The Indian Telecommunications network has 203 million connections which is the 3rd largest in the world and the 2nd largest among the emerging economies of Asia. Today, it is the fastest growing market in the world. Telecom industry in India has a major role in Indian economy.
Bharti AIRTEL usually referred simply as AIRTEL is the leading global telecommunications company which performs its mobile operations across Asia and Africa. It operates GSM network in all countries which provides 2G and 3G services depending upon the country. It is the largest cellular service provider in India.
Swot Analysis of AIRTEL:
Strengths
AIRTEL is the largest operator.
More innovations.
Strategic alliance with IT companies.
It has Global presence.
Weakness
Less number of towers.
No plan like free calls as the competitors as its loosing value among youth.
Opportunities
Global Expansion
Partnered with IT companies to use the latest technology.
Threats
Competition is more from the domestic players
Aditya Birla Group owns IDEA cellular. It provides services in around 25 countries with over 1.3 lakh of employees. IDEA cellular provides GSM services in India with over 72 million customers. It is most customer friendly cellular service which has also introduces its first prepaid offerings in India.
Swot Analysis of IDEA:
Strengths
Market penetration by cutting the prices of tariff rates.
Strategic Alliance.
Profit growth rate is also increasing.
Weakness
No broad band and DTH service.
Less market share in urban market.
Opportunities
Launch 3G services.
Started internet services.
Strategic alliance with NOKIA.
Threats
Increase in competition in domestic market
Reducing of tariff rates resulted in lowering of service tax.
Financial Performance of the above companies for FYE 2009 and FYE 2010:
Financial Ratios:
Liquidity Ratios/Solvency Ratios:
Current Ratio:
The current ratio metric is produced by dividing current liabilities into current assets. It is calculated as follows
Current ratio = Current assets ÷ Current liabilities
Current ratios of AIRTEL for the year 2009 and 2010 are 0.69 and 0.68 respectively. This shows that the firm has high assets in 2009 when compared to 2010, which means AIRTEL is more capable of clearing its liabilities and is able to give confidence for the short term investors in year 2009 and it's slightly decreased in 2010.
Current ratios of IDEA for the year 2009 and 2010 are 0.98 and 0.96 respectively. . This shows that the firm has high assets in 2009 when compared to 2010, which means IDEA is more capable of clearing its liabilities and is able to give confidence for the short term investors in year 2009 and it's slightly decreased in 2010.
Quick ratio/Acid Test ratio:
Quick Ratio is also known as Acid test or Liquid ratio. The Acid test ratio is the ratio between quick assets and current liabilities.
Acid-test ratio = Quick assets ÷Current liabilities.
The acid test ratio of AIRTEL for year 2009 and 2010 are 0.65 and 0.72 respectively. This shows that AIRTEL has very strong acid ratio means it is not dependent on its inventories to clear off its liabilities and it is nice sign to invest in AIRTEL.
The acid test ratios of IDEA for year 2009 and 2010 are 1.31 and 0.86 respectively. This means that large part of the current assets of IDEA is tied up in slow moving and unsalable inventories and slow paying debts.
Inventory turnover ratio:
Inventory Turnover ratio defined as
Inventory turnover ratio = Cost of goods sold ÷Average inventory.
The inventory turnover ratio of AIRTEL for years 2009 and 2010 are 547.83 and 1307.05 respectively. The inventory-holding period of AIRTEL for year 2009 and 2010 are only few hours. AIRTEL has very less inventory holding period.
The inventory turnover ratio of IDEA for years 2009 and 2010 are 230.69 and 253.76 respectively.
Debtors turnover ratio:
This ratio establishes a relationship between newt credit sales and average debtors.
Debtors turnover ratio = net credit sales ÷average debtors
The debtors turnover ratios of AIRTEL are 12.78 and 15.30 for the years 2009 and 2010 respectively. The debtors collection period is 0.9 months and 0.78 months for the years 2009 and 2010. These figures show that company is collecting its debits very keenly.
The debtors turnover ratio of IDEA are 37.32 and 31.20 for the year 2009 and 2010. The debtors collection periods are 0.32 months and 0.38 months for the years 2010 and 2009 respectively.
Solvency Ratios
Debt equity ratios:
Debt-equity ratio is calculated as
Debt-equity ratio = Outsiders funds ÷ Shareholder's funds
The debt equity ratios of AIRTEL are 0.28 and 0.14 for the years 2009 and 2010 respectively. This ratio shows that the outsiders funds is very less when compared to the shareholder's funds.
The debt equity ratios of ITC are 0.67 and 0.57 for the years 2009 and 2010 respectively. This indicates that the outsiders funds is very less when compared to the shareholders funds.
Profitability ratios:
Gross Profit Ratio:
Gross profit ratio is expressed as
Gross Profit Ratio = Gross profit ÷sales * 100
Gross profit margins of AIRTEL are 29.33% and 28.15% for the years 2009 and 2010 respectively.
Gross profit margins of IDEA for the years 2009 and 2010 are 20.51% and 15.83% respectively. IDEA enjoys a fair amount of gross profit margin.
Net profit ratio:
This ratio is defined
Net profit ratio = net profit ÷ net sales * 100
The net profit ratios of AIRTEL for the years 2009 and 2010 are 22.58 and 26.36 respectively. As the net profit margin is high is good to the firm as it can withstand in the market during the bad phase also.
The net profit ratios of IDEA for the years 2009 and 2010 are 9.91 and 8.71 respectively. When compared to IDEA, AIRTEL enjoys a low net profit margin.
Operating profit ratio:
Operating profit ratio is expressed as
Operating profit ratio = operating profit ÷ net sales * 100
The operating profit ratio of AIRTEL for the year 2009 and 2010 are 38.74 and 39.08 respectively. The operating profit ratio of IDEA for the year 2009 and 2010 are 31.63 and 27.37 respectively.
Return on capital employed (ROCE):
ROCE = EBIT / average total capital employed * 100
The ROCE ratios for AIRTEL in the year 2009 and 2010 are 28.40 and 23.86 respectively.
The ROCE ratios for IDEA in the year 2009 and 2010 are 11.20 and 10.73 respectively.
FINANCIAL STATEMENTS (Horizontal):
Profit and Loss account of AIRTEL
Debit
2009
2010
Credit
2009
2010
Expenditure
Raw materials
Depreciation
Interest
Equity Dividend
Preference Dividend
Power and fuel
Corporate Dividend Tax
Reported Net Profits
Transfer to capital account
To Net profit
286.94
3,206.28
434.16
379.65
0.00
0.00
64.52
7,743.84
20,676.47
32791.86
278.72
37.54
8.21
59.73
0.00
0.00
64.55
9,426.15
22,370.45
36,693.09
Income:
Sales turnover
Excise duty
Net sales
Other income
Stock adjustment
34,048.32
0.00
34,048.32
-1,261.75
5.29
32,791.86
35,609.54
0.00
35,609.54
1,118.46
-34.91
36,693.09
Balance sheet of AIRTEL
Liabilities
2009
2010
Assets
2009
2010
Sources of funds:
Total share capital
Share application money
Preference share capital
Reserves
Revaluation reserves
Secured Loans
Unsecured loans
Current Liabilities:
Provisions
Total
1898.24
116.22
0
25,627.38
2.13
51.73
7661.92
13,832.49
634.40
49824.51
1898.77
186.09
0
34,650.19
2.13
39.43
4999.49
12,183.25
658.75
54618.1
Gross Block
Less: Accumulator Depreciation
Investments
Current Assets:
Inventories
Sundry Debtors
Cash& Bank balance
Loans& advances
Fixed deposits
Miscellaneous expenses
Capital working progress
37,266.70
12,253.34
11,777.76
62.15
2550.05
153.44
5602.83
2098.16
0.09
2566.67
49824.51
44,212.53
16,187.56
15,773.32
27.24
2104.98
54.89
6276.12
761.86
0.00
1594.74
54618.1
Cash Flows of AIRTEL
SOURCES
2009
2010
Applications
2009
2010
Cash Opening Balance
Cash from Operations
Net Cash from Investment activities
Net Cash from Financing activities
Total
503.31
11,853.15
-10,894.38
-672.00
790.08
789.88
12,692.63
-10,601.66
-2539.32
341.53
Closing Cash Equivalent
790.08
790.08
341.53
341.53
Profit and loss account of IDEA
Debit
2009
2010
Credit
2009
2010
Expenditure
Raw materials
Depreciation
Interest
Equity Dividend
Preference Dividend
Power and fuel
Corporate Dividend Tax
Reported Net Profits
Transfer to capital account
To Net Profit
18.92
1096.72
1206.35
0.00
0.00
533.54
0.00
1001.21
6402.99
10,258.83
0.02
1366.61
982.44
0.00
0.00
942.27
0.00
1053.66
7889.07
12,234.07
Income:
Sales turnover
Excise duty
Net sales
Other income
Stock adjustment
9857.08
0.00
9857.08
401.80
-0.05
10,258.83
11,850.24
0.00
11,850.24
383.83
0.00
12,234.07
Balance sheet of IDEA
Liabilities
2009
2010
Assets
2009
2010
Sources of funds:
Total share capital
Share application money
Preference share capital
Reserves
Revaluation reserves
Secured Loans
Unsecured loans
Current Liabilities:
Provisions
Total
3100.10
18.23
0.00
8176.09
0.00
5564.93
2014.43
3496.04
98.65
22,468.47
3299.84
44.45
0.00
8112.95
0.00
5988.61
537.81
4313.76
137.76
22,435.18
Gross Block
Less: Accumulator Depreciation
Investments
Current Assets:
Inventories
Sundry Debtors
Cash& Bank balance
Loans& advances
Fixed deposits
Miscellaneous expenses
Capital working progress
15,562.75
4739.86
4928.81
42.73
329.59
140.86
2278.21
2203.57
0.00
1721.82
22,468.47
22,834.40
7907.34
2755.13
46.70
430.12
129.13
3533.15
151.31
0.00
462.58
22,435.18
Cash flows of IDEA
SOURCES
2009
2010
Applications
2009
2010
Cash Opening Balance
Cash from Operations
Net Cash from Investment activities
Net Cash from Financing activities
Total
497.06
1863.74
-7655.35
7639.00
2344.43
2921.82
1985.14
-2095.94
-2530.57
280.44
Closing Cash Equivalent
2344.43
2344.43
280.44
280.44
FINANCIAL STATEMENTS (Vertical):
CASH FLOWS SHEET (IDEA)
FY2009 FY2010
Net Profit Before Tax
1001.21
1053.66
Net Cash From Operating Activities
1863.74
1985.14
Net Cash (used in)/from
Investing Activities
-7655.36
-2095.94
Net Cash (used in)/from Financing Activities
7639.00
-2530.57
Net (decrease)/increase In Cash and Cash Equivalents
1847.37
-2641.38
Opening Cash & Cash Equivalents
497.06
2921.82
Closing Cash & Cash Equivalents
2344.43
280.44
BALANCE SHEET OF IDEA
Sources Of Funds
FY2009
FY2010
Total Share Capital
3,100.10
3,299.84
Equity Share Capital
3,100.10
3,299.84
Share Application Money
18.23
44.45
Preference Share Capital
0.00
0.00
Reserves
8,176.09
8,112.95
Revaluation Reserves
0.00
0.00
Networth
11,294.42
11,457.24
Secured Loans
5,564.93
5,988.61
Unsecured Loans
2,014.43
537.81
Total Debt
7,579.36
6,526.42
Total Liabilities
18,873.78
17,983.66
Application Of Funds
Gross Block
15,562.75
22,834.40
Less: Accum. Depreciation
4,739.86
7,907.34
Net Block
10,822.89
14,927.06
Capital Work in Progress
1,721.82
462.58
Investments
4,928.81
2,755.13
Inventories
42.73
46.70
Sundry Debtors
329.59
430.12
Cash and Bank Balance
140.86
129.13
Total Current Assets
513.18
605.95
Loans and Advances
2,278.21
3,533.15
Fixed Deposits
2,203.57
151.31
Total CA, Loans & Advances
4,994.96
4,290.41
Deffered Credit
0.00
0.00
Current Liabilities
3,496.04
4,313.76
Provisions
98.65
137.76
Total CL & Provisions
3,594.69
4,451.52
Net Current Assets
1,400.27
-161.11
Miscellaneous Expenses
0.00
0.00
Total Assets
18,873.79
17,983.66
Contingent Liabilities
2,279.41
1,960.75
Book Value (Rs)
36.37
34.59
Profit and Loss account of IDEA
Income
FY2009
FY2010
Sales Turnover
9,857.08
11,850.24
Excise Duty
0.00
0.00
Net Sales
9,857.08
11,850.24
Other Income
401.80
383.83
Stock Adjustments
-0.05
0.00
Total Income
10,258.83
12,234.07
Expenditure
Raw Materials
18.92
0.02
Power & Fuel Cost
533.54
942.27
Employee Cost
458.46
561.17
Other Manufacturing Expenses
4,022.86
5,187.63
Selling and Admin Expenses
1,621.90
1,823.48
Miscellaneous Expenses
82.76
91.58
Preoperative Exp Capitalised
0.00
0.00
Total Expenses
6,738.44
8,606.15
Operating Profit
3,118.59
3,244.09
PBDIT
3,520.39
3,627.92
Interest
1,206.35
982.44
PBDT
2,314.04
2,645.48
Depreciation
1,096.72
1,366.61
Other Written Off
146.13
184.59
Profit Before Tax
1,071.19
1,094.28
Extra-ordinary items
15.68
91.61
PBT (Post Extra-ord Items)
1,086.87
1,185.89
Tax
85.65
115.08
Reported Net Profit
1,001.21
1,053.66
Total Value Addition
6,719.52
8,606.12
Preference Dividend
0.00
0.00
Equity Dividend
0.00
0.00
Corporate Dividend Tax
0.00
0.00
Per share data (annualised)
Shares in issue (lakhs)
31,000.95
32,998.38
Earning Per Share (Rs)
3.23
3.19
Equity Dividend (%)
0.00
0.00
Book Value (Rs)
36.37
34.59
CASH FLOWS SHEET of AIRTEL
FY2009 FY2010
Net Profit Before Tax
8161.54
10699.25
Net Cash From Operating Activities
11853.15
12692.63
Net Cash (used in)/from
Investing Activities
-10894.38
-10601.66
Net Cash (used in)/from Financing Activities
-672.00
-2539.32
Net (decrease)/increase In Cash and Cash Equivalents
286.77
-448.35
Opening Cash & Cash Equivalents
503.31
789.88
Closing Cash & Cash Equivalents
790.08
341.53
BALANCE SHEET OF AIRTEL
Sources Of Funds
FY2009
FY2010
Total Share Capital
1,898.24
1,898.77
Equity Share Capital
1,898.24
1,898.77
Share Application Money
116.22
186.09
Preference Share Capital
0.00
0.00
Reserves
25,627.38
34,650.19
Revaluation Reserves
2.13
2.13
Networth
27,643.97
36,737.18
Secured Loans
51.73
39.43
Unsecured Loans
7,661.92
4,999.49
Total Debt
7,713.65
5,038.92
Total Liabilities
35,357.62
41,776.10
Application Of Funds
Gross Block
37,266.70
44,212.53
Less: Accum. Depreciation
12,253.34
16,187.56
Net Block
25,013.36
28,024.97
Capital Work in Progress
2,566.67
1,594.74
Investments
11,777.76
15,773.32
Inventories
62.15
27.24
Sundry Debtors
2,550.05
2,104.98
Cash and Bank Balance
153.44
54.89
Total Current Assets
2,765.64
2,187.11
Loans and Advances
5,602.83
6,276.12
Fixed Deposits
2,098.16
761.86
Total CA, Loans & Advances
10,466.63
9,225.09
Deffered Credit
0.00
0.00
Current Liabilities
13,832.49
12,183.25
Provisions
634.40
658.75
Total CL & Provisions
14,466.89
12,842.00
Net Current Assets
-4,000.26
-3,616.91
Miscellaneous Expenses
0.09
0.00
Total Assets
35,357.62
41,776.12
Contingent Liabilities
4,104.25
3,921.50
Book Value (Rs)
145.01
96.24
Profit and Loss account of AIRTEL
Income
FY2009
FY2010
Sales Turnover
34,048.32
35,609.54
Excise Duty
0.00
0.00
Net Sales
34,048.32
35,609.54
Other Income
-1,261.75
1,118.46
Stock Adjustments
5.29
-34.91
Total Income
32,791.86
36,693.09
Expenditure
Raw Materials
286.94
278.72
Power & Fuel Cost
0.00
0.00
Employee Cost
1,397.54
1,401.66
Other Manufacturing Expenses
8,627.13
11,882.41
Selling and Admin Expenses
9,385.68
6,856.42
Miscellaneous Expenses
1,409.89
1,482.39
Preoperative Exp Capitalised
-269.25
-293.31
Total Expenses
20,837.93
21,608.29
Operating Profit
13,215.68
13,966.34
PBDIT
11,953.93
15,084.80
Interest
434.16
283.35
PBDT
11,519.77
14,801.45
Depreciation
3,206.28
3,890.08
Other Written Off
178.82
207.84
Profit Before Tax
8,134.67
10,703.53
Extra-ordinary items
-46.15
-50.78
PBT (Post Extra-ord Items)
8,088.52
10,652.75
Tax
321.78
1,177.87
Reported Net Profit
7,743.84
9,426.15
Total Value Addition
20,551.00
21,329.56
Preference Dividend
0.00
0.00
Equity Dividend
379.65
379.79
Corporate Dividend Tax
64.52
64.55
Per share data (annualised)
Shares in issue (lakhs)
18,982.40
37,975.30
Earning Per Share (Rs)
40.79
24.82
Equity Dividend (%)
20.00
20.00
Book Value (Rs)
145.01
96.24
Conclusion
For any investor who wants to purchase the shares in the company will check the overall company's performance and position as it gives the clear idea about the company growth. From the above current ratios firms are more capable of clearing its liabilities and is able to give confidence for the short term investors in year 2009 and it's slightly decreased in 2010.Quick ratios of the firms are below the acceptable level for AIRTEL when compared to IDEA which might raise some concerns over the inventory and liquidity of business. Cash flow of the IDEA is decreased for 2010 when compared to 2009 where as AIRTEL has only small change in cash flow that is repayment of debt is more for AIRTEL. When compared to IDEA, AIRTEL enjoys a low net profit margin. Gross profit of companies earns a fair amount of money to meet its operational expenses and ensures good amount of returns for the shareholders.
It is recommended that the investor can purchases the s hares of AIRTEL which has sales in business and good cash flows from the operating activities and strong in industry in all demand and supply.
