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PREFACE
Practice orientation of management student is must generating competence to
deal with issues at grass root level it is for this reason that Research project
study is prescribed as apart of syllabus for MBA Degree in Bhopal. The main
objective of this project is the “Study on Financial Analysis on BHARTI
AIRTEL SERVICES LTD.”.
This project was also carried out to understand the future Outlook of the
BHARTI AIRTEL SERVICES LTD. Another motive includes finding about the
key financial condition of BHARTI AIRTEL SERVICES LTD. Their
performance, growth potential and also the opportunities that exist for the
Indian industries. The scope of this project is limited to study of BHARTI
AIRTEL SERVICES LTD... .
Financial analysis is the process of identifying the financial
strengths and weaknesses of the firm and establishing relationship between the
items of the balance sheet and profit & loss account.
Financial analysis is defined as the systematic use of the ratio to
interpret the financial statements. So that the strengths and weaknesses of a
firm, as well as its historical performance and current financial condition can be
determined. Ratio reflects a quantitative relationship helps to form a
quantitative judgment.
I have tried to put my maximum effort to get the accurate statistical data.
However I would appreciate if any mistakes are brought to my by the reader.
1
TABLE OF CONTENT
S.NO CONTENTS PAGE NO.
01 INTRODUCTION 03
02 COMPANY PROFILE 21
03 OBJECTIVE OF THE STUDY 30
04 RESEARCH METHODOLOGY 32
05 DATAANALYSIS
&INTERPRETATION
36
06 FINDINGS 55
07 SUGGESTION 57
08 CONCLUSION 59
09 BIBLIOGRAPHY 61
2
INTRODUCTION
3
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial
strengths and weaknesses of the firm and establishing relationship between the
items of the balance sheet and profit & loss account.
Financial ratio analysis is the calculation and comparison of ratios,
which are derived from the information in a company’s financial statements.
The level and historical trends of these ratios can be used to make inferences
about a company’s financial condition, its operations and attractiveness as an
investment. The information in the statements is used by
Trade creditors, to identify the firm’s ability to meet their claims i.e.
liquidity position of the company.
Investors, to know about the present and future profitability of the
company and its financial structure.
Management, in every aspect of the financial analysis. It is the
responsibility of the management to maintain sound financial condition in
the company.
RATIO ANALYSIS
The term “Ratio” refers to the numerical and quantitative relationship between
two items or variables. This relationship can be exposed as
Percentages
Fractions
Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to
interpret the financial statements. So that the strengths and weaknesses of a
firm, as well as its historical performance and current financial condition can be
determined. Ratio reflects a quantitative relationship helps to form a
quantitative judgment.
4
STEPS IN RATIO ANALYSIS
The first task of the financial analysis is to select the information relevant
to the decision under consideration from the statements and calculates
appropriate ratios.
To compare the calculated ratios with the ratios of the same firm relating
to the pas6t or with the industry ratios. It facilitates in assessing success
or failure of the firm.
Third step is to interpretation, drawing of inferences and report writing
conclusions are drawn after comparison in the shape of report or
recommended courses of action.
BASIS OR STANDARDS OF COMPARISON
Ratios are relative figures reflecting the relation between variables.
They enable analyst to draw conclusions regarding financial operations. They
use of ratios as a tool of financial analysis involves the comparison with related
facts. This is the basis of ratio analysis. The basis of ratio analysis is of four
types.
Past ratios, calculated from past financial statements of the firm.
Competitor’s ratio, of the some most progressive and successful
competitor firm at the same point of time.
Industry ratio, the industry ratios to which the firm belongs to
Projected ratios, ratios of the future developed from the projected or pro
forma financial statements
NATURE OF RATIO ANALYSIS
5
Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios for helping in
making certain decisions. It is only a means of understanding of financial strengths and
weaknesses of a firm. There are a number of ratios which can be calculated from the
information given in the financial statements, but the analyst has to select the appropriate data
and calculate only a few appropriate ratios. The following are the four steps involved in the
ratio analysis.
Selection of relevant data from the financial statements depending upon
the objective of the analysis.
Calculation of appropriate ratios from the above data.
Comparison of the calculated ratios with the ratios of the same firm in the
past, or the ratios developed from projected financial statements or the
ratios of some other firms or the comparison with ratios of the industry to
which the firm belongs.
INTERPRETATION OF THE RATIOS
The interpretation of ratios is an important factor. The inherent
limitations of ratio analysis should be kept in mind while interpreting them. The
impact of factors such as price level changes, change in accounting policies,
window dressing etc., should also be kept in mind when attempting to interpret
ratios. The interpretation of ratios can be made in the following ways.
Single absolute ratio
Group of ratios
Historical comparison
Projected ratios
Inter-firm comparison
6
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS
The calculation of ratios may not be a difficult task but their use is
not easy. Following guidelines or factors may be kept in mind while interpreting
various ratios are
Accuracy of financial statements
Objective or purpose of analysis
Selection of ratios
Use of standards
Caliber of the analysis
IMPORTANCE OF RATIO ANALYSIS
Aid to measure general efficiency
Aid to measure financial solvency
Aid in forecasting and planning
Facilitate decision making
Aid in corrective action
Aid in intra-firm comparison
Act as a good communication
Evaluation of efficiency
Effective tool
LIMITATIONS OF RATIO ANALYSIS
Differences in definitions
Limitations of accounting records
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Lack of proper standards
No allowances for price level changes
Changes in accounting procedures
Quantitative factors are ignored
Limited use of single ratio
Background is over looked
Limited use
Personal bias
CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only.
There are different parties interested in the ratio analysis for knowing the
financial position of a firm for different purposes. Various accounting ratios can
be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios
1. Traditional Classification
It includes the following.
Balance sheet (or) position statement ratio: They deal with the
relationship between two balance sheet items, e.g. the ratio of current
assets to current liabilities etc., both the items must, however, pertain to
the same balance sheet.
8
Profit & loss account (or) revenue statement ratios: These ratios deal with
the relationship between two profit & loss account items, e.g. the ratio of
gross profit to sales etc.,
Composite (or) inter statement ratios: These ratios exhibit the relation
between a profit & loss account or income statement item and a balance
sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage
ratios, activity ratios and profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify
them as primary and secondary ratios. The primary ratio is one, which is of the
prime importance to a concern. The other ratios that support the primary ratio
are called secondary ratios.
IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS
ARE
1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current
obligations as & when there becomes due. The short term obligations of a firm
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can be met only when there are sufficient liquid assets. The short term
obligations are met by realizing amounts from current, floating (or) circulating
assets The current assets should either be calculated liquid (or) near liquidity.
They should be convertible into cash for paying obligations of short term
nature. The sufficiency (or) insufficiency of current assets should be assessed by
comparing them with short-term current liabilities. If current assets can pay off
current liabilities, then liquidity position will be satisfactory.
To measure the liquidity of a firm the following ratios can be
calculated
Current ratio
Quick (or) Acid-test (or) Liquid ratio
Absolute liquid ratio (or) Cash position ratio
(a) CURRENT RATIO:
Current ratio may be defined as the relationship between
current assets and current liabilities. This ratio also known as Working capital
ratio is a measure of general liquidity and is most widely used to make the
analysis of a short-term financial position (or) liquidity of a firm.
Current assetsCurrent ratio = Current liabilities
Components of current ratio
CURRENT ASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
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Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses
(b) QUICK RATIO
Quick ratio is a test of liquidity than the current ratio. The term
liquidity refers to the ability of a firm to pay its short-term obligations as &
when they become due. Quick ratio may be defined as the relationship between
quick or liquid assets and current liabilities. An asset is said to be liquid if it is
converted into cash with in a short period without loss of value.
Quick or liquid assetsQuick ratio = Current liabilities
Components of quick or liquid ratio
QUICK ASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Sundry debtors Short-term advances
Marketable securities Sundry creditors
Temporary investments Dividend payable
Income tax payable
(c) ABSOLUTE LIQUID RATIO
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Although receivable, debtors and bills receivable are generally
more liquid than inventories, yet there may be doubts regarding their realization
into cash immediately or in time. Hence, absolute liquid ratio should also be
calculated together with current ratio and quick ratio so as to exclude even
receivables from the current assets and find out the absolute liquid assets.
Absolute liquid assetsAbsolute liquid ratio = Current liabilities
Absolute liquid assets include cash in hand etc. The acceptable
forms for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid
assets are considered to pay Rs.2 worth current liabilities in time as all the
creditors are nor accepted to demand cash at the same time and then cash may
also be realized from debtors and inventories.
Components of Absolute Liquid Ratio
ABSOLUTE LIQUID ASSETS CURRENT LIABILITIESCash in hand Out standing or accrued expensesCash at bank Bank over draftInterest on Fixed Deposit Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable
2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to
meet its long term obligations. Accordingly, long term solvency ratios indicate
firm’s ability to meet the fixed interest and costs and repayment schedules
associated with its long term borrowings.
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The following ratio serves the purpose of determining the solvency
of the concern.
Proprietory ratio
(a) PROPRIETORY RATIO
A variant to the debt-equity ratio is the proprietory ratio which is
also known as equity ratio. This ratio establishes relationship between share
holders funds to total assets of the firm.
Shareholders fundsProprietory ratio = Total assets
SHARE HOLDERS FUND TOTAL ASSETS
Share Capital Fixed Assets
Reserves & Surplus Current Assets
Cash in hand & at bank
Bills receivable
Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid Expenses
3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and
earn profits. The efficiency with which assets are managed directly effect the
volume of sales. Activity ratios measure the efficiency (or) effectiveness with
which a firm manages its resources (or) assets. These ratios are also called
“Turn over ratios” because they indicate the speed with which assets are
converted or turned over into sales.
Working capital turnover ratio
13
Fixed assets turnover ratio
Capital turnover ratio
Current assets to fixed assets ratio
(a) WORKING CAPITAL TURNOVER RATIO
Working capital of a concern is directly related to sales.
Working capital = Current assets - Current liabilities
It indicates the velocity of the utilization of net working capital.
This indicates the no. of times the working capital is turned over in the course of
a year. A higher ratio indicates efficient utilization of working capital and a
lower ratio indicates inefficient utilization.
Working capital turnover ratio=cost of goods sold/working capital.
Components of Working Capital
CURRENT ASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses
(b) FIXED ASSETS TURNOVER RATIO
It is also known as sales to fixed assets ratio. This ratio measures
the efficiency and profit earning capacity of the firm. Higher the ratio, greater is
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the intensive utilization of fixed assets. Lower ratio means under-
utilization of fixed assets.
Cost of SalesFixed assets turnover ratio = Net fixed assets
Cost of Sales = Income from Services
Net Fixed Assets = Fixed Assets - Depreciation
(c) CAPITAL TURNOVER RATIOS
Sometimes the efficiency and effectiveness of the operations are
judged by comparing the cost of sales or sales with amount of capital invested
in the business and not with assets held in the business, though in both cases the
same result is expected. Capital invested in the business may be classified as
long-term and short-term capital or as fixed capital and working capital or
Owned Capital and Loaned Capital. All Capital Turnovers are calculated to
study the uses of various types of capital.
Cost of goods soldCapital turnover ratio = Capital employed
Cost of Goods Sold = Income from Services
Capital Employed = Capital + Reserves & Surplus
15
(d) CURRENT ASSETS TO FIXED ASSETS RATIO
This ratio differs from industry to industry. The increase in the
ratio means that trading is slack or mechanization has been used. A decline in
the ratio means that debtors and stocks are increased too much or fixed assets
are more intensively used. If current assets increase with the corresponding
increase in profit, it will show that the business is expanding.
Current AssetsCurrent Assets to Fixed Assets Ratio =
Fixed Assets
Component of Current Assets to Fixed Assets Ratio
CURRENT ASSETS FIXED ASSETS
Cash in hand Machinery
Cash at bank Buildings
Bills receivable Plant
Inventories Vehicles
Work-in-progress
Marketable securities
Short-term investments
Sundry debtors
4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits.
Because profit is the engine, that drives the business enterprise.
Net profit ratio
Return on total assets
Reserves and surplus to capital ratio
Earnings per share
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Operating profit ratio
Price – earning ratio
Return on investments
(a) NET PROFIT RATIO
Net profit ratio establishes a relationship between net profit (after
tax) and sales and indicates the efficiency of the management in manufacturing,
selling administrative and other activities of the firm.
Net profit after taxNet profit ratio= Net sales
Net Profit after Tax = Net Profit (–) Depreciation (–) Interest (–) Income Tax
Net Sales = Income from Services
It also indicates the firm’s capacity to face adverse economic
conditions such as price competitors, low demand etc. Obviously higher the
ratio, the better is the profitability.
(b) RETURN ON TOTAL ASSETS
Profitability can be measured in terms of relationship between net
profit and assets. This ratio is also known as profit-to-assets ratio. It measures
the profitability of investments. The overall profitability can be known.
Net profitReturn on assets =
17
Total assets
Net Profit = Earnings before Interest and Tax
Total Assets = Fixed Assets + Current Assets
(c) RESERVES AND SURPLUS TO CAPITAL RATIO
It reveals the policy pursued by the company with regard to growth
shares. A very high ratio indicates a conservative dividend policy and increased
ploughing back to profit. Higher the ratio better will be the position.
Reserves& surplusReserves & surplus to capital = Capital
(d) EARNINGS PER SHARE
Earnings per share is a small verification of return of equity and is
calculated by dividing the net profits earned by the company and those profits
after taxes and preference dividend by total no. of equity shares.
Net profit after taxEarnings per share = Number of Equity shares
The Earnings per share is a good measure of profitability when
compared with EPS of similar other components (or) companies, it gives a view
of the comparative earnings of a firm.
18
(e) OPERATING PROFIT RATIO
Operating ratio establishes the relationship between cost of goods
sold and other operating expenses on the one hand and the sales on the other.
Operating costOperation ratio = Net sales
However 75 to 85% may be considered to be a good ratio in case
of a manufacturing under taking.
Operating profit ratio is calculated by dividing operating profit by
sales.
Operating profit = Net sales - Operating cost
Operating profitOperating profit ratio =
Sales
(f) PRICE - EARNING RATIO
Price earning ratio is the ratio between market price per equity
share and earnings per share. The ratio is calculated to make an estimate of
appreciation in the value of a share of a company and is widely used by
investors to decide whether (or) not to buy shares in a particular company.
Generally, higher the price-earning ratio, the better it is. If the price
earning ratio falls, the management should look into the causes that have
resulted into the fall of the ratio.
Market Price per SharePrice – Earning Ratio = Earnings per Share
19
Capital + Reserves & SurplusMarket Price per Share =
Number of Equity Shares
Earnings before Interest and TaxEarnings per Share =
Number of Equity Shares
(g) RETURN ON INVESTMENTS
Return on share holder’s investment, popularly known as Return
on investments (or) return on share holders or proprietor’s funds is the
relationship between net profit (after interest and tax) and the proprietor’s funds.
Net profit (after interest and tax)Return on shareholder’s investment = Shareholder’s funds
20
COMPANY
PROFILE
Bharti airtel
bharti airtel limited is a leading global telecommunications company with
operations in 19 countries across Asia and Africa. The company offers
mobile voice & data services, fixed line, high speed broadband, IPTV,
DTH, turnkey telecom solutions for enterprises and national &
21
international long distance services to carriers. bharti airtel has been
ranked among the six best performing technology companies in the
world by business week. bharti airtel had 200 million customers across
its operations.
Award
airtel has won the ‘Most Preferred Cellular Service Provider Brand’ award at
the CNBC Awaaz Consumer Awards in Mumbai. This is 6th year in a row that
airtel has won the award in this category. This year, the awards were based on
an exhaustive consumer survey done by The Nielsen Company. Over 3,000
consumers, spanning 19 cities and 16 states in India, rated brands across
different categories to choose brands which delivered true value for money.
bharti airtel has received the prestigious Businessworld-FICCI-SEDF Corporate
Social Responsibility Award 2009-2010. The FICCI Socio Economic
Development Foundation (FICCI-SEDF) and Businessworld CSR award was
instituted in 1999 to recognize exemplary responsible business practices by the
Indian industry.
Organization chart
22
business description
Provides GSM mobile services in all the 22 telecom circles in India,
Srilanka, Bangladesh and now in 16 countries of Africa.
Provides telemedia services (fixed line and broadband services through
DSL) in 87 cities in India.
Provides an integrated suite of Enterprise solutions, in addition to
providing long distance connectivity both Nationally and Internationally.
We also offer DTH and IPTV Services
established
July 07, 1995, as a Public Limited Company
23
ISIN
INE397D01024
proportionate revenue
Rs. 172,698 million (ended September 30, 2011-Audited)
Rs. 152,310 million ( ended September 30, 2010-Audited)
As per IFRS Accounts
proportionate EBITDA
Rs. 58,151million ( ended September 30, 2011 - Audited)
Rs. 51,377 million ( ended September 30, 2010- Audited)
As per IFRS Accounts
shares in issue
3,797,530,096 as at September 30, 2011
listings
Bombay Stock Exchange Limited (BSE)
National Stock Exchange of India Limited (NSE)
24
stock exchange symbol
NSE – BHARTIARTL
BSE – 532454
Corporate governance
The board of directors of the company has an optimum mix of executive and
non-executive directors, which consists of two executive and fourteen non-
executive directors. The chairman and managing director, Mr. Sunil Bharti
Mittal, is an executive director and the number of independent directors on the
board is 50% of the total board strength. The independence of a director is
determined on the basis that such director does not have any material pecuniary
relationship with the company, its promoters or its management, which may
affect the independence of the judgment of a director. The board members
possess requisite skills, experience and expertise required to take decisions,
which are in the best interest of the company.
For Emerging Business
Data & Services
Internet technology
Internet technology has evolved as a trusted platform to do boundary-less
business and share valued information. We at airtel have a proven experience in
delivering High Performance Internet Solutions to corporate on a congestion
free transoceanic Global IP Network.
25
airtel identifies varied needs of emerging and established businesses in India
and offers a portfolio of Internet products customized to meet requirements of
this high growth business segment. airtel delivers its array of Internet products
from 130+ locations across India and globally. Focused on sustained
performance, each IP solution has a well qualified definition to meet your
business specific need. On varied IP Port speeds and aggressive commercials,
there is a ready answer for Business Continuity, Burst-able Bandwidth,
distributed or centralized internet delivery, industry leading latency
commitment with proactive network management and user friendly online
network monitoring tool
Our global MPLS backbone is capable of carrying any type of data (i.e.
voice, video, CRM, ERP, FTP etc.) across the globe. With coverage in
more than 70 countries and 700 cities, our MPLS network is the right
choice for managing your Global WAN connectivity requirements
MPLS services offered
Layer 3 Global MPLS service specifications:
Highly scalable and redundant backbone architecture
No quick fix using existing ATM and frames
Separate MPLS and Internet backbone
Support of any-to-any meshed connectivity
Support on variety of CE-PE routing protocol like Static, OSPF and BGP
Support of multiple class of services
Flexible physical access port ranging from T1/ E1, DS3, STM1 to FE
Flexible port speed ranging from 64 Kbps to STM1 level
End-to-end CPE management and monitoring services
24x7x365 central NOC and support team
Service level guarantee provided on uptime, availability, latency, packet
loss and jitter (for voice traffic only)
26
Layer 2 Global MPLS
Coverage in major geographies like Hong Kong, Singapore, UK and USA
Backbone network build on Cisco AToM (Any Transport on MPLS)
Support of point-to-point and point-to-multipoint architecture
Support of single class of service
Scalable and redundant backbone architecture
Access supported is on Ethernet
SLA provided on availability, latency and packet class
Four Classes of Services
Premium RT – Real time multimedia
Premium NRT – Interactive video and streaming
Business - Mission critical business applications
Standard – HTTP/FTP/Non-time critical applications
* available on-net and selected extended networks
How it benefits you
Comprehensive end-to-end solutions
Support of Layer 2 and Layer 3 connectivity
Multiple protocol and interface support
End-to-end managed services
End-to-end service level agreement
24x7x365 central NOC and support team
Plug and play implementation
Low maintenance and ongoing manageability
Better security with no routing disclosures to service providers
3G
Embrace the next generation of mobile communications - the generation
of 3G.airtel brings to you a world class 3G network capable of delivering
27
amazing access speeds to keep you ahead, increasing bandwidth on
your mobile to broadband speeds. 3G not only promises faster web
browsing and file downloads but also empowers demanding multimedia
applications such as video conferencing, Voice-over-IP (VoIP), full
motion video and streaming music. Experience a whole new world of
applications with amazing speed on airtel 3G.
what you get from airtel 3G on Mobile:
Voice & services
Now you can communicate, whenever you want to, not just in plain words, but
also in more exciting, innovative yet simple new ways. Choose from our range
of postpaid services, to do more with airtel
Fixed Line Voice
Our ISDN PRI offers you 30 bearer channels and 2 data channels where
each channel operates at 64kbps. Thus a 2048kbps line is formed which
can be used for the following applications
High end voice communication
Uses ISDN signalling
High speed data transfer
Leased line backup
Centrex
Now you can connect your different offices within the same city using our
Centrex facility. You can reach your collegue in a separate office by just
dialing a short digit code, completely free of charge.
Centrex provides switching at the central office instead of individual
offices and works like EPABX service. Airtel would own and manage the
equipment and software necessary to implement the service.
Business Application
audio conferencing
28
get the convenience of holding conversations with your team members
at different locations with airtel audio conferencing service. So, give an
all-new definition to communication and change your office space
forever!
Reservation-based Audio conference is of two types:
Attended conference service: Using this service, you can hold a large party,
multi-location conference and other important conferences smoothly, and a
conference coordinator is available throughout the proceedings.
Unattended conference service: Our conference coordinator can be
accessed by simply pressing * and 0 anytime during the
conference. This type of conference could be used for conducting small
routine conferences.
video conferencing
airtel video conference service lets you enjoy the benefit of a real time meeting
by providing an end-to-end, bug free video conversation with your business
partners at different locations.
Reservation-based video conference is of two types:
Attended conference service: Conference coordinator is available during
the entire conference to ensure that it is held smoothly. This type of
conference is beneficial to you for conducting a multi-party / multi-
location conference.
Unattended conference service: Our conference coordinator can be
accessed simply by pressing a button anytime during the conference. Use
this kind of conference to conduct small routine conferences.
Data Center & Managed Services
Co-Location Services
29
airtel’s managed co-location services ensure that your technology
investments are secure in a high performance environment, thus
providing you peace of mind. Backed by industry specific SLAs, network
uptime guarantees and full scalability to meet your growing business
need, our services help you focus on your own business and utilize your
resources better.
airtel provides State-of-the-Art Tier III and Tier III+ data centers to co-locate
and operate your business critical IT & telecom equipments and applications.
We own an extensive global and domestic network infrastructure. You could
drive significant operational efficiencies by having a single partner for your
managed co-location and network connectivity needs. Our MPLS POPs at select
data Center locations provide you network redundancy, resilience & low
latency.
Managed Services
1. The service facilitates the customer to access airtel’s onsite technical
resource 24 x 7, 365 days for routine activities of operations &
maintenance and also during emergency situations.
2. Response times
a. Business hours : 2 hrs
b. Out of hours : 4 hrs Business hours : 9 AM-5PM, Mon-Fri.
3. Packs usable per month, no carry-over
4. Additional hours available
30
OBJECTIVE OF STUDY
31
OBJECTIVES OF THE STUDY
To study the financial position of the company.
To analyse the financial stability and overall performance of BHARTI AIRTEL
SERVICES LTD. in general.
To analyse and interpret the trends as revealed by various ratios of the company in
particular.
32
To analyse the profitability and solvency position of the unit with the existing tools of
financial analysis.
To study the changes in the assets, liabilities structure of the company during the
period of study.
33
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. it may
be understood as a science of studying how research is done scientifically. So, the research
34
methodology not only talks about the research methods but also considers the logic behind
the method used in the context of the research study.
RESEARCH DESIGN:
Descriptive research is used in this study because it will ensure the minimization of
bias and maximization of reliability of data collected. The researcher had to use fact and
information already available through financial statements of earlier years and analyse these
to make critical evaluation of the available material. Hence by making the type of the
research conducted to be both Descriptive and Analytical in nature.
From the study, the type of data to be collected and the procedure to be used for this
purpose were decided.
DATA COLLECTION:
The required data for the study are basically secondary in nature and the data are
collected from the audited reports of the company.
SOURCES OF DATA:
The sources of data are from the annual reports of the company from the year 2009-
2010.
METHODS OF DATA ANALYSIS:
The data collected were edited, classified and tabulated for analysis. The analytical
tools used in this study are:
35
ANALYTICAL TOOLS APPLIED:
The study employs the following analytical tools:
1. Comparative statement.
2. Common Size Statement.
3. Trend Percentage.
4. Ratio Analysis.
IMPROTANCE OF THE STUDY
By “FINANCIAL PERFORMANCE ANALYSIS OF BHARTI AIRTEL SERVICES
LTD.” we would be able to get a fair picture of the financial position of BHARTI
AIRTEL SERVICES LTD..
By showing the financial performance to various lenders and creditors it is possible to
get credit in easy terms if good financial condition is maintained in the company with
assets outweighing the liabilities.
Protecting the property of the business.
Compliances with legal requirement,
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LIMITATIONS OF THE STUDY
The analysis and interpretation are based on secondary data contained in the published
annual reports of BHARTI AIRTEL SERVICES LTD. for the study period.
Due to the limited time available at the disposable of the researcher the study has been
confined for a period of 7 years (2001-2007).
Ratio itself will not completely show the company’s good or bad financial position.
Inter firm comparison was not possible due to the non availability of competitors data.
The study of financial performance can be only a means to know about the financial
condition of the company and cannot show a through picture of the activities of the
company.
37
DATA ANALYSIS &
INTERPRETATION
38
CALCULATION & INTERPRETATION OF RATIOS
1) CURRENT RATIO:
Meaning:
Current ratio may be defined as the relationship between current
assets and current liabilities. This ratio is also known as working
capital ratio, is measure of general liquidity and mostly used to
make the analysis of a short-term financial position or liquidity of
a firm. The rule of thumb for current Ratio is 2:1 which is
considered as strong financial position of the company.
Current ratio = Current Assets
Current Liabilities
Calculation :
Year 2010 2009
Current
assets
39935.57 38026.00
Current
liabilitie
s
23696.97 21686.07
Ratio 1.69:1 1.75:1
39
Interpretation:
In 2009 current ratio was 1.75 which is decreased to 1.69 in the
year 2010. As compared to last year Current Assets has increased
because of increase in Inventories, Cash and Bank balance and
other Current Assets but Current Ratio has decreased because of
excess advance received from debtor , decrease in Cost of
Removal of over burden, and increase in current liability .
40
2) QUICK / ACID TEST/ LIQUID RATIO :
Meaning:
Quick ratio is more rigorous test of liquidity than the
current ratio. The term liquidity refers to the ability to pay its
short term obligations as and when they become due. As a rule
of thumb quick ratio of 1:1 is considered satisfactory.
Quick Ratio = Quick/ liquid Assets
Current liabilities
Calculation :
Year 2010 2009
Quick
assets
3406.48 1458.94
Current
liabilitie
s
23696.97 21686.07
Quick
ratio
0.14:1 0.07:1
41
Interpretation:
In 2009 quick ratio was 0.07 which has increased to 0.14 in 2010.
Quick assets has increased by 133% and Current liabilities has
increased only by 9% Due to which quick ratio has increased by
100%. The management has taken a great effort in maintaining
high quick assets as compared to last year.
42
3) STOCK TURN OVER OR INVENTORY TURN OVER
RATIO :
Meaning :
Every firm has to maintain a certain amount of inventory of
finished goods so as to meet the requirement of business. But the
level of inventory should neither be too high nor too low. Because
it is harmful to hold more inventory as amount of capital is
blocked in it and some cost is involved in it.
Inventory turn over ratio measure the speed with which stock is
converted into sales. Usually high inventory ratio indicates an
efficient management of inventory because more frequently stocks
are sold ; the lesser amount of money is required to finance the
inventory. Where as low inventory turn over ratio indicates the
inefficient management of inventory. A low inventory turn over
implies over investment in inventories.
Inventory turn over ratio = Cost of good sold
Average inventory
Cost of goods sold = Opening Stock+ Purchase + Direct
Expenses - Closing Stock
Average inventory = Opening stock + Closing stock
Calculation :
Year 2010 2009
COGS 57147.72 50738.36
Avg.
inventor
y
6294.255 4994.18
Ratio 9.08
Times
10.16
Times
43
Interpretation:
In 2009 inventory turn over ratio was 10.16 times which is
reduced to 9.08 times. Reduction of Inventory turn over ratio in
2010 may be due to increase in cost of goods sold with increase in
sales as compared to last year or due to non availability of opening
balance of inventory in the year 2009.
44
4) DEBTOR TURN OVER RATIO:
Meaning :
A concern may sell goods on cash as well as on credit. The volume
of sales can be increased by adopting liberal credit policy. But
liberal credit policy may result in tying up substantial funds of a
firm in form of trade debtors. Trade debtors are expected to be
converted into cash within short period and are included in current
assets.
Debtors velocity indicates the number of times the debtors are
turned over during a year. Higher the value of debtor turnover the
more efficient is the management of debtors/sales and vice versa.
Debtor turnover ratio = Net credit sales
Average debtors
Average debtors = Opening Debtor + closing Debtor
2
Calculation :
Year 2010 2009
Sales 135235.59 123719.15
Debtor Nil 219.19
Ratio Nil 564 Times
NOTES: Debtor in the year 2010 is -594.18 because of excess
advance received from customer therefore debtor is considered nil.
45
Interpretation:
Debtor turn over ratio in the year 2009 is extremely high i.e 564
times . The ratio is too high because the entire sale done by the
project is according to the agreement with customer. The debtor
shown on the closing day of financial year is not received by the
customer because customer has time to pay his liability in near
future. So the project is not worried about the Bad debts.
46
5) GROSS PROFIT RATIO:
Meaning :
The gross profit ratio indicates the extent to which selling prices of
goods per unit may decline without resulting in losses on
operations of a firm. It reflects the efficiency with which a firm
produces its products. Gross profit should be adequate to cover the
operating expenses and to provide for fixed charges, dividends and
accumulation of reserves.
Gross profit ratio = Gross profit * 100
Net Sales
Gross Profit = Sales- Cost of goods sold
Calculation :
Year 2010 2009
Gross
profit
78087.87 72980.79
Net sales 135235.59 123719.15
Ratio 58 % 59 %
47
Interpretation:
In the year 2009 gross profit ratio was 59 % which is decreased to
58% in the year 2010. The project gross profit has increased with
increase in sales as compared to last year. The project gross profit
ratio has decreased by 1% due to increase in direct expenses. The
company has sound position to meet its non-operating expenses
and also enough capable to pay taxes and royalty to the
government.
48
6) OPERATING RATIO:
Meaning :
Operating ratio establishes the relationship between cost of goods
sold and other operating expenses on the one hand and sales on the
other hand. Operating ratio indicates the percentage of net sales
that is consumed by operating cost. Higher the operating ratio is
less favourable for the company because it would have small
margin to cover interest, income tax , dividend and reserve.
Operating ratio = Operating Cost*100
Net Sales
Calculation :
YEAR 2010 2009
Operating Cost 59747.87 55732.54
Net Sales 135235.59 123719.15
Ratio 44.18% 45.05%
49
Interpretation:
In the year 2009 operating ratio was 45.05% which is reduced to
44.18% in the year 2010. Reduction in operating ratio will
contribute more to net profit . Reduction in operating ratio may be
possible due to reduction in cost per tones.
50
7) NET PROFIT RATIO:
Meaning:
Net profit ratio establishes a relationship between net profit after
tax and sales and indicate the efficiency of the management in
controlling the expenses of the company.
Net profit ratio = Net profit after tax *100
Net sales
Calculation :
Year 2010 2009
Net profit 82105.48 67010.72
Net sales 135235.59 123719.15
Ratio 60.71% 54.16%
51
Interpretation:
The net profit of the company has been increased by 6.55% as
compared to last year. In 2009 project net profit was 54.16%
which increased to 60.71% in 2010. Net profit of the project has
been increased due to increase in sales/ production, reduction in
cost per tonnes, and better control on operating expenses. The net
profit of the project reveals sound business of the project and
strong financial position.
52
8) WORKING CAPITAL TURNOVER RATIO:
Meaning:
Working capital turnover ratio indicates the velocity of the
utilization of net working capital. This ratio indicates the number
of times the working capital is turned over in the course of a year.
This ratio measures the efficiency with which the working capital
is being used by a firm. A higher ratio indicates efficient
utilization of working and low ratio indicates otherwise. But a
very high working capital turnover ratio is not a good situation for
any firm and must be taken while interpreting the ratio.
Working Capital Turnover Ratio = Cost of Sales
Net working capital
Calculation :
YEAR 2010 2009
COGS* 57147.72 50738.36
WORKING CAP. 16238.6 16339.93
RATIO 3.52 times 3.11 imes
*COGS :- Cost of Goods Sold
53
Interpretation: In the year 2009 ratio was 3.11 times which is
increased to 3.52 times in the year 2010. As compared to last
year working capital has been utilized very efficitently. In 2010,
the reciprocal of this ratio( 1/3.52=0.284) shows that for sales of
RS 1 company requires 28 paisa as working capital. This ratio is
very helpful to forecast the working capital requirement on the
basis of sales.
54
9) CREDITOR TURNOVER RATIO:
Meaning: In the course of business operations, a firm has
to make credit purchases and incur short-term liabilities. A
supplier of goods i.e, creditors is always interested to
know how much time the firm is likely to take in repaying
its trade creditors. It shows the speed at which payments
are made to the supplier for purchase made from them. It
is a relation between net credit purchase and average
creditors. Higher creditor turnover ratio or lower credit
period enjoyed signifies that the creditors are being paid
promptly.
Creditors turnover ratio = Net Credit Purchases
Average creditors
Average creditors = opening creditors + closing creditors
2
Calculation :
YEAR 2010 2009
CREDIT
PURCHASE
38301.77 39152.12
AVG.
CREDITORS
22691.52 21686.07
RATIO 1.69 times 1.81times
Credit purchase include consumption of stores and spares, social
overhead, power & fuel, repairs& contractual expenses.
55
Interpretation :
A high creditors turnover ratio indicates that creditors not paid
in time while a low ratio gives an idea that the business is not
taking full advantages of credit period allowed by the creditors.
Since creditors turnover ratio has decreased from 1.81 times to
1.69 times which represents that creditors are paid in time. It’s a
good sign for the company.
56
FINDINGS
57
Finding
I came across following findings during undergoing the project work on topic
“FINANCIAL ANALYSIS OF BHARTI AIRTEL SERVICES LTD..”.
1. In BHARTI AIRTEL SERVICES LTD. the coordination among the
various sections of the Finance & Accounts department is very nice, as
the Finance & Accounts department is a big department consisting of
near about 32 sections. It is the work force of the Finance & Accounts
department, which makes it possible.
2. In the BHARTI AIRTEL SERVICES LTD.. Ltd there not to create
debtors they generally deal with first to receive the cash or cheque, and
then they supply the finished material.
3. In the BHARTI AIRTEL SERVICES LTD. Ltd there working capital
management is very good, they use the IBS (ERP system) to manage
the over all activity.
4. During the study I find that their is no huge variation in budget decided
and the actual one.
5. The taxation policy is to be made flexible because of which bulkiness
of the work is to be removed.
6. The tendering process time is to be minimized so that the current
market price benefits if any can be availed.
7. Monthly return filling is not on line process, hence sales and excise
department face problem.
8. Online inventory valuation can be implemented.
9. The departmental policies is to made flexible which leads to decrease
in the work flow process as well as it leads in better profits.
58
SUGGESTION
59
RECOMMENDATION AND SUGGESTIONS
1. The company may increase the performance by reducing the borrowed capital, so that
the interest an finance charges will be less.
2. The company may increase the sales if it attempts to move into export market.
3. The company may reduce the operating inefficiencies through effective utilization of
all the resources.
4. The company may strike a balance between the current assets and current liabilities to
maintain the solvency position.
5. Optimum utilization of Working Capital can be planned so as to result in sound
financial position.
6. There is an urgent need to upgrade and modernize the plants for improving the
profitability of BHARTI AIRTEL SERVICES LTD..
60
CONCLUSION
61
CONCLUSION:
After analyzing the Financial Analysis of the BHARTI AIRTEL SERVICES
LTD. Ltd .I found that the Company is really in Good financial condition
because the management has taken a great effort in managing the funds like
acquiring and allocation of the funds, optimum utilization of the available
resources. The analysis shows that the profitability of the company is increases
as compared to the last years due to high production and sells with lesser
expenses. The organization is in sound position which is good for the company,
stakeholders as well as the Country also.Good financial position not just
beneficial for the company stake holders but it helps to improves the GDP as
well as the per capita income of the entire country.
Finance is the life blood of every business. Without effective financial management a
company cannot in this competitive world. A Prudent financial Manager has to measure the
working capital policy followed by the company.
BHARTI AIRTEL SERVICES LTD. continues to play an important role in the
industrial development of country. There is every possibility that BHARTI AIRTEL
SERVICES LTD. would establish for itself a permanent and unshakable position in the
industrial map of India and also in the emerging international market for steel.
62
BIBLIOGRAPHY
63
BIBLIOGRAPHY:
Books:
Dr. S. N. Maheshwari, Financial Management, English Revised
Edition.
M.Y. Khan and P. K. Jain, Financial Management,
Ravi M. Kishore, Financial Management, 6th Edition.
I.M. Pandey, Financial Management.
Website:
http://www.google.com
http://www.wikipedia.com
http://www.scribd.com
http://www.bhartiairtelservices.com
64
ANNEXURE
BHARTI AIRTEL SERVICES LTD.
65
Balance Sheet AS on 31st March 2010-2009
PARTICULARS DETAILS AS AT 31ST
MARCH2010(RS IN LAKH)
DETAILS AS AT 31ST
MARCH2009(RS IN LAKH)
SOURCES OF FUND:SHAREHOLDERS FUNDS:Share capitalShare money pending allotmentReserves & surplusLOAN FUND:SecuredUnsecuredCurrent Account with HQ
APPLICATION OF FUND:A. Fixed Assets
Gross Block
Less: DepreciationNet Block
B. Capital work-in-ProgressC. Surveyed off Fixed Assets
Awaiting disposal
InvestmentCurrent Assets , Loans & Advances:
DebtorsInventoriesCash & Bank Balances
Loans& AdvancesOther current Assets
Cost of Removal of Over BurdenTotal Current Assets, Loans &
0.000.0082105.48
92891.7458620.3734271.374170.97240.11
(594.18)7594.3336.32600.583363.7628934.7639935.5723696.97
82105.48
0.000.00(27184.43)54921.05
38682.45
0.00
16238.60
0.0054921.05
0.000.0067025.47
82890.7457996.9924893.75677.51195.71
219.194994.180.14607.01632.6031572.8838026.0021686.07
67025.47
0.000.00(24918.57)42106.90
25766.97
0.00
16339.93
0.0042106.90
66
AdvancesLess: Current Liabilities & Provisions:Net Current AssetsMisc. Expenditure
BHARTI AIRTEL SERVICES LTD.
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDEDAS on 31st March 2010-2009
PARTICULARS 31ST MARCH 2010(RS IN LAKHS)
31ST MARCH2009(RS IN LAKHS)
INCOME:SalesCoal issued for other purposesAccretion/ Decretion in StockWorkshop jobs for own purposesOther incomeEXPENDITURE:Consumption of Stores & SparesEmployees Remuneration & BenefitsSocial OverheadPower & FuelRepairsContractual ExpensesMiscellaneous ExpensesOverburden Removal Adjustment –Existing Mines
135235.590.002292.770.007511.49145039.8519900.2713336.933459.463814.224090.727037.105471.052638.12
123719.150.00854.390.004735.80129309.3420644.3516093.003392.103903.615392.115819.956196.995709.57
67
Total ExpenditureGROSS OPERATING PROFIT/ LOSSInterestFinancial/Commitment ChargesDepreciationProvisionsWrite OffPROFIT / LOSS FOR THE YEAROverburden Removal Adjust. For Closed MinesProvision written BackPrior Period AdjustmentExtra Ordinary ItemsPROFIT / LOSS BEFORE TAXATIONProvision for income tax for earlier yearsPROFIT AFTER TAXProvision for Dividend on Preference SharesProvision for proposed Dividend of Equity sharesProvision for income tax on proposed DividendNet profit After Tax & Proposed DividendRetained Profit After Trans. To ReserveBALANCE CARRIED TO BALANCE SHEET
59747.8785291.88192.86175.762856.35111.870.0081955.140.00131.6518.690.0082105.480.0082105.480.000.000.0082105.4882105.4882105.48
55732.5473576.80324.94312.295853.00268.480.0066818.090.0029.04163.590.0067010.720.0067010.720.000.000.0067010.7267010.7267010.72
68
