meet the requirements of the business. But the level of inventory should
neither be too high nor too low. A too high inventory means higher carrying costs and
higher risk of stocks becoming obsolete whereas too low inventory may mean the
loss of business opportunities. It is very essential to keep sufficient stock in business.
Higher ratio indicates
 Stock is sold out fast
 Same volume of sales from less stock or more sales from same stocks
13

14.  Too high ratio shows stock outs or over trading
 Less working capital requirement
Lower ratio reveals
 Stock is sold at a slow speed
 Same volume of sales from more stocks or less sales from same stocks
 More working capital requirement
 Too low ratios show obsolete stocks or under trading
Cost of Goods Sold or Sales
Inventory (stock) Turnover Ratio: -----------------------------------------------
Average Inventory at cost
It is always better to calculate Turnover Ratios on the basis of “Cost of Goods
Sold”. If information regarding cost of goods sold is not available, only there
the “Sales” figure should be used as base.
ii. TOTAL ASSETS TURNOVER RATIO:
This ratio expresses the relationship between costs of goods sold or net sales and
total assets or investments of a firm. It is also called ‘Total Investment Turnover
Ratio’ and is calculated by using the following formulae:
14

15. Net Sales or Cost of Goods Sold
Total Assets Turnover Ratio= --------------------------------------------------------
Total Assets
Interpretation and Significance: This ratio indicates the number of times the
assets are turned over in a year in relation to sales. A higher total assets turnover
ratio indicates that assets are not properly utilized in comparison to sales. Thus,
there is an over investment in assets. Extremely high ratio means over-trading in the
business.
iii. FIXED ASSETS TURNOVER RATIO
This ratio expresses the relationship between fixed assets (less depreciation) and
net sales or cost of goods sold. Since investment in fixed assets is made for the
ultimate purpose of efficient sales, the ratio is used to measure the fulfillment of that
objective. As such, investments are excluded from fixed assets as they do not affect
sales. It is calculated by using the following formula:
Sales or Cost of Goods Sold
Fixed Assets Turnover Ratio=-------------------------------------------------------------
15

16. Fixed Assets (less depreciation)
Interpretation and Significance: This ratio measures the efficiency and profit
earning capacity of the firm. The higher the ratio, the greater is the intensive
utilization of fixed assets. Lower ratio means under utilization of fixed asset and
excessive investment in these assets. As volume of sales depends on a variety of
factors such as price, quality of goods, salesmanship, marketing etc. it is argued that
no direct relationship can be established between sales and fixed assets.
Accordingly, it is not recommended for general use.
iv. CURRENT ASSETS TURNOVER RATIO
This ratio expresses the relationship between current assets and net sales or cost of
goods sold. It is calculated using the following formula:
Sales or Cost of Goods Sold
Current Assets Turnover Ratio=-----------------------------------------------------
Current Assets
Interpretation and Significance: This ratio reflects the efficiency and capacity of
working capital. It is a very useful technique for non-factoring units or those
16

17. manufacturing units requiring lesser working capital. On the basis of this ratio,
efficiency or current assets and over or under investment in the firm is examined.
v. CAPITAL TURNOVER RATIO
This ratio establishes the relationship between net sales or cost of goods sold and
capital employed. Capital employed is calculated either by deducting current
liabilities from total assets or by adding long-term loans in shareholders’ funds (share
capital + reserves and surplus). Fictitious and non-trading assets are excluded from
assets. It is calculated using the following formulae:
Sales or Cost of Goods Sold
Capital Turnover Ratio: -------------------------------------------------------------
Capital Employed
Interpretation and Significance: The efficiency and effectiveness of the
operations are judged by comparing the sales or cost of sales with the amount of
capital employed in the business and not with the assets held in the business.
Therefore, this ratio is a better measurement of efficient use of capital employed.
Efficient use of capital symbolizes profit earning capacity and managerial efficiency
of the business. A higher ratio indicates the quicker rotation of capital to generate
higher sales which leads to higher profitability. On the contrary a lower ratio will
indicate that either the capital is not being used infinity to generate enough sales.
17

18. 3. PROFITABILITY RATIOS
The main objective of every business firm is to earn profit. It is possible only when
resources of the firm are effectively utilized. The firm’s ability to earn maximum profit
by the best utilization of its resources is called profitability. Profit refers to the
absolute quantity of profit, whereas profitability refers to the ability to earn profit.
Profit is an absolute measure of earning capacity and profitability is the relative
measure of earning capacity. Profitability depends on quantum of sales, cost of
production and use of financial resources etc. The profitability of a firm can easily be
measured by its profitability ratios. These ratios indicate overall managerial
efficiency. There are two types of profitability ratios. First, profitability ratios based on
sales: Second, profitability ratios based on capital and assets.
 PROFITABILITY RATIOS BASED ON SALES
From profit point of view, it is significant that adequate profit should be earned on
each unit of sales. If adequate profit is not earned on sales, there will be difficulty in
meeting the operating expenses and nod dividend will be paid to the shareholders.
Therefore, following profitability ratios are calculated in relation to sales. These are
also called ‘General Profitability Ratios’.
i. Gross Profit Ratio
18

19. This ratio expresses the relationship of gross profit on sales to net sales in terms of
percentage. Expressed as a formula, the gross profit ratio is:
Gross Profit
Gross Profit Ratio= -------------------------- * 100
Net Sales
Net Sales – Cost of Goods Sold
Gross Profit Ratio = ------------------------------------------ * 100
Net Sales
Interpretation and Significance: This ratio measures the trading effectiveness
and basic profit earning potentiality of a firm. The higher the ratio, the greater will be
the margin and that is why it is also called, ‘margin ratio’. An increase in the gross
profit ratio may be the result of one or all of the following:
 Higher selling price but cost of goods remaining the same
 Lower cost of goods sold but selling price remaining the same
 Such combination of selling prices and costs where margin is more
19

20.  Increase in items of excess margin
On the contrary, a low gross profit ratio is the indication of the fact that – (1) profit are
declining in comparison to sales, (2) production costs are much more due to inability
to purchases raw material on reasonable terms, inefficient use of plant and
machinery and over investment. This low gross profit may also be the result of
reduction in selling price without a corresponding decline in cost of production.
Therefore, a relatively low gross profit ratio is a danger signal and warrants a
detailed analysis of the factors responsible for it.
ii. Operating Ratio
This ratio expresses the relationship between operating costs and net sales.
Operating costs refer to cost of goods sold plus operating expenses. Expressed as a
formula:
Operating Costs
Operating Ratio = --------------------------- * 100
Net Sales
Cost of Goods Sold + Operating Expenses
20

21. Operating Ratio = --------------------------------------------------------- * 100
Net Sales
Interpretation and Significance: this ratio indicates the operational efficiency
and profit earning capacity of the business. It shows the percentage of net sales that
is absorbed by cost of goods sold and operating expenses. Therefore, the lower the
operating ratio, the higher the operating profit to recover non-operating
expenses such as interest, divided etc. and vice-versa. While interpreting this
ratio, it is important to note that changing management decisions may create
possible variations in expenses from year to year or firm to firm. An operating ratio
ranging between 75% and 85% is generally considered as standard for
manufacturing firms.
iii. Operating profit Ratio
This ratio is also called Operating Profit Margin. It establishes the relationship
between operating profits and net sales. It is also defined as the ratio of profit
before depreciation, interest and tax to total turnover. Operating profit means the
net profit arising from the normal operations and activities of the business without
taking into account of extraneous transactions and expenses of purely financial
nature. In other words, operating profit is calculated by sub-starting all direct
and indirect expenses relating to main business from net sales. This ratio is
calculated by using the following formulae:
21

22. Operating Profit
Operating profit Ratio = --------------------------- * 100
Net Sales
Gross Profit – Operating Expenses
Operating Profit Ratio = ---------------------------------------------- * 100
Net Sales
Interpretation and Significance: This ratio indicates the net profitability of the
main business i.e. operating efficiency of a firm. In some firms, the profit from main
business is very low; while the profit from secondary functions such as interest on
bank deposits and dividend on shares etc. is so much that the net profit of the net
profit of the firm at the end is enhanced. In such a case, the operating profit ratio
explains that the efficiency of the firm is very low. Therefore, the higher the operating
ratio, the better would be the operational efficiency of the firm. A higher operating
profit ratio means that a firm has been able not only to increase its sales but also
been able to cut down its operating expenses.
iv. Expenses ratio
22

23. Sometimes, it becomes imperative to analysis each component of cost of goods sold
and operating expenses to find out how far the firm is able to save or over spend in
respect of different items of expenses. Therefore, to express the relationship of each
item of cost of goods and operating expenses with sales, the expenses ratios are
computed. These ratios reveal the relationship of different expenses to net
sales. Important expenses ratios are calculated using the following formulae:
Material consumed
Material Consumed Ratio = ---------------------------------- * 100
Net Sales
Manufacturing Expenses
Manufacturing Expenses Ratio = ----------------------------------------------- * 100
Net Sales
Administrative Expenses
Administrative Expenses Ratio = ---------------------------------------------- * 100
Net Sales
23

24. Selling and Distribution Expenses Ratio =
Selling and Distribution Expenses
------------------------------------------------------ * 100
Net Sales
Finance Expenses
Finance Expenses Ratio = ------------------------------------- * 100
Net Sales
Non-operating Expenses
Non-operating Expenses Ratio = ----------------------------------------------- * 100
Net Sales
Interpretation and Significance: Expenses ratios reveal the managerial efficiency
and profit earning capacity of the firm. If these ratios are compared over a period of time with
24

25. the ratios of similar firm as well as with the previous ratios of the same firm, the saving or
over spending of each item can be ascertained. While interpreting the expenses ratios, it
should be kept in view that certain fixed expenses would decrease as sales increase, but
variable expenses would remain constant.
v. Net Profit Ratio
This ratio measures the relationship between net profit and sales of a firm. Net
profit is the excess of revenue over expenses during a particular accounting period.
The net profit ratio is determined by dividing the net profit by sales and expressed as
percentage. The formula used is as follows:
Net Profit (After tax)
Net Profit Ratio = -------------------------------- * 100
Net Sales
Net Profit (before tax)
Net Profit Ratio = --------------------------------- * 100
Net Sales
25

26. Interpretation and Significance: This ratio is the indication of overall profitability
and efficiency of the business. It not only reveals the recovery of costs and expenses
from to revenue of the period, but also to leave a margin of reasonable
compensation to the owners for providing capital at their risk. A high net profit ratio
would only means adequate returns to the owners. It also enables a firm to withstand
in cut-throat competition when the selling price is falling or cost of production is
rising. A low net profit ratio on the other hand, would only indicate inadequate returns
to the owners.
 Profitability Ratios based on Capital
This efficiency of an enterprise is judged by the amount of profits. But sometimes the
conclusions drawn on the basis of profits to sales ratio may be misleading, as the
amount of profit depends to a great extent upon the volume of investment in assets
or capital employed in the business. Therefore, the state of efficiency cannot be
judged by the volume of profits alone. This requires the calculation of ratio with
reference to capital and assets to measure the real profitability. The important
categories of such ratios are discussed below:
• Return on capital Employed
The primary objective of making investment in any business is to obtain adequate
return on capital. Therefore, to measure the overall profitability of the firm, it is
26

27. essential to compare profit with capital employed. With this objective, return on
capital employed is calculated. It is also called` Return on investment’ (ROI).This
ratio expresses the relationship between profit and capital employed and is
calculated in percentage by dividing the net-profit by capital employed.
Net profit (PBIT)
Return on capital Employed= ---------------------------- * 100
Capital Employed
Alternatively, it can be calculated as:
Return on Capital Employed = Assets Turnover * Profit Margin
Sales Net Profit
= ------------------- * -------------------- * 100
Total Sales Sales
Interpretation and Significance: Since profit is the overall objective of a
business enterprise, this ratio is a barometer of the overall performance of the
enterprise. It measures how efficiently the capital employed in the business is being
used. In other words, it is also a measure how efficiently the capital employed in the
27

28. business. Even the performance of two dissimilar firms may be compared with the
help of this ratio. Furthermore, the ratio can be used to judge the borrowing policy of
the enterprise. If an enterprise having the ratio of return on investment 15% borrows
at 16%, it would indicate that it is borrowing at a rate higher than its earning. The
comparisons of this ratio with that of similar firms and with industry average over a
period of time would disclose as to how effectively the long-term funds provided by
owners and creditors have been used.
• Return on Net Worth
This ratio expresses the percentage relationship between net profit (after
interest and tax) and net worth or shareholders’ funds. This is also known as
‘Return on Proprietors’ funds’ it is used to ascertain the rate of return on
resources provided by the shareholders. The ratio is calculated by using the
following formula:
Net Profit (after tax and interest)
Return on Shareholders’ Fund = --------------------------------------------------- * 100
Shareholders’ Funds or Net Worth
Significance: This ratio measures the amount of earnings for each rupee that the
shareholders alive invested in the company. The higher the ratio the more favorable
is the interpretation of the company’s use of its resources contributed by the
shareholders. This ratio can be composed with that of other units engaged in similar
activities as also with the industry on average.
28

29. • Return on Equity Shareholders’ funds
Equity shareholders are the real owners of a company. Therefore, the profitability of
a company from the owners’ stand point should be viewed in terms of return to
equity shareholders. This ratio is calculated by dividing the profit available for equity
shareholders by the equity shareholders’ funds. Expressed as a formula, the ratio is:
Return on Equity Shareholders’ fund =
Net Profit after tax – Preference Dividend
----------------------------------------------------------------------- * 100
Equity Shareholders’ funds
Interpretation and significance: This ratio is the best measure of a company’s
profit earning capacity. The higher the ratio, the better the performance and
prospectus of the company. It provides adequate test to evaluate whether a
company has earned satisfactory return for its equity shareholders or not. The
adequacy of the return can be measured by comparing it with the return of the
previous year or of companies engaged in similar business or with the overall
industry average. The investors can decide to invest or not to invest in the equity
shares of a company by comparing it with the normal rate of return in the market.
29

30. Due to issue of new shares or buy back of share during the year, the equity capital
and preference share capital of the company do not remain the same throughout the
year. Therefore, to calculate the amount of average shareholders’ fund which is one
half of the opening and closing balance is used to calculate the – (1) Return on Net
worth and (2) Return on Equity shareholders’ Fund. In absence of opening balance,
closing balance is used.
• Return on Total Assets
Profitability can also be measured by establishing relationship between net profit and
total assets. This ratio is computed by dividing the net profits after tax by total and
total assets. This ratio is computed by dividing the net profits after tax by total funds
invested or total assets. Total assets means all net fixed assets, current assets are
included only when they have realizable value. Expressed as formula, the ratio is
Net Profit after Tax
Return on Total Assets = ---------------------------- * 100
Total Assets
Interpretation and significance: This ratio measures the profitability of
investments which reflects managerial efficiency. The higher the ratio, the better is
the profit earning capacity of the firm or vice versa. But this ratio does not reveal the
profitability of different sources of funds used in purchasing the total assets.
30

31. Technically, this ratio suffers from the drawback that the interest paid to the creditors
is excluded form the net profit, whereas the real return on the total assets is the net
operating earnings. Therefore, to consider real earning, interest on long-term loans
should be added back to profit after tax. Thus, return on total assets should be
computed on the following revised formula:
Net Profit after tax + Interest
Return on Total Assets = -------------------------------------------- * 100
Total Assets
Note: In any view profit is earned on total assets of the business during the year and
these assets may increase or decrease during the year. Therefore, average amount
of the total assets should be used in calculating this ratio.
31

32. 32

33. 2.0 SCOPE OF THE STUDY
Studies due with the details that affect the profit of the company along with
that the financial ratios will the help us to know the financial position and
liquidity of the company .some more reasons are as follows-
33

34. • The profile provides detailed financial ratios for the past five years as well as
interim ratios for the last five interim periods for major companies.
• Examines key information about company for business intelligence.
• Financial ratios presented for major public companies include revenue trends,
profitability, growth, margins and returns, liquidity and leverage, financial
position and efficiency ratios.
• The company's core strengths and weaknesses and areas of development or
decline are analyzed and presented objectively. Business, strategic and
operational aspects are taken into account.
• Opportunities available to the company are sized up and its growth potential
assessed. Competitive and/or technological threats are highlighted.
• The profile contains valuable and critical company information ' business
structure and operations, the company history, major products and services,
34

35. prospects, key competitors, key employees, executive biographies, important
locations and subsidiaries.
35

36. “Ratio analysis” is a technique of analysis and interpretation of financial. It is a
process of establishing and interpretation various ratios for helping in making more
meaning decision. The ratio analysis is the most powerful tool of financial analysis.
Analysis of ratio provides dues to the financial position of a concern. There are the
pointers or indicates of financial strength, soundness, position or weakness of an
enterprise. One can draw conclusions about the exact financial position of a concern
with the help of ratios.
36

37. The topic was chosen to analyses the performance in terms of short term solvency
and profitability position of "TATA TELESERVICES LTD”
Yet another factor, which efforts the useless of ratio is that there is difference of
opinion regarding the various concepts used to compute the ratios. Different firms
may use the terms in different senses of the same firm may interpret and see them
different at different situation.
Even though the ratios suffer from serious limitation, the analyst should not be
carried away by it’s over simplified nature. Easy computation with high degree of
precision, Nevertheless there are important tool of financial analysis the reliability
and significance attached to ratio will largely depend upon the equity of data on
which they are based.
37

38. Overview
The global reach and industry expertise of Tata Communications drives and delivers
a new world of communications. The company leverages its Tata Global Network,
vertical intelligence and leadership in emerging markets to deliver value-driven,
globally managed solutions.
Tata Communications is a leading global provider of a new world of communications.
With a leadership position in emerging markets, Tata Communications leverages its
advanced solutions capabilities and domain expertise across its global and pan-India
38

39. network to deliver managed solutions to multi-national enterprises, service providers
and Indian consumers.
The Tata Global Network includes one of the most advanced and largest submarine
cable networks, a Tier-1 IP network, with connectivity to more than 200 countries
across 400 PoPs, and nearly 1 million square feet of data center and colocation
space worldwide.
Tata Communications' depth and breadth of reach in emerging markets includes
leadership in Indian enterprise data services, leadership in global international voice,
and strategic investments in operators in South Africa (Neotel), Sri Lanka (Tata
Communications Lanka Limited), and Nepal (United Telecom Limited).
Tata Communications Limited is listed on the Bombay Stock Exchange and the
National Stock Exchange of India and its ADRs are listed on the New York Stock
Exchange. (NYSE: TCL)
INTRODUCTION
Tata Teleservices Limited spearheads the Tata Group’s presence in the telecom
sector. The Tata Group had revenues of around USD 70.8 billion in Financial Year
2008-09, and includes over 90 companies, over 363,039 employees worldwide and
more than 3.5 million shareholders.
39

40. Incorporated in 1996, Tata Teleservices is the pioneer of the CDMA 1x technology
platform in India. It has embarked on a growth path since the acquisition of Hughes
Tele.com (India) Ltd [renamed Tata Teleservices (Maharashtra) Limited] by the Tata
Group in 2002. It launched mobile operations in January 2005 under the brand name
Tata Indicom and today enjoys a pan-India presence through existing operations in
all of India’s 22 telecom Circles. The company is also the market leader in the fixed
wireless telephony market. The company’s network has been rated as the ‘Least
Congested’ in India for five consecutive quarters by the Telecom Regulatory
Authority of India through independent surveys.
Tata Teleservices Limited now also has a presence in the GSM space, through its
joint venture with NTT DOCOMO of Japan, and offers differentiated products and
services under the TATA DOCOMO brand name. TATA DOCOMO arises out of the
Tata Group’s strategic alliance with Japanese telecom major NTT DOCOMO in
November 2008. TATA DOCOMO has received a pan-India license to operate GSM
telecom services—and has also been allotted spectrum in 18 telecom Circles. The
company has rolled out GSM services in 17 of India’s 22 telecom Circles in the quick
span of less than a year. The company plans to launch pan-India operations by the
end of FY 2010-11.
TATA DOCOMO marks a significant milestone in the Indian telecom landscape, and
has already redefined the very face of telecom in India, being the first to pioneer the
per-second tariff option—part of its ‘Pay for What You Use’ pricing paradigm. Tokyo-
based NTT DOCOMO is one of the world’s leading mobile operators—in the
Japanese market, the company is the clear market leader, used by over 50 per cent
of the country’s mobile phone users.
40

41. Tata Teleservices operates under five different brands— Tata Indicom (CDMA
services), Tata DOCOMO (GSM services), Virgin Mobile, Tata Walky (which is the
brand for fixed wireless phones), Tata Photon (the company’s brand that provides a
variety of options for wireless mobile broadband access) and T24. TTSL recently
entered into a strategic partnership agreement with Indian retail giant Future Group
to offer mobile telephony services under a new brand name—T24—on the GSM
platform. The exciting new brand was unveiled in February and it has commenced
the GSM operations under the brand name T24 in Andhra Pradesh and will roll out
services in other circles shortly.
Today, Tata Teleservices Ltd, along with Tata Teleservices (Maharashtra) Ltd,
serves nearly 70 million customers in more than 450,000 towns and villages across
the country, with a bouquet of telephony services encompassing Mobile Services,
Wireless Desktop Phones, Public Booth Telephony and Wire line Services.
In December 2008, Tata Teleservices announced a unique reverse equity swap
strategic agreement between its telecom tower subsidiary, Wireless TT Info-Services
Limited, and Quippo Telecom Infrastructure Limited—with the combined entity
kicking off operations with 18,000 towers, thereby becoming the largest independent
entity in this space—and with the highest tenancy ratios in the industry. Today, the
combined entity has a portfolio of nearly 35,000 towers.
TTSL’s bouquet of telephony services includes mobile services, wireless desktop
phones, public booth telephony, wireline services and enterprise solutions.
Over the last few months, Tata Teleservices’ industry-best and innovative offerings
have gained industry-wide recognition and the Year 2010 saw TTSL add many
41

42. notable accolades to its name. TTSL was named The Best Emerging Markets
Carrier by Telecom Asia, and received 8 awards at the World HRD Conference,
including 5th Best Employer in India. The company also received 3 awards at the
Telecom Operator Awards 2010 from Tele.net; Best Company, CEO of the Year and
Best Quality of Service, and Business Standard award for ‘Most Innovative Brand of
the Year’.
Tata Communications
We at Tata communications apart of the Tata family take pride in sharing the set of
five core values of the family: integrity, understanding, excellence, unity and
responsibility. These values, which have been part of the Group's beliefs and
convictions from its earliest days, continue to guide and drive the business decisions
of Tata companies. The Group and its enterprises have been steadfast and
distinctive in their adherence to business ethics and their commitment to corporate
social responsibility. This is a legacy that has earned the Group the trust of many
millions of stakeholders in a measure few business houses anywhere in the world
can match.
Corporate Governance in substance rather than form is what the company believes
in and actively implements. To implement this, a high level Corporate Governance
council has been formed to ensure that the best practices of Corporate Governance
are adopted.
We believe in fairness in words, actions and deeds with all our stakeholders.
42

43. TATA GROUP PROFILE
Tata Communications Limited along with its global subsidiaries (Tata
Communications) is a leading global provider of the new world of communications.
The company leverages its Tata Global Network, vertical intelligence and leadership
in emerging markets, to deliver value-driven, globally managed solutions to the
Fortune 1000 and mid-sized enterprises, service providers and consumers.
The Tata Communications portfolio includes transmission, IP, converged voice,
mobility, managed network connectivity, hosted data center, communications
solutions and business transformation services to global and Indian enterprises &
service providers as well as, broadband and content services to Indian consumers.
The Tata Global Network encompasses one of the most advanced and largest
submarine cable networks, a Tier-1 IP network, connectivity to more than 200
countries across 400 PoPs and more than one million square feet data center
space. Tata Communications serves its customers from its offices in 80 cities in 40
countries worldwide. Tata Communications has a strategic investment in South
African operator Neotel, providing the company with a strong anchor to build an
African footprint.
The number one global international wholesale voice operator and number one
provider of International Long Distance, Enterprise Data and Internet Services in
India, the company was named "Best Wholesale Carrier" at the World
Communications Awards in 2006 and was named the "Best Pan-Asian Wholesale
43

44. Provider" at the 2007 Capacity Magazine Global Wholesale Telecommunications
Awards for the second consecutive year.
Becoming the leading integrated provider to drive and deliver a new world of
communications, Tata Communications became the unified global brand for VSNL,
VSNL International, Teleglobe, Tata Indicom Enterprise Business Unit and CIPRIS
on February 13, 2008.
Tata Communications Ltd. is a part of the $62.5 billion Tata Group; it is listed on the
Bombay Stock Exchange and the National Stock Exchange of India and its ADRs
are listed on the New York Stock Exchange (NYSE: TCL).
Tata is a rapidly growing business group based in India with significant international
operations. Revenues in 2007-08 are estimated at $70.8 billion USD , of which 61
per cent is from business outside India. The Group employs around 350,000 people
worldwide. The Tata name has been respected in India for 140 years for its
adherence to strong values and business ethics.
The business operations of the Tata Group currently encompass seven business
sectors: communications and information technology, engineering, materials,
services, energy, consumer products and chemicals. The Group's 27 publicly listed
enterprises have a combined market capitalization of some $60 billion, among the
highest among Indian business houses, and a shareholder base of 3.2 million. The
major companies in the Group include Tata Steel, Tata Motors, Tata Consultancy
Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels and Tata
Communications.
44

45. The Group's major companies are beginning to be counted globally. Tata Steel
became the sixth largest steel maker in the world after it acquired Corus. Tata
Motors is among the top five commercial vehicle manufacturers in the world and has
recently acquired Jaguar and Land Rover. TCS is a leading global software
company, with delivery centers in the US, UK, Hungary, Brazil, Uruguay and China,
besides India. Tata Tea is the second largest branded tea company in the world,
through its UK-based subsidiary Tetley. Tata Chemicals is the world's second largest
manufacturer of soda ash. Tata Communications is one of the world's largest
wholesale voice carriers.
In tandem with the increasing international footprint of its companies, the Group is
also gaining international recognition. Brand Finance, a UK-based consultancy firm,
recently valued the Tata brand at $11.4 billion and ranked it 57th amongst the Top
100 brands in the world. Business week ranked the Group sixth amongst the
"World's Most Innovative Companies" and the Reputation Institute, USA, recently
rated it as the "World's Sixth Most Reputed Firm."
Founded by Jamsetji Tata in 1868, the Tata Group's early years were inspired by the
spirit of nationalism. The Group pioneered several industries of national importance
in India: steel, power, hospitality and airlines. In more recent times, the Tata Group's
pioneering spirit has been showcased by companies like Tata Consultancy Services,
India's first software company, which pioneered the international delivery model, and
Tata Motors, which made India's first indigenously developed car, the Indica, in 1998
and recently unveiled the world's lowest-cost car, the Tata Nano, for commercial
launch by end of 2008.
45

46. The Tata Group has always believed in returning wealth to the society it serves.
Two-thirds of the equity of Tata Sons, the Tata Group's promoter company, is held
by philanthropic trusts which have created national institutions in science and
technology, medical research, social studies and the performing arts. The trusts also
provide aid and assistance to NGOs in the areas of education, healthcare and
livelihoods. Tata companies also extend social welfare activities to communities
around their industrial units. The combined development-related expenditure of the
Trusts and the companies amounts to around 4 per cent of the Group's net profits.
Going forward, the Group is focusing on new technologies and innovation to drive its
business in India and internationally. The Nano car is one example, as is the Eka
supercomputer (developed by another Tata company), which in 2008 is ranked the
world's fourth fastest. The Group aims to build a series of world class, world scale
businesses in select sectors. Anchored in India and wedded to its traditional values
and strong ethics, the Group is building a multinational business which will achieve
growth through excellence and innovation, while balancing the interests of its
shareholders, its employees and wider society.
Our Culture
46

47. Our People
Our global office holds talent from six continents. Our vast pool of expertise in the
communications and technology sectors embody our commitment to conduct ethical
and sustainable business. Tata Communications continues a tradition of developing
and deploying innovative solutions for existing and emerging markets worldwide. Our
international team reflects the dynamic and diverse market Tata Communications
serves.
Our Values
Service and business at Tata Communications is guided by a commitment to ethical
and responsible conduct.
• Integrity: Trust travels
We must conduct our business fairly, with honesty and transparency.
Everything we do must stand the test of public scrutiny.
• Understanding: Open the world
We must be caring, show respect, compassion and humanity for our
colleagues and customers around the world, and always work for the benefit
of the communities we serve.
47

48. • Flexibility: Act agile
We work to create, design and grow in an environment that supports our
customers and people with adaptive thinking and action.
• Excellence: Go the distance
We must constantly strive to achieve the highest possible standards in our
day-to-day work and in the quality of the goods and services we provide.
• Unity: Journey as one
we must work cohesively with our colleagues across the Group and with our
customers and partners around the world, building strong relationships based
on tolerance, understanding and mutual cooperation.
• Responsibility: Advance life
48

49. We must continue to be responsible, sensitive to the countries, communities
and environments in which we work, always ensuring that what comes from
the people goes back to the people many times over.
Purpose
• At the Tata Group their purpose is To improve the quality of life of the
communities they serve.
• They do this through leadership in sectors of national economic significance,
to which the Group brings a unique set of capabilities.
• This requires them to grow aggressively in focused areas of business.
• Their heritage of returning to society what they earn evokes trust among
consumers, employees, shareholders and the community.
• The Tata name is a unique asset representing leadership with trust
.
49

50. CEO managing director
Srinath Narasimhan
Managing Director, CEO
Tata Communications
Srinath Narasimhan is the Managing Director and CEO of Tata Communications
(formerly VSNL), part of the $62.5 billion Tata Group.
Mr. Srinath has over 20 years experience within the Tata Group, having held various
positions in project management, sales and marketing, as well as significant
corporate functions in several Tata companies. Mr. Srinath has been responsible for
spearheading new projects in high-technology areas such as process automation
and control, computers and telecommunications and was an instrumental figure early
in the launch of the Tata Group's CDMA services.
Mr. Srinath previously served as Executive Assistant to the Chairman for Tata
Industries, a position he held until 1992. He worked with a strategic team to set up
Tata Information Systems, which later became Tata IBM. Throughout his tenure
here, he accepted a number of assignments in sales and marketing.
In 1998, Mr. Srinath returned to Tata Industries as General Manager, Projects and
worked with Tata Teleservices in this capacity for a year. In 1999, he moved to
50

51. Hyderabad as Chief Operating Officer responsible for all the operations of Tata
Teleservices. In late 2000, Mr. Srinath took over as Chief Executive Officer of Tata
Internet Services, a position he held until February 2002, when he moved to VSNL
as Director (Operations). He subsequently became Executive Director for VSNL.
In 2006, Mr. Srinath was honored with the Telecom Asia 'CEO of the Year' award in
recognition of his role in transforming VSNL from a domestic monopoly to a major
global telecommunications company in just four years. During this time, VSNL's
business model was reinvented and the company entered several new businesses,
both in India and abroad.
Mr. Srinath holds a degree in Mechanical Engineering from the Indian Institute of
Technology, Chennai and an MBA from the Indian Institute of Management, Kolkata,
specializing in marketing and systems.
51

52. History
52

53. Milestones
1868
• The TATA Group was founded byJamsetji Nusserwanji Tata in the mid 19th
century, a period when India had just set out on the road to gaining
independence from British rule.
1874
• The Central India Spinning, Weaving and Manufacturing Company is set up,
marking the Group's entry into textiles.
1902
• The Indian Hotels Company is incorporated to set up the Taj Mahal Palace
and Tower, India's first luxury hotel, which opened in 1903.
1907
• The Tata Iron and Steel Company (now Tata Steel) is established to set up
India's first iron and steel plant in Jamshedpur. The plant started production in
1912.
53

54. 1910
• The first of the three Tata Electric Companies, The Tata Hydro-Electric Power
Supply Company, (now Tata Power) is set up.
1911
• The Indian Institute of Science is established in Bangalore to serve
as a centre for advanced learning.
1912
• Tata Steel introduces eight-hour working days, well before such a system was
implemented by law in much of the West.
1917
• The Tata’s enter the consumer goods industry, with the Tata Oil Mills
Company being established to make soaps, detergents and cooking oils.
1932
• Tata Airlines, a division of Tata Sons, is established, opening up the aviation
sector in India.
54

55. 1939
• Tata Chemicals, now the largest producer of soda ash in the country, is
established
1945
• Tata Engineering and Locomotive Company (renamed Tata Motors in 2003) is
established to manufacture locomotive and engineering products.
• Tata Industries is created for the promotion and development of hi-tech
industries.
1952
• Jawaharlal Nehru, India's first Prime Minister, requests the Group to
manufacture cosmetics in India, leading to the setting up of Lakme.
1954
• India's major marketing, engineering and manufacturing organisation, Voltas,
is established.
1962
55

56. • Tata Finlay (now Tata Tea), one of the largest tea producers, is established.
• Tata Exports is established. Today the company, renamed Tata International,
is one of the leading export houses in India.
1968
• Tata Consultancy Services (TCS).
India's first software services company, is established as a division of Tata
Sons.
1970
• Tata McGraw-Hill Publishing Company is created to publish educational and
technical books.
• Tata Economic Consultancy Services is set up to provide services in the field
of industrial, marketing, statistical and techno-economic research and
consultancy.
1984
• Titan Industries – a joint venture between the Tata Group and the Tamil Nadu
Industrial Development Corporation (TIDCO) – is set up to manufacture
watches.
1991
56

57. • Tata Motors rolls out its millionth vehicle. (The two-million mark was reached
in 1998 and the third million in 2003.)
1995
• Tata Quality Management Services institutes the JRD QV Award, modelled on
the Malcolm Baldrige National Quality Value Award of the United States,
laying the foundation of the Tata Business Excellence Model.
1996
• Tata Teleservices (TTSL) is established to spearhead the Group's foray into
the telecom sector.
• Tata Indicom delivers cellular services through its CDMA mobile telephony
platform. It has pre-paid and post-paid options, enhanced through tie-ups for
handsets with leading manufacturers.
1998
• Tata Indica – India's first indigenously designed and manufactured car – is
launched by Tata Motors, spearheading the Group's entry into the passenger
car segment.
1999
• The new Tata Group corporate mark and logo are launched.
57

58. 2000
• Tata Tea acquires the Tetley Group, UK. This is the first major acquisition of
an international brand by an Indian business group.
2001
• Tata AIG – a joint venture between the Tata Group and American
International Group Inc (AIG) – marks the Tata
re-entry into insurance.
• (The Group's insurance company, New India Assurance, was nationalized in
1956).
• The Tata Group Executive Office (GEO) is set up to design and implement
change in the Tata Group and to provide long-term direction.
2002
• The Tata Group acquires a controlling stake in VSNL, India's leading
international telecommunications service provider.
• Tata Consultancy Services (TCS) becomes the first Indian software company
to cross one billion dollars in revenues.
• Titan launches Edge, the slimmest watch in the world.
• Idea Cellular, the cellular service born of a tie-up involving the Tata Group, the
Birla Group and AT&T, is launched.
58

59. • Tata Indicom, the umbrella brand for telecom services from the Tata
Teleservices stable, starts operations.
2003
• Tata Motors launches CityRover – Indicas fashioned for the European market.
The first batch of CityRovers rolled out from the Tata Motors stable in Pune on
September 16, 2003.
2004
• Tata Motors acquires the heavy vehicles unit of Daewoo Motors, South Korea.
• TCS goes public in July 2004 in the largest private sector initial public offering
(IPO) in the Indian market, raising nearly $1.2 billlion.
2005
• Tata Steel acquires Singapore-based steel company NatSteel by subscribing
to 100 per cent equity of its subsidiary, NatSteel Asia .
• VSNL acquired Tyco Global Network, making it one of the world's largest
providers of submarine cable bandwidth.
• Tata Sons completes 60 years of Tata operations in the US.
• The Taj takes over management of The Pierre, NY .
• Taco acquires Wundsch Weidinger, Germany.
59

60. • Tata Steel acquires stake in Carborough Down Coal Project, Queensland,
Australia
• VSNL acquires Teleglobe International Holdings, Bermuda
• TCS acquires Sydney-based Financial Network Services (FNS)
• Tata Motors passenger vehicle sales cross one-million mark
• TCS acquires leading BPO firm Comicrom in Chile.
• The Indian Hotels Company acquires hotel run by Starwood, Sydney.
• Tata Steel acquires Millennium Steel, Thailand.
• Tata Chemicals acquires controlling stake in Brunner Mond Group, UK.
• Tata launched gold plus ,a new jewellery range.
2006
• Tata Credit Card launched
• Foundation stone for the Tata Medical Centre unveiled in Kolkata
• TCS launches India’s largest e-governance initiative, MCA-21
• Tata Steel ranked world’s best steel maker for the third time by World Steel
Dynamics
• Tata Coffee acquires US-based Eight O'Clock Coffee
• Tatas join hands with Indigene Pharmaceuticals to build a global
biopharmaceutical company
• Tata Sky satellite television service launched across the country
• Tata Steel begins construction of R670 million Ferrochrome plant in South
Africa
60

61. • Tata Group acquires 30-per cent stake in Glacéau
• VSNL rebrands SNO as Neotel in South Africa
2007
• In a giant leap, Tata Steel's acquisition of the Anglo-Dutch steel major Corus
has vaulted the former to the fifth position from 56th in global steel production
capacity.
2008
• Vsnl, Vsnl international and Teleglobe unite as tata communication.
2009
• Tata Communication and tyco telecommunication complete TGN-Intra Asia
system.
Tata in communication sactor
1. Broadband services (Tata Indicom)
2. Telecommunications (Tata Indicom)
61

62. • Tata Teleservices and VSNL, through their common brand Tata Indicom, offer
a complete range of telecom solutions for business needs. Tata Indicom is the
world leader in fixed wireless services.
They are providing:
 Fixed-wire phone connections
 Web conferencing
 Centrex (central exchange)
Consultancy
• Management consultancy (Tata Economic Consultancy Services, Tata
Strategic Management Group)
Corporate Sustainability
Working for the disadvantaged sections of the society is a way of life at the Tata
Group. As Mr. JRD Tata believed, “society is an important stakeholder in the
development of any organization”. Social Responsibility has been central to the core
values of the Tata group for over a century now—and Tata companies have not only
been proactive on compliance with regulatory requirements, but have also had a
farsighted vision in ensuring sustainability of business processes; restoration of
biodiversity; and conserving wildlife where possible.
62

63. Keeping in tune with the changing business, environmental and social scenarios, the
Tata Group has adopted the term ‘Corporate sustainability’ instead of Corporate
Social Responsibility. Sustainable livelihoods are the demand of all social initiatives
in the Group. Tata Teleservices Ltd is a responsible corporate citizen, and strives to
give back to the community it operates in. The main objective behind the CS
initiatives of TTSL is to use telecom to impact the life of the underprivileged sections
of society. The company Endeavour’s to make a positive contribution to the
community by supporting a wide range of socio-economic, educational and health
initiatives. Keeping in mind the Tata Group guidelines and the objective mentioned
above, we have identified and implemented many CS initiatives since 2006-end.
Toward the end of 2008, with the then new TTSL Corporate Sustainability team
having come on board, Tata Teleservices Limited began the process of joining the
select few Tata Group companies that had put together their CS Big Picture. Under
the guidance of the Tata Council for Community Initiatives, TTSL began work on this,
and the ‘Big Picture’ was put together in mid-2008. Under the TTSL Big Picture (see
image below), Education and Environment were identified as the two primary pillars
for CS@TTSL, with all projects and activities stemming from there.
That having been said, it was also decided that rather than put a stop to all the good
work that many of TTSL’s 20 Circle offices were doing (but which were not aligned to
the Big Picture), the CS team would let these carry on for the cause of continuity in
the target communities, slowly bringing them under the pillars identified—the process
of Big Picture Alignment at TTSL, thus, began.
63

64. TATA Business Excellence Model
Tata Business Excellence Model is a framework which helps companies to achieve
excellence in their business performance. This is the chosen model by the TATA
group to help in building globally competitive organizations across TATA Group
companies. TBEM is based on the Malcolm Balridge National Quality Award Model
of the U.S.
The Criteria have three important roles in strengthening competitiveness:
• To help improve organizational performance practices, capabilities, and
results
• To facilitate communication and sharing of best practices information among
all organizations within TATA Group.
• To help in guiding organizational planning and opportunities for learning
TBEM Criteria is designed to help organizations use an integrated approach to
organizational performance management that results in
• Delivery of ever-improving value to customers and stakeholders, contributing
to organizational sustainability
• Improvement of overall organizational effectiveness and capabilities
• Organizational and personal learning
The Criteria are built on the following set of 11 Interrelated Core Values and
Concepts:
• Visionary Leadership
64

65. • Customer-driven Excellence
• Organizational and Personal Learning
• Valuing Employees and Partners
• Agility
• Focus on the Future
• Managing for Innovation
• Management by Fact
• Social Responsibility
• Focus on Results and Creating Value
• Systems Perspective
The Core Values and Concepts are embodied in seven Categories, as follows:
• Leadership
• Strategic Planning
• Customer and Market Focus
• Measurement, Analysis, and Knowledge Management
• Work force Focus
• Process Management
• Business Results
The TBEM criteria are the operational details of the Core Values, applied to the
different facets of a Business organization.
The 7 Criteria Categories are divided into 18 items and 32 Areas to Address
The TBEM framework has the following characteristics
65

66. • Focus on Business results
• Non-prescriptive and Adaptable
• Maintains System Perspective
• Supports Goal based diagnosis
TBEM instills a process centric approach in an organization as a means to achieve
the chosen Business Goals
Tata Teleservices Limited as a part of the TATA Group has adopted the TATA
Business Excellence model as an intricate part of its operation structure and uses it
to grow from strength to strength, keeping Operational excellence and Business
results in focus.
Vision
Deliver a new world of communications to advance the reach and leadership of
our customers.
Commitment
Invest in building long-lasting relationships with customers and partners and lead
the industry in responsiveness and flexibility.
66

67. Strategy
Build leading-edge IP-leveraged solutions advanced by our unmatched global
infrastructure and leadership in emerging markets.
Communication on Progress Year: 2009-2010
Tata Teleservices Limited (TTSL) is leading the way for Tata Group‟s presence in
the telecom sector. Incorporated in 1996, Tata Teleservices is the pioneer of CDMA
1x technology in India, and after launching mobile operations in January 2005 under
the brand name Tata Indicom, today now enjoys a pan-India presence, with existing
operations in India‟s 22 telecom circles. The company also leads the market in fixed
wireless telephony, and for the last five consecutive quarters, the company‟s
network has been rated the “Least Congested” by the Telecom Regulatory Authority
of India.
Now TTSL also has a presence in GSM space, thanks to its November 2008
strategic alliance with Japan‟s NTT DOCOMO. The joint venture now offers
67

68. differentiated products and services under the TATA DOCOMO brand name. TATA
DOCOMO marks a significant milestone in Indian telecom, redefining the industry
with its innovative per-second tariff option, or “Pay for What You Use” pricing
paradigm. TTSL‟s bouquet of telephony services includes mobile, wireless desktop,
public booth, wireline and enterprise solutions. Four brands comprise Tata
Teleservices Limited: Virgin Mobile, Tata Walky (fixed wireless phones), Tata Photon
family (different options of wireless mobile broadband access), and T24 (GSM
mobile services, through a strategic partnership with Indian company Future Group).
In December 2008, Tata Teleservices announced a unique reverse equity swap
strategic agreement between its telecom tower subsidiary, Wireless TT Info-Services
Limited (WTTISL), and Quippo Telecom Infrastructure Limited (QTIL). Kicking off
operations with 18,000 towers, this combined entity has become the largest
independent entity in telecom, with the highest tenancy ratios in the industry.
Today, the WTTISL and QTIL partnership has a portfolio of around 35,000 towers.
Currently, Tata Teleservices Ltd, combined with Tata Teleservices (Maharashtra)
Ltd, serves nearly 65 million customers in over 420,000 towns and villages across
the country, providing top-quality telephony services.
Tata Communications’ strategic focus
Over the next two to three years, Tata Communications will focus on:
• Redefining "wholesale" from a commodity, low value business to a
partnership-driven, value-enhancing one
68

69. • Expanding access networks in India including rolling out wireless (WiMAX)
networks for business and consumes
• Rapidly grow its global enterprise segment with catalyst services including
Telepresence, media and entertainment solutions, Ethernet and cloud
computing
• Achieving global benchmarks in customer services and operations
• Creating at least one new "home market" in addition to India and South Africa
COMPANY NAME
69

70.  METHODOLOGY ADOPTED.
 OBJECTIVES OF THE STUDY.
 TOOLS AND TECNIQUES USED.
 GEOGRAPHICAL AREA COVERED.
70

71. RESEARCH METHODOLOGY
The study is made on the basis of secondary data. The annual report by the firms
was of great help collection the necessary information. In addition to this, the
personal of “TATA TELESERVICES LTD” were very co-operative in forwarding the
necessary information as and when required.
5.1 METHODOLOGY ADOPTED
UNIVERSE OF THE STUDY-:
A research design is the arrangement of conditions for collection and analysis of
data in a manner that aims to combine relevance to the research purpose with
economy in procedure. Research design is a plan that specifies the sources and
71

72. types of information relevant to the research problem. It is a strategy specifying
which approach will be used for gathering and analyzing the data. In fact research
design is the conceptual structure within which research is conducted. It constitutes
the blue print for the collection, measurement and analysis of data.
Types of Research Design:-
Research Design is mainly of three types:-
1. Exploratory Research:-
2. Descriptive Research or Conclusive Research:-
3. Experimental Research or empirical research
The research undertaken by me in this project is empirical research. The
research methodology adopted for the project can be stated as follows:-
In order to do the research successfully and fulfill the objective of the research, the
prime thing was to study the entire balance sheet and P & L accounts of different
years of TATA TELESERVICES LTD. I had done that by collecting the required
information through firm’s manual and data available on internet
. After that a detailed and systematic report was then prepared.
SAMPING SIZE
Area covered for this study has been taken as TATA TELESERVICES LTD. Sample
size for this study which is taken by me is approx 75 people’s .It has been so taken
by the researcher because it was convenient for her to approach the site easily.
Also, the research has been carried over the topic. Finance ratio analysis because it
clearly prescribes the strengths and weakness of company and its financial value.
72

73. SAMPLING METHOD
Sampling is the process of selecting units (e.g. people, organizations) from a
population of interest so that by studying the sample we may fairly generalize our
results back to the population from which they were chosen.
The difference between non probability and probability sampling is that non
probability sampling does not involve random selection and probability sampling
does.
We can divide non probability sampling methods into two broad types: accidental or
purposive
Most sampling methods are purposive in nature because we usually approach the
sampling problem with a specific plan in mind.
This research analysis has not been carried over any types of sampling because the
data is strictly of secondary type and does not count in any types of sampling
method.
The study is made on the basis of secondary data. The annual reports by the firms
were of great help collection the necessary information. In addition to this, the
personal of “TATA TELESERVICES LTD” were very co-operative in forwarding the
necessary information as and when required.
73

74. Data require for this project is mainly two type’s i.e. primary data & secondary data
and I also use the Graphs in analysis of ratio which help to understand to every one.
Tools for data collection
Data require for this project is mainly tow type’s i.e. primary data & secondary data and I
also use the Graphs in analysis of ratio which help to understand to every one.
• Primary Data: -
Those are collected fresh and the time and this happens to be original in character. The
primary data were collected through personal interaction with the manager and official of
the firm.
• Data is collected from telephone enquiries.
• Concert with the expertise.
• Data is collected from survey.
• Secondary Data: -
Secondary data means data is already available i.e. they refer the data which have
already been collected and analyzed by someone else, then he has to look into various
74

75. sources form whose he can obtain them, usually the publications technical trade journal
books, Magazines, Net and Reports of company etc.
• Data is collected from past year records.
• Data is collected from my guide.
• Data is collected from GOOGLE.
75

76. 5.3 OBJECTIVES OF THE STUDY
The objectives of this project are as under:
1. To compare the financial ratio from last 5 year of “TATA TELESERVICES LTD.”
76

77. 2. To analyze the profitability ratio of “TATA TELESERVICES LTD.”
3. To check the liquidity position of “TATA TELESERVICES LTD.”
4. To gain insight into long tern solvency of “TATA TELESERVICES LTD.”
5. To know the financial Position of the Company by calculating the ratio analysis of “TATA
TELESERVICES LTD.”
77

78. 78

79. SAMPLES & TOOLS
Samples used in the profitability of TATA TELESERVICES LTD. company
are following:
 Profit & Loss account of the unit for the years 2005-06 to 2009-10.
 Balance Sheet of the unit for the years 2005-06 to 2009-10.
 Various schedules relevant to the Profit & Loss account and Balance Sheet.
The tools used in the profitability of TATA TELESERVICES LTD.
Company are following:
 Comparative Balance Sheet.
 Comparative Profit and Loss Account.
 Various standards ratio.
79

80. TOOLS OR TECHNIQUES OF FINANCIAL STATEMENTS ANALYSIS
Financial statements indicate certain absolute information about assets, liabilities,
equity, revenues, expenses and profit or loss of an enterprise. Various techniques
are applied for analyzing the financial statements.
Following tools and techniques for analysis of the statements:
1. Comparative Balance sheet Statements:
Comparative Financial Statements are the
Statements in which figures for two or more periods are placed side by side along
with change in figures in absolute and percentage form to facilitate comparison. Both
Income Statement and Position Statement are prepared in the form of comparative
Financial Statements.
2. Comparative profit and loss account Statement:
It expresses all figures of financial
statements as percentage of common base. In the P&L account the sale figure is
assumed to be 100 and all figures are expressed as a percentage of sales.
3. Ratio Analysis:
It expresses the relationship between two
financial variables taken from financial statements of an accounting period in the
form of ratios.
80

81. COMPARATIVE BALANCE SHEET
The comparative balance sheet analysis is the study of the trend of the same items,
groups of items and computed items in two balance sheets of the unit on different
dates. The changes in periodical balance sheet items reflect the conduct of a
business. The changes can be observed by the comparison of the balance sheet at
the beginning and at the end of a period and these changes can help in forming an
opinion about the progress of a unit.
Comments and Interpretations of Comparative Balance sheet:
• The working capital has decreased by Rs. 21.16crore in compare to the last years. In
the year 2010 ,2009,2008,2007,and 2006 is Rs. 196.96crore ,218.07crore,125.00
cr ,203.17 crore ,and 175.08 crore respectively This is mainly due to increase the
current liability in the current year.
• Reserve & surplus, which is having only current year profit, has increased by Rs.
298.01 crore with respect to previous year.
• Intangible assets have decreased by Rs. 29.84Lakh. This is due to prior year impact
of delaying capitalization on computer software.
81

82. 82

83. Area covered for this study has been taken as TATA TELESERVICES LTD in NEW
DELHI. It has been so taken by the researcher because it was convenient for her to
approach the site easily.
Also, the research has been carried over the topic. Finance ratio analysis because it
clearly prescribes the strengths and weakness of company and its financial value.
83

84. 84

85. Particular 2009-2010 2008-2009
Telecom Revenue 2069.10 1941.68
Other income 208.71 112.28
Total Income 2277.81 2053.96
Expenditure 1737.30 1460.78
Earnings Before Interest,
Depreciation, Tax 540.51 593.18
Finances Treasury Charges (Net) 317.62 304.78
Depreciation 520.89 446.79
Loss Before Tax 298.00 158.39
Wealth Tax & Fringe Benefit Tax 0.01 1.21
Loss After Tax 298.01 159.60
Profit and Loss (Rs. in crores)
Interpretation: The total revenue grew by 10.90% to Rs. 2,277.81 Cr. During the
year, the Company consolidated its position in the market by increasing its share of
new additions in the wireless market (i.e. fixed wireless and mobile). The subscriber
base grew by 73% to cross 13 million, mainly through the very successful launch of
GSM services by the company, The change in interconnect regime with reduced
85

86. termination charges and competitive pressures which pulled down the tariffs resulted
in lower Average Revenue per User (ARPU) compared to the previous year.
Operating expenses increased by 18.93%, mainly due to costs associated with the
launch and operations of GSM services. The Company reported a positive EBIDTA
of Rs. 540.51 Cr., as compared to the previous year’s EBIDTA of Rs. 593.18 Cr.,
despite the costs associated with the launch of GSM services.
Market Capture and Net Profit compare with other company’s
Market Cap. Net Profit
(Rs. cr.)
Bharti Airtel 131,603.41 9,426.16
Reliance Comm 28,875.74 478.93
Idea Cellular 23,719.92 1,053.66
Tata Comm 7,828.95 483.18
Spice Comm 3,929.12 -1,015.22
TataTeleservice 3,803.88 -298.01
MTNL 3,442.95 -2,514.87
Tulip Telecom 2,596.23 249.58
86

87. market capture
Bharti Airtel Reliance Comm Idea Cellular Tata Comm
Spice Comm TataTeleservice MTNL Tulip Telecom
2%
4% 2% 2% 1%
11%
14%
64%
Interpretation: Bharti Airtel is the big competitor of TATA TELESERVICES,
1.85% capture in market which is too small compare to the other tele companies,
TATA TELESERVICES try to give more innovation in to their product and services it
help to increases their sale and profitability of the company.
Current ratio and Quick ratio
Particular 2006 2007 2008 2009 2010
Current ratio 0.15 0.24 0.19 0.18 0.14
Quick ratio 0.29 0.37 0.45 0.56 0.40
87

88. Current ratio
Quick ratio
Interpretation: Traditionally a current ratio of 2:1 is considered to be a satisfactory
ratio. On the basis of this traditional rule , if the current ratio is 2 or more, it means
the firm is adequately liquid and has the ability to meets it current obligation but if
the current ratio is less than two it means the firm has difficulties in meeting its
current obligations. The logic behind this rule is that even if the value of current
assets becomes half, the firm can still meet its short term obligations. Here the
current ratio in the year 2010 is 0.14:1 that is more than the last years
2006,2007,2008,2009 ratio which is 0.15:1, 0.24:1, 0.19:1 and 0.18:1 respectively.
It indicates rs. of quick assets available for each rs. Of current liability tradionally a
quick ratio of 1:1 is considered to be a satisfactory ratio but hear in the year 2010
quick ratio is 0.40:1 is decreased to compared to the last year ratio 0.56:1 and this
decreased due to cheques in hand.
88

89. Operating Profit Margin
Particular 2006 2007 2008 2009 2010
Operating
Profit
11.23 20.54 23.75 28.27 22.27
Margin
Operating Profit Margin
30
25
20
15
Operating Profit Margin
10
5
0
2006 2007 2008 2009 2010
Interpretation: This ratio indicates an average operating cost incurred on a sale of
goods worth Rs.100.Lower the ratio, greater is the operating profit to cover the non-
operating expenses, to pay dividend and to create reserves and vice versa. Here the
operating ratio in year 2010, 2009, 2008, 2007, and 2006 are 22.27%, 28.27, 23.75,
20.54 and 11.23 respectively. in the year 2010 4% more in compare last year 2009.
89

90. This change is due to increase the sale because of operational efficiency of the
company. Operating ratios increases year to year which is good for the company.
Gross Profit Margin
Particular 2006 2007 2008 2009 2010
Gross Profit
0.58 10.61 -1.98 6.32 -1.28
Margin
Gross Profit Margin
12
10
8
6
4
Gross Profit Margin
2
0
2006 2007 2008 2009 2010
-2
-4
Interpretation: Gross profit ratio of 2006 to 2010 are0.58%,10.61%,-1.98,6.32%
and-1.28% .i.e. fluctuate during year so it indicate the profit earning of the company
is not so good negative ratios shows the poor performance of the company. higher
the ratio, the more efficient the production and purchase management. This change
due to change in government policy because of government fix the prices of the raw
material of the company and in this year it gives the more margin of profit on sale
and that’s why this ratio increases.
90

91. Net Profit Margin
Particular 2006 2007 2008 2009 2010
Net Profit -49.31 -21.81 -7.07 -7.80 -13.44
Margin
Interpretation: This ratio is the indication of overall profitability and efficiency of
the business. high net profit ratio would only means adequate returns to the owners.
It also enables a firm to withstand in cut-throat competition when the selling price is
falling or cost of production is rising .the ratio in the year 2010 , 2009,2008,2007,
and 2006 are -49.31%, -21.81%,-7.07,-7.08% and -13.44% respectively it shows
loss of the company.
91

92. Return On Investment
Particular 2006 2007 2008 2009 2010
Return On
-21.48 -8.21 1.44 5.09 -0.73
Investment
Return On Investment
-
- Return on Investment
-
-
-
Interpretation: The ratio can be used to judge the borrowing policy of the
enterprise. If an enterprise having the ratio of return on investment 15% borrows at
16%, it would indicate that it is borrowing at a rate higher than its earning. The
comparisons of this ratio with that of similar firms and with industry average over a
period of time would disclose as to how effectively the long-term funds provided by
owners and creditors have been used.
92

93. Inventory Turnover Ratio
Particular 2006 2007 2008 2009 2010
Inventory --- 641.35 769.00 1012.25 345.37
Turnover
Ratio
Interpretation: It indicates the speed with which the inventory is converted into
sales. in general, a high ratio indicates efficient performance since an improvement
in the ratio shows that either the same volume of sales has been maintained with a
lower investment in stocks, or the volume of sales has increased without any
increase in the amount of stocks. However, too high ratio and too low ratio call for
further investigation. A too high ratio may be the result of very low inventory levels,
which may result in frequent stock-out, and thus the firm may incur high stock out
costs. On the other hand, a too low ratio may be the result of excessive inventory
levels: slow moving or obsolete inventory and thus the firm may incur high carrying
93

94. costs. Thus a firm should have neither a very high nor a very low stocks turnover
ratio: it should have a satisfactory level here the stocks turnover ratio in year 2010
is345.37 that is low 666.88 from the last three years i.e 641.35,769.00, 1012.25 in
the year 2007,2007,2008 respectively.
Asset Turnover Ratio
Particular 2006 2007 2008 2009 2010
Asset Turnover
0.35 0.40 0.49 0.57 0.49
Ratio
Interpretation: The asset turnover ratio simply compares the turnover with the
assets that the business has used to generate that turnover. ratio in the year 2010 ,
2009,2008,2007, and 2006 are 0.49%, 0.57%, 0.49, 0.40% and 0.35% respectively.
This ratio were increasing till 2009 but due to some reason it go to down fall in 2010.
94

95. 95

96. 1. The total revenue grew by 10.90% to Rs. 2,277.81 Cr. During the year, the Company
consolidated its position in the market by increasing its share of new additions in the
wireless market (i.e. fixed wireless and mobile).
2. Operating expenses increased by 18.93%, mainly due to costs associated with the
launch and operations of GSM services.
3. The Company reported a positive EBIDTA of Rs. 540.51 Cr, as compared to the
previous year’s EBIDTA of Rs. 593.18 Cr, despite the costs associated with the
launch of GSM services.
4. Current ratio position is not good in the period 2006 to 2010.it is not stable. An ideal
current ratio is 2:1. The current ratio in the year 2010 is 0.14:1 that is more than
the last years 2006, 2007, 2008, 2009 ratio which is 0.15:1, 0.24:1, 0.19:1 and
0.18:1 respectively.
96

97. 5. The operating ratio in year 2010, 2009, 2008, 2007, and 2006 are 22.27%,
28.27, 23.75, 20.54 and 11.23 respectively. Operating ratios increases year to
year which is good for the company.
6. A quick ratio1:1 is usually considered satisfactory it is again a rule of thumb only.
Again it is not stable. Year wise it is increase or decrease.
7. In 2010 and 2010 inventory ratio are not more than 2009, 2008 and 2007. The
company working capital might be tied up in finance inventory.
8. The stocks turnover ratio in year 2010 is345.37 that is low 666.88 from the
last three years i.e. 641.35,769.00, 1012.25 in the year 2007,2007,2008
respectively.
9. Gross profit ratio of 2006 to 2010 are 0.58%,10.61%,-1.98,6.32%
and-1.28% .i.e. fluctuate during year so it indicate the profit earning of the
company is not so good negative ratios shows the poor performance of the
company. Net profit of the company is not in good position.
10. Company market share is too low comparing other Teleservices company. But TATA
TELESERVICES is growing year to year.
11. The change in interconnect regime with reduced termination charges and competitive
pressures which pulled down the tariffs resulted in lower Average Revenue per User
(ARPU) compared to the previous year.
97

98. 12. During the year, the Company registered highest incremental wireless subscriber
additions of 28% and end of period market share of 17.6%.
98

99. 99

100. 1. The company should maintain the current ratio for the years by proper maintaining
current assets and current liabilities.
2. The company should properly utilize its liquid assets by employing it in better
technologies. Which may increase the efficiency and quality of the products?
3. The company should reduce cost of production and also operating cost, which may
ultimately increase the profits of the company.
4. The company should improve our competitiveness through improved material
utilization and reduced process cost.
5. The company should increase there efficiencies of net working capital and to
maintain adequate level of working capital.
100

101. 101

102. • There is not accurate information provided by the management.
• Information is not sufficient for study which is given by the company.
• Limited period which is not sufficient for the study.
• Sample size is too small not represent whole NEW DELHI.
• No good response from the clients during telephonic communication.
102

103. 103

104. As of April 2010, there were more than 638 million telephone connections in the
country of which 601 million were wireless connections. Approximately 15 million
mobile connections are being added every month. The national mobile tele-density
is around 54 per hundred. So in way we can say that company is growing year to
year.
During the year, the Company focused on increasing its retail presence to achieve a
better market penetration for its various products and services.
Profitability depend upon the profitability ratios of the company and most of the
profitability ratios of the company going in a negative(such as gross profit ratio and
net profit ratio) way which is not good sigh of the company.
Company does not properly utilize their liquid assets by which company suffer lot.
There are imbalance between the current liability net current assets in the company
and it’s affect the current ratios and present current ratios of the company is not
good.
At last we can say that overall performance of the TATA TELESERVICES company
are not so good. TATA TELESERVICES improve their services and it help increase
the sale.
During the year, the Company registered highest incremental wireless subscriber
additions of 28% and end of period market share of 17.6%. During the year, the
Company increased its focus on CDMAs inherent data capabilities to offer high
speed data services to subscribers. The Company offers High Speed Internet
Access (HSIA) service undertheTata Photon* brand. The Company has also made
significant investments in the Enterprise business segment. The Company further
104

105. expanded its wire line presence in Mumbai, Delhi and other state. The Company
continued to focus on value added service offerings. The Company introduced
several attractive product and service propositions that addressed specific customer
needs.
During the year, the Company has focused on operational efficiency and quality
control measures with a constant endeavor to further improve its network quality.
The Company has also successfully unlocked the bandwidth potential in its existing
transmission network and offered transmission bandwidth to the new operators. The
Company has undertaken ISO 9001:2008 certification to demonstrate its capability to
consistently provide services that enhance customer satisfaction through effective
deployment of a quality management system. In view of the losses, the Directors
regret their inability to recommend any dividend for the year under consideration. No
appropriations are proposed to be made for the year under consideration. The total
revenue grew by 10.90% to Rs. 2,277.81 Cr. in the year; the Company consolidated
its position in the market by increasing its share of new additions in the wireless
market (i.e. fixed wireless and mobile).
The Company reported a positive EBIDTA of Rs.540.51 Cr, as compared to the
previous year’s EBIDTA of Rs. 593.18 Cr, despite the costs associated with the
launch of GSM services.
105

106. 106

107. Books:-
• Financial Management: - Prasanna Chandra
• Financial Management: - Ravi M. Vechalakar
• Cost & Management Account: - Ravi Kishor
Magazines:-
• Annual General Report
• Company Document
Internet Sites:-
• www.tatateleservices.com
• www.google.com
• www.moneycontrol.com
• www.rediffmoneywiz.com
107

108. SOURCES OF COLLECTION OF DATA:-
1. Staff of the TATA TELESERVICES LTD
2. Magazines and Internet
3. Journal Books of TATA TELESERVICES LTD
4. Annual General Report of 2006-07, 2007-08, 2008-09 and 2009-10
108

109. 109

110. Key Financial Ratios of Tata Teleservices Rs. in crores)
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
Investment Valuation Ratios
Face Value 10.00 10.00 10.00 10.00 10.00
Dividend Per Share -- -- -- -- --
Operating Profit Per Share (Rs) 0.81 1.60 2.14 3.03 2.60
Net Operating Profit Per Share
7.20 7.78 9.02 10.72 11.65
(Rs)
Free Reserves Per Share (Rs) -13.27 -11.78 -11.06 -11.94 -13.51
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Operating Profit Margin(%) 11.23 20.54 23.75 28.27 22.27
Profit Before Interest And Tax
-31.79 -11.03 -1.90 6.28 -1.28
Margin(%)
Gross Profit Margin(%) 0.58 10.61 -1.98 6.32 -1.28
Cash Profit Margin(%) -6.30 9.52 16.39 15.47 7.54
Adjusted Cash Margin(%) -1.61 8.95 16.39 15.47 7.54
Net Profit Margin(%) -49.31 -21.81 -7.07 -7.80 -13.44
Adjusted Net Profit Margin(%) -44.62 -22.38 -7.07 -7.80 -13.44
Return On Capital Employed(%) -21.48 -8.21 1.44 5.09 -0.73
Return On Net Worth(%) 108.73 96.70 62.68 43.33 44.72
Adjusted Return on Net
-- -- -- -- --
Worth(%)
Return on Assets Excluding
-19.56 -1.78 -1.06 -1.94 -3.51
Revaluations
Return on Assets Including
-19.56 -1.78 -1.06 -1.94 -3.51
Revaluations
Return on Long Term Funds(%) -40.54 -10.43 2.33 12.44 -2.43
Liquidity And Solvency Ratios
Current Ratio 0.15 0.24 0.19 0.18 0.14
Quick Ratio 0.29 0.37 0.45 0.56 0.40
Debt Equity Ratio -- -- -- -- --
Long Term Debt Equity Ratio -- -- -- -- --
Debt Coverage Ratios
Interest Cover -2.92 -0.91 0.21 0.58 -0.07
Total Debt to Owners Fund -- -- -- -- --
Financial Charges Coverage
0.88 1.72 2.60 2.18 1.50
Ratio
Financial Charges Coverage
0.51 1.76 2.72 2.07 1.67
Ratio Post Tax
Management Efficiency Ratios
1,012.2
Inventory Turnover Ratio -- 641.35 769.00 345.37
5
110

111. Debtors Turnover Ratio 7.35 8.63 9.18 9.20 8.76
1,012.2
Investments Turnover Ratio -- 633.77 769.00 345.37
5
Fixed Assets Turnover Ratio 0.57 0.75 0.49 0.57 0.49
Total Assets Turnover Ratio 1.03 1.22 1.21 1.18 1.16
Asset Turnover Ratio 0.35 0.40 0.49 0.57 0.49
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- 0.36 1.03
Number of Days In Working
-270.33 -184.78 -118.06 -79.30 -142.94
Capital
Profit & Loss Account Ratios
Material Cost Composition -- 0.23 0.45 0.44 1.23
Imported Composition of Raw
-- -- -- -- --
Materials Consumed
Selling Distribution Cost
16.83 16.96 9.48 10.06 15.78
Composition
Expenses as Composition of
-- -- -- -- --
Total Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit -- -- -- -- --
Dividend Payout Ratio Cash
-- -- -- -- --
Profit
Earning Retention Ratio -- -- -- -- --
Cash Earning Retention Ratio -- 100.00 100.00 100.00 100.00
AdjustedCash Flow Times -- 15.90 9.02 9.83 21.58
Earnings Per Share -3.56 -1.72 -0.66 -0.84 -1.57
Book Value -3.27 -1.78 -1.06 -1.94 -3.51
111

112. PROFIT AND LOSS OF TATA TELESERVICES LTD. (Rs. in crores)
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 1,095.13 1,406.98 1,707.19 2,034.62 2,210.39
Excise Duty 0.00 0.00 0.00 0.00 0.00
Net Sales 1,095.13 1,406.98 1,707.19 2,034.62 2,210.39
Other Income -49.34 24.30 78.40 -26.51 37.28
Stock Adjustments 0.00 0.00 0.00 -0.21 4.39
Total Income 1,045.79 1,431.28 1,785.59 2,007.90 2,252.06
Expenditure
Raw Materials 0.00 3.36 7.80 9.15 27.37
Power & Fuel Cost 30.17 36.76 52.27 0.00 107.96
Employee Cost 48.56 71.00 93.63 112.90 146.26
Other Manufacturing
495.18 569.48 648.32 814.29 823.66
Expenses
Selling and Admin
279.99 319.19 220.72 288.68 464.37
Expenses
Miscellaneous
118.18 118.12 278.97 232.81 170.95
Expenses
Preoperative Exp
0.00 0.00 0.00 0.00 -18.79
Capitalised
Total Expenses 972.08 1,117.91 1,301.71 1,457.83 1,721.78
Operating Profit 123.05 289.07 405.48 576.58 493.00
PBDIT 73.71 313.37 483.88 550.07 530.28
Interest 142.02 177.61 182.27 268.68 331.99
PBDT -68.31 135.76 301.61 281.39 198.29
Depreciation 471.90 446.23 439.35 446.79 520.89
Other Written Off 0.00 0.00 0.00 0.00 0.00
Profit Before Tax -540.21 -310.47 -137.74 -165.40 -322.60
Extra-ordinary items 0.00 0.00 12.93 8.21 25.16
PBT (Post Extra-ord
-540.21 -310.47 -124.81 -157.19 -297.44
Items)
Tax 0.85 0.70 0.93 1.21 0.01
Reported Net Profit -541.06 -310.61 -125.74 -159.60 -298.01
Total Value Addition 972.08 1,114.55 1,293.91 1,448.68 1,694.41
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 0.00 0.00 0.00 0.00 0.00
Corporate Dividend Tax 0.00 0.00 0.00 0.00 0.00
112

113. Per share data
(annualised)
18,094.9 18,935.6 18,971.9
Shares in issue (lakhs) 15,205.85 18,971.97
7 4 1
Earning Per Share (Rs) -3.56 -1.72 -0.66 -0.84 -1.57
Equity Dividend (%) 0.00 0.00 0.00 0.00 0.00
Book Value (Rs) -3.27 -1.78 -1.06 -1.94 -3.51
COMPAREATIVE BALANCE SHEET OF TATA TELESERVICES LTD.
(Rs. in crores)
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 1,520.59 1,809.50 1,893.56 1,897.19 1,897.20
Equity Share Capital 1,520.59 1,809.50 1,893.56 1,897.19 1,897.20
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves -2,018.20 -2,130.71 -2,094.15 -2,265.52 -2,563.53
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Net worth -497.61 -321.21 -200.59 -368.33 -666.33
Secured Loans 1,080.12 1,696.26 2,098.09 2,036.13 2,300.43
Unsecured Loans 1,031.73 332.61 528.78 1,076.16 1,309.00
Total Debt 2,111.85 2,028.87 2,626.87 3,112.29 3,609.43
Total Liabilities 1,614.24 1,707.66 2,426.28 2,743.96 2,943.10
Application Of Funds
Gross Block 3,646.17 4,053.52 4,524.71 4,552.63 5,574.14
Less: Accum.
1,384.66 1,826.85 1,663.58 1,653.55 2,070.32
Depreciation
Net Block 2,261.51 2,226.67 2,861.13 2,899.08 3,503.82
Capital Work in Progress 175.08 203.17 125.00 218.07 196.91
Investments 0.00 0.00 0.00 75.00 120.00
Inventories 0.00 2.22 2.22 2.01 6.40
Sundry Debtors 155.80 170.32 201.48 240.73 264.12
Cash and Bank Balance 22.31 38.51 34.45 27.48 22.98
Total Current Assets 178.11 211.05 238.15 270.22 293.50
Loans and Advances 146.59 171.37 216.99 299.91 301.05
Fixed Deposits 5.08 45.10 0.01 0.00 0.00
Total CA, Loans &
329.78 427.52 455.15 570.13 594.55
Advances
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 1,074.19 1,071.79 981.91 981.61 1,466.05
Provisions 77.94 77.91 33.09 36.71 6.13
Total CL & Provisions 1,152.13 1,149.70 1,015.00 1,018.32 1,472.18
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114. Net Current Assets -822.35 -722.18 -559.85 -448.19 -877.63
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 1,614.24 1,707.66 2,426.28 2,743.96 2,943.10
Contingent Liabilities 434.62 423.60 406.51 979.37 565.14
Book Value (Rs) -3.27 -1.78 -1.06 -1.94 -3.51
Compare with other TELE company’s (Rs. in crores)
Market Cap. Net Profit
(Rs. cr.)
Bharti Airtel 131,603.41 9,426.16
Reliance Comm 28,875.74 478.93
Idea Cellular 23,719.92 1,053.66
Tata Comm 7,828.95 483.18
Spice Comm 3,929.12 -1,015.22
TataTeleservice 3,803.88 -298.01
MTNL 3,442.95 -2,514.87
Tulip Telecom 2,596.23 249.58
114