Rinki Project

8/8/2019 Rinki Project

http://slidepdf.com/reader/full/rinki-project 1/92

PROJECT REPORT ON

“Ratio Analysis of Bharti Airtel”

AT

Bharti Airtel

A Project Report submitted in partial fulfillment of the requirements of

POST GRADUATE DIPLOMA IN MANAGEMENT

By

Rinki Kumari

Reg no-MP08171

INSTITUTE OF BUSINESS MANAGEMENT & RESEARCHIBMR House, # 44, 6th Cross, Wilson Garden, Hosur Main Road,

Bangalore. 560027. INDIA



A Project Report of

Rinki Kumari

“Ratio Analysis of Bharti Airtel”

is approved and is acceptable in quality and form.

Research Guide’s Name……………

Signature………………..

Qualification and Designation……………

Phone Number…………



CERTIFICATE

This is to certify that the Project Report titled

“Ratio Analysis Of Bharti Airtel “

Submitted in partial fulfillment of the requirements for the

Post Graduate Program In Management

Rinki Kumari

has worked under my supervision and guidance and that no part of this report hasbeen submitted for the award of any other Degree, Diploma, Fellowship or other

similar titles or prizes and that the work has not been published in any journal or

magazine.

Registration No.: MP08171

Attested Certified

Dr. Chandra Niranjan Mr. ………….

Dean, IBMR Faculty Guide



The Project Report of

Rinki Kumari

“Ratio Analysis Of Bharti Airtel”

is approved and is acceptable in quality and form.

Internal Examiner External Examiner

Signature: _____________ Signature_____________

Name: _____________ Name: ____________



STUDENT’S DECLARATION

I hereby declare that the Project Report titled

“Ratio Analysis Of Bharti Airtel “

Submitted in partial fulfillment of the requirements for the

POST GRADUATE PROGRAM IN MANAGEMENT

to IBMR Business School, Bangalore.

It is my original work and not submitted for the award of any other

Degree, Diploma, Fellowship or other similar title or prizes.

Place: Bangalore Name: Rinki Kumari

Date: Reg No: MP08171



Acknowledgement

I am grateful to the Dean of IBMR, Dr. Chandra Niranjan for giving me the

opportunity to carry on this project work, which in all means was as enriching

experience with loads to learn and ample participation ensured there upon.

The successful completion of this project has been the result of the help

extended by a number of people. Hence I would like to place on record my

acknowledgment.

My special thanks to Mr. Pankaj Kumar, Chartered Accountant, Finance

Department, Bharti Airtel limited who guided me throughout the project

giving adequate guidance & feedback during my project completion.

I would like to thank Mrs Shivi Khanna. …………, Faculty Institute of

Business Management and Research, who has guided me in getting my project

completed effectively. I would like to thank him for all the words of

encouragement and support that he has granted me during my project

In last but not least I would like say thanks to everyone who is directly or

indirectly helped me to complete this project specially my family members

and friends, who inspired and motivated me in taking up this project, and

making it a success.



EXECUTIVE SUMMARY

To run a business, we need Capital and thus Finance is the blood for any

organization to function efficiently. Since every single business activity

revolve around a broad common objective, i.e. to earning a PROFIT. The

subject on Finance gives an opportunity to understand their effective

application, utilization & funding the business & playing a pivotal role in the

success of the organization. Therefore, though not completely covering the

financial aspects of the business, still brief study on the Working Capital &

Ratio Analysis forming the part of Financial Statements are interpreted in this

Topic.

In the above context, the Topic provides me the insights on financial standingof the organization. It helps in understanding & explore, how the financial

resources are being utilized during the operations of the business, the

application & source of funds in various fixed assets & working capital, how

the company is perceived in the eyes of the shareholders which reflects

through the Earnings Per Share, and many more such financial expressions…

Apart from the given reason, there are other dimensions to choose this topic.

unlike manufacturing or trading industries, Service industries are much

different in managing their Working Capital. Like; the inventories are most of

the time in the intangible form. The working capital is funded mostly from

the long-term sources; like in the case of Bharti Airtel Limited.



Table of Content

Chapter Content Page No.

1. Introduction To The Company 10-32a. Business Profile 10-18

b. Corporate Profile 19-28

c. Milestone Of The Company 29-30

d. Product Profile 31

e. Swot Analysis 32

2. Introduction to The Product 33-43

3. Project Profile 44-46

a. Objective Of The Product

b. Methodology and Procedure

4. Data Analysis and Interpretation 47-78

5. Findings and Recommendation 79-84

6. Limitation Of The Study 85-87

7. Conclusion 88-90

8 Refrences 91-92

Chapter 1



“INTRODUCTION”

Introduction To The Industry :

Telecommunications started in the nineteenth century with the Telegraphy,

and developed through the Telephone and Ratio to Television to Satellites and

the Internet etc. The data transmitted has advanced from signals (Morse code)

through voice to pictures and data and, with the development of convergence,

to combinations of these. Every year, new technologies increase the services

available and the speed of delivery. A combination of factors is resulting in

the ever-decreasing cost of these services. This free report gives an overview

of this development, and the role of regulators to control it.



Since people wanted to say something to other people who were out of

earshot, there have been attempts at communication. These attempts have

advanced from carrier pigeons, signaling towers, smoke signals through

telegraph, telephone, radio and satellite. Technology has advanced to allow

TV, the Internet, high speed data transmission and a combination of these.

This report includes a time line of the major developments in physical means

of communication, then telecommunications for the past 25 years

Despite retaining their role as cash cows for incumbent operators, fixed and

mobile voice services are progressively being overtaken by broadband.

Increasingly, operators will need to take a holistic view of the market,

necessitating a total review of this 100-year-old product. For various reasons,

fixed-line operators have not introduced significant new products, services or

cost-saving technologies in the same way that mobile operators have. There iscertainly room for new premium voice services, based on more intuitive

navigation, CD sound quality and interactivity between handset and TV.

Fixed-line voice will probably be with us forever, but will become a subset of

broadband, instead of the other way around. Broadband will combine voice

and data, providing the opportunity to open up a number of triple play

markets. High mobile charges are also an interesting target for VoIP over

wireless broadband. This report includes BuddeCommn’s analysis of the

future of voice, with a focus on fixed, mobile and VoIP.

The larges sector of the telecommunications industry continues to be made up

of wired telecommunications carriers. Establishments in this sector mainly



provide telecommunications services via wires and cables that connect

customers’ premises to central offices maintained by telecommunications

companies. The central offices contain switching equipment that routes

content to its final destination or to another switching center that determines

the most efficient route for the content to take. These companies also

maintain the cable network that connects different regions of the country as

well as foreign countries, and forms the backbone of the industry. While

voice used to be the main type of data transmitted over the wires, wired

telecommunications service now includes the transmission of all types of

graphic, video and electronic data mainly over the Internet.

These new services are made possible through the use of digital technologies

that provide much more efficient use of the telecommunications networks.

One major technology breaks digital signals into packets during transmission. Networks of computerized switching equipment route the packets. Packets

may take separate paths to their destination and may share the paths with

packets from other users. At the destination, the packets are reassembled, and

the transmission is completed. Because packet switching considers alternate

routes, and allows multiple transmissions to share the same route, it results in

a more efficient use of telecommunications capacity as packets are routed

along less congested routes.

The transmission of voice signals requires relatively small amounts of

capacity on telecommunications networks. By contrast, the transmission of

data, video and graphics requires much higher capacity. This transmission



capacity is referred to as “bandwidth”. As the demand increased for high-

capacity transmissions- especially with the rising volume of Internet data-

telecommunications companies have been expanding and upgrading their

networks to increase the amount of available bandwidth.

Cable and other program distribution is another sector of the

telecommunications industry. Establishments in this sector provide television

and other services on a subscription or fee basis. these establishments do not

include cable networks. (Information on cable networks is included in the

section on broadcasting, which appears elsewhere in the Career Guide.)

Distributors of pay television services transmit programming through two

basic types of systems. Cable systems transmit programs over fiber optic and

coaxial cables. Direct Broadcasting Satellite (DBS) operators constitute a

growing segment of the pay television industry. DBS operators transmit programming from orbiting satellites to customers’ receivers, known as

‘minidishes’. Establishments in the cable and other program distribution

industry generate revenue through subscriptions, providing Internet access,

providing phone service, and advertising sales. They also charge fees for pay-

per-view or video-on-demand programs.

Wireless telecommunications carriers, many of which are subsidiaries of the

wired carriers, transmit voice, graphics, data, and Internet access through the

transmission of signals over networks of radio towers. The signal is

transmitted through an antenna into the wire line network. Increasing



numbers of consumers are choosing to replace their hoe landline phones with

wireless phones. Other wireless services include beeper and paging services.

Resellers of telecommunications services are another sector of the

telecommunications industry. These resellers lease transmission facilities,

such as telephone lines or space on a satellite, from existing

telecommunications networks, and then resell the service to other customers.

Other sectors in the industry include message communications services such

as e-mail and facsimile services, satellite telecommunications, and operators

of other communication services ranging from radar stations to radio networks

used by taxicab companies.

Recent Developments:

Telecommunications carriers are expanding their bandwidth by replacing

copper wires with fiber optic cables. Fiber optic cable, which transmits light

signals along glass strands, permits faster, higher capacity transmissions than

traditional copper wire lines. In some areas, carries are extending fiber optic

cable to residential customers, enabling them to offer cable television, video-

on-demand, very high-speed Internet, and conventional telephone

communications over a single line. However, the high cost of extending fiber

to homes has slowed deployment. In most areas, wired carries are instead

leveraging existing copper lines that connect most residential customers with a

central office, to provide digital subscribe lines (DSL) Internet service.



providers’ high-speed Internet connections also can be used for VoIP and

cellular phones are being developed that use VoIP to make calls using local

wireless Internet connections. All of the major sectors of the

telecommunications industry ware or will increasingly use VoIP.

Wireless telecommunications carriers are deploying several new technologies

to allow faster data transmission and better Internet access that should make

them more competitive with wire line carriers. With faster Internet

connections speeds, wireless carriers are selling music, videos, and other

exclusive content that can be downloaded and a played on cellular phones.

Wireless equipment companies are developing the next generation of

technologies that will allow even faster data transmission. The replacement of

landlines with cellular service should become increasingly common because

advances in wireless systems will provide ever faster data transmissionspeeds.

Other reasons for choosing ‘Indian Telecom’ sector are: (Consumerist

Outlook)

One of the largest Working Population giving huge market potential

Emerging Economy

Rising Income & Growing availability of Retail Credit resulting in

increased consumerism

Largest youth population

Communication being a necessity in professional & personal lives



Telecommunication Companies in India

Telecommunication Reforms in India revolutionized the telecom industries

sector in India, which is an important factor for the growth of the Indian

telecom sector and in turn helped the Indian economy to perform well for the

past few years. The Telecommunication reforms in India were development

and growth oriented. Technological advancements and innovations

contributed largely towards the reformation of the telecom sector in India.

The sector of telecom was a monopoly under the Central Government of

India. During the 1990s this sector faced fierce challenges due to the

development in the technological sector. The sector was privatized and with

the abolition of the monopoly new player entered the consumer market. The

competition increased in the telecom sector, the rates were slashed in order to

grab the share of the market and the customers were provided with better services.

The telecommunication reforms in India started in the eighties with the

mission better communication. This is regarded as the first phase of the

reformation process. Several private manufacturers of tailor made equipments

entered the market. There were private developer for indigenous technologies

and the franchisee for STD/ISD and PCO increased. The Videsh Sanchar

Nigam Limited (VSNL) and Mahanagar Telephone Nigam Limited (MTNL)

were set up under the Government of India’s Department of

Telecommunication.



The second phase of telecommunication reforms in India came in the early

nineties. The introduction of the New Economic Policy (NEP) in the year

1991 was a landmark in the history of telecom industry sector in India. The

manufacturing of equipments pertaining to telecom sector was decentralized

and several value added services were introduced into the market. The telecom

services were divided into basic telephony, radio paging and cellular mobile

The TRAI was established an independent regulatory body pertaining to

telecom sector. The growth of the private sector increased.

The third phase of the telecommunication reforms in India took place in the

period of the late nineties. The government of India introduced the New

Telecom Policy 1999. The TRAI was endowed with more power. The concept

of revenue sharing was introduced to replace the fixed license fee. The

National Long Distance was introduced with free entrance. Moreover, therewas introduction of International Long Distance schemes. The Bharat Sanchar

Nigam Limited (BSNL), a corporate body of the telecom service sector was

formed, followed by the introduction of the Internet to the Indian market.

The stupendous growth of the telecommunication companies in India over the

last fifteen years can be attributed to the liberal government of India,

economic policy. The economic renaissance effected in the early 1990s

brought around a paradigm shift on the overall business scenario of India. The

telecommunication companies in India went through a huge make-over during

the implementation of the open-market policy of India. The erstwhile closed

market policy was replaced by a more liberal form of economic policy. A



whole new form of Indian Telecommunication Policy was drafted to

compliment the change effected in the economic policy of India. The

amendment effected the new telecommunication policy of India made huge

changes with respect to investments and entry of Foreign Direct Investments

(FDI) and Foreign Institution Investors (FII) respectively, into the virgin

Indian telecommunication market. This resulted entry of private, domestic and

foreign telecommunication companies in India.



Introduction to the Company

Bharti Airtel

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The

Bharti Group, has a diverse business portfolio and has created global brands in

the telecommunication sector. Bharti has recently forayed into retail business

as Bharti Retail Pvt. Ltd. under a MoU with Wal-Mart for the cash & carry

business. It has successfully launched an international venture with EL

Rothschild Group to export fresh agri- products exclusively to markets in

Europe and USA and has launched Bharti AXA Life Insurance Company Ltd

under a joint venture with AXA, world leader in financial protection and

wealth management.

Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and

the first private telecom services provider with a footprint in all the 23 telecom

circles. Bharti Airtel since its inception has been at the forefront of technology

and has steered the course of the telecom sector in the country with its world

class products and services. The businesses at Bharti Airtel have been

structured into three individual strategic business units (SBU’s) - Mobile

Services, Airtel Telemedia Services & Enterprise Services. The mobile

business provides mobile & fixed wireless services using GSM technology

across 23 telecom circles while the Airtel Telemedia Services business offers

broadband & telephone services in 94 cities. The Enterprise services provide

end-to-end telecom solutions to corporate customers and national &



international long distance services to carriers. All these services are provided

under the Airtel brand.

Bharti Airtel is one of India's leading private sector providers of

telecommunications services based on an aggregate of 71.77 million

customers as on June 2008, consisting of 69.38 million GSM mobile

customers and 2.39 Bharti Telemedia Customers.

Bharti Airtel Limited, a group company of Bharti Enterprises, is India’s

leading integrated telecom services provider with an aggregate of 71.77

million customers as of end of June 2008, consisting of 69.38 million mobile

customers. Bharti Airtel has been rated among the best performing companies

in the world in the Business Week IT 100 list 2007. Bharti Airtel is structured

into three strategic business units - Mobile services, Telemedia services andEnterprise services. The mobile business provides mobile & fixed wireless

services using GSM technology across 23 telecom circles. The Telemedia

business provides broadband and telephone services in 94 cities and is

foraying into the IPTV and DTH segments. The Enterprise business provides

end-to-end telecom solutions to corporate customers and national and

international long distance services to carriers. All these services are provided

under the Airtel brand. Airtel’s high-speed optic fibre network currently spans

over 78,540 kilometers covering all the major cities in the country. The

company has two international landing stations in Chennai that connects two

submarine cable systems - i2i to Singapore and SEA-ME-WE-4 to Europe.



Company shares are listed on The Stock Exchange, Mumbai (BSE) and The

National Stock Exchange of India Limited (NSE).

Vision & Promise :

By 2010 Airtel will be the most admired brand in India :

• Loved by more customers

• Targeted by top talents

• Benchmarked by more businesses

“We at Airtel always think in fresh and innovative ways about the needs of

our customers and

how we want them to feel. We deliver what we promise and go out of our

way to delight the

customer witha little bit more”

Quality Policy :

We will deliver error free service to our customer by doing our jobs right

and first time every time.



Partners :

The company has a strategic alliance with SingTel. The investment made by

SingTel is one of the largest investments made in the world outside Singapore,

in the company.

The company’s mobile network equipment partners include Ericsson and

Nokia. In the case of the broadband and telephone services and enterprise

services (carriers), equipment suppliers include Siemens, Nortel, Corning,

among others. The Company also has an information technology alliance with

IBM for its group-wide information technology requirements and with Nortel

for call center technology requirements. The call center operations for the

mobile services have been outsourced to IBM Daksh, Hinduja TMT, Teletech

& Mphasis.

Airtel was born free, a force unleashed into the market with a relentless and

unwavering determination to succeed. A spirit charged with energy,

creativity and a team driven “to seize the day” with an ambition to become the

most globally admired telecom service. Airtel, after just ten years, has risen to

the pinnacle of achievement.

As India’s leading Telecommunications Company, Airtel brand has played the

role as a major catalyst in India’s reforms, contributing to its economic

resurgence.



Today, we touch people’s lives with our Mobile services, Telemedia services,

to connecting India’s leading 1000+corporate. We also connect Indians living

in USA with our call home service.

Corporate Governance

Bharti Airtel Limited firmly believes in the principles of Corporate

Governance and is committed to conduct its business in a manner, which will

ensure sustainable, capital-efficient and long-term growth thereby maximizing

value for its shareholders, customers, employees and society at large.

Company’s policies are in line with Corporate Governance guidelines

prescribed under Listing Agreement/s with Stock Exchanges and the

Company ensures that various disclosures requirements are complied in ‘letter

and spirit’ for effective Corporate Governance.

During the financial year 2003-04, your Company was assigned highest

Governance and Value Creation (GVC) rating viz. ‘Level 1’ rating by

CRISIL, which indicates that the company’s capability with respect to

creating wealth for all its stakeholders is the highest, while adopting sound

Corporate Governance practices. This rating was re-affirmed by CRISIL on

20th April 2006.

• Board of Directors

• Audit Committee

• Human Resource (HR)/ Remuneration Committee



• ESOP Compensation Committee

• Investors Grievance Committee

•

Memorandum of Association

• Article of Association

Business Divisions

Mobile Services:

Bharti Airtel offers GSM mobile services in all the 23-telecom circles of India

and is the largest mobile service provider in the country, based on the number

of customers.

Enterprise Services (Corporate):

The group focuses on delivering telecommunications services as an integrated

offering including mobile, broadband & telephone, national and international

long distance and data connectivity services to corporate, small and medium

scale enterprises.

Airtel Telemedia Services :

The group offers high speed broadband internet with a best in class network.

With Landline services in 94 cities we help you stay in touch with your friends

& family and the world.



Enterprise Services (Carrier Services):

The Company compliments its mobile and broadband & telephone services

with national and international long distance services. It has over 35,016 route

kilometers of optic fibre on its national long distance network. For

international connectivity to east, it has a submarine cable landing station at.

For international connectivity to the west, the Company is a member of the

South East Asia-Middle East-Western Europe – 4 (SEA-ME-WE-4)

consortiums along with 15 other global telecom operators.



Board of Directors :

The board of directors of the Company has an optimum mix of executive and

non-executive directors, which consists of two executive and twelve 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.

The composition of the Board is as under:

• Sunil Bharti Mittal

• Rajan Bharti Mittal

• Akhil Gupta

• Rakesh Bharti Mittal

• Chua Sock Koong

• N. Kumar

• Kurt Hellstrom

• Donald Cameron

• Paul O'Sullivan



• Pulak Chandan Prasad

• Bashir Abdulla Currimjee

•

Ajay Lal

• Arun Bharat Ram

• Francis Henggm



Organization Chart – Bharti Airtel



Milestone of the Company : -

Awards and Recognitions :

Bharti Airtel has recently won multiple recognitions in the field of

Information Technology including Spamhaus Group‘Whitehat Network

Star’; ‘Security Strategist Award’ and‘Intelligent Enterprise Award‘ at

the Technology Senate2009 and ‘CIO Hall of Fame’

Bharti Airtel has won the CNBC-TV18 India Business Leader Award for

the Outstanding Company of the year, 2007

Bharti draws top honours at the NDTV Profit Business Leadership

Awards 2007

Bharti Airtel Ranked 3rd on Shareholder Returns in Business Week IT

100 List

Sunil Bharti Mittal conferred Degree of Doctor of Science (Honoris

Causa) by G. B. Pant University



Highlights :

Overall customer base crosses 7.17 crore

Market leader with a market share of all India wireless subscribers at

24.2%

Bharti Airtel and Pacnet join forces to deliver enhanced connectivity

to and from India

Bharti Airtel, India’s leading private telecom services provider

would observe a 'Silent Period' from the close of business on June

30, 2008 (Monday), till the declaration of results for the first quarter

ended June 30, 2008, as a commitment towards highest level of

corporate governance.

Bharti Airtel and Apple to Bring iPhone 3G to India

Joins hands with IFFCO to usher in the Second Green Revolution to

benefit millions of rural consumers

Airtel Spells “End of Distance” in India

]Financial Year 2008 : Strong Revenue Growth of 46% and ending

at over Rs. 27,000 Crore

Product Profile



Chapter – 2

Introduction to the Project

Introduction to Working Capital Management



Working Capital Management (WCM) is the management of short-term

financing requirements of a firm. This includes maintaining optimum balance

of working capital components – receivables, inventory and payables – and

using the cash efficiently for day-to-day operations. Optimization of working

capital balance means minimizing the working capital requirements and

realizing maximum possible revenues. Efficient WCM increases firm’s free

cash flow, which in turn increases the firm’s growth opportunities and return

to shareholders. Even though firms traditionally are focused on long term

capital budgeting and capital structure, the recent trend is that many

companies across different industries focus on WCM efficiency. There is

much evidence in the financial literature that present the importance of WCM.

Results of empirical analysis show that there is statistical evidence for a strong

relationship between the firm’s profitability and its WCM efficiency. TheTelecommunication industry is characterized by high intensive working

capital requirements and high competition because of rapid technology

changes, which make the WCM crucial to bring attractive earnings to

shareholders. The analysis is done to get insight into how efficiently WCM is

managed in Bharti Airtel Limited is more inclined to in improving WCM

efficiency.

Management of short term assets and short run sources of finance is described

as working capital management. Working capital management is concerned

with all decisions and acts that influence the size and effectiveness of working

capital. The goal of working capital management is to manage each of the



firm’s current assets and current liabilities in such a way that an acceptable

level of working capital is maintained. It is concerned with the determination

of appropriate levels of current assets and their efficient use as well as the

choice of financing mix for raising the current resources.

Proper management of working capital is very important for the success of a

concern. It aims at protecting the purchasing power of assets and maximizing

the return on investment. The manner of management of working capital to a

very large extent determines the success of operations of the concern. Failure

of business is undoubtedly due to poor management of working capital.

Shortage of working capital is so often advanced as the main cause of failure

of an industrial concern.

Working Capital refers to the cash a business requires for day-to-dayoperations, or, more specifically, for financing the conversion of raw materials

into finished goods, which the company sells for payment. Among the most

important items of working capital are levels of inventory, debtors and

creditors. These items are looked at for signs of a company’s efficiency and

financial strength.

The better a company manages its working capital, the less the company needs

to borrow. Even companies with cash surpluses need to manage working

capital to ensure that those surpluses are invested in ways that will generate

suitable returns for investors.

Working Capital Management Concepts :



The working capital meets the short-term financial requirements of a business

enterprise. It is the investment required for running day-to-day business. It is

the result of the time lag between the expenditure for the purchase of raw

materials and the collection for the sales of finished products. The

components of working capital are inventories, accounts to be paid to

suppliers, and payments to be received from customers after sales. Financing

is needed for receivables and inventories net of payables. The proportions of

these components in the working capital change from time to time during the

trade cycle. The working capital requirements decide the liquidity and

profitability of a firm and hence affect the financing and investing decisions.

Lesser requirement of working capital leads to less need for financing and less

cost of capital and hence availability of more cash for shareholders. However,

the lesser working capital may lead to lost sales and thus may affect the profitability. The management of working capital by managing the

proportions of the WCM components is important to the financial health of

businesses from all industries. To reduce accounts receivable, a firm may

have strict collections policies and limited sales credits to its customers. This

would increase cash inflow. However the strict collection policies and lesser

sales credits would lead to lost sales thus reducing the profits. Maximizing

account payables by having longer credits from the suppliers also has the

chance of getting poor quality materials from supplier that would ultimately

affect the profitability. Minimizing inventory may lead to lost sales by stock-

outs. The working capital management should aim at having balanced;



optimal proportions of the WCM components to achieve maximum profits and

cash flow.

Gross Working Capital :

The gross working cycle refers to the length of time between the firms paying

cash for material, etc., entering into the production process / stock and the

inflow of cash from debtors (sales). Some raw materials will be available on

credit but, cash will be paid out for the other part immediately. Then it has to

pay labour costs and incurs factory overheads. These three combined together

will constitute work-in-progress. After the production cycle is complete,

work-in-progress will get converted into finished products. The finished

products when sold on credit into sundry debtors. Sundry debtors will be

realized in cash after the expiry of credit period. This cash can again be usedfor financing raw materials, work-in-progress, etc. Thus there is a complete

cycle from cash to cash wherein cash get converted into raw materials, work-

in-progress, finished goods, debtors, and finally into cash again. This cycle is

also known as Operating Cycle.



The determination of working capital cycle helps in the forecast, control and

management of working capital. It indicates the total time lag and the relative

significance of its constituent parts.

the operating cycle consists of the following event which continues throughout

the life of business.

Conversion of cash into raw materials;

Conversion of raw materials into work-in-progress;

Conversion of work-in-progress into finished stock;

Conversion of finished stock into accounts receivables through sales;

and

Conversion of accounts receivables into cash,



Working Capital of Bharti Airtel Limited has been analysed by using

Ratio Analysis :

Meaning of Ratio :

A Ratio is a simple arithmetical expression of the relationship of one number

to another.

Definition :

According to Accountants Handbook of Wixon, Kell & BedFord, “Ratio

Analysis is the expression of the quantitative relationship between two

numbers”

Use & Significance of Ratio Analysis :

The ratio analysis is one of the most powerful tools of financial analysis. It is

used as a device to analyse and interpret the financial health of the enterprise.

(A) Management use of Ratio Analysis

Helps in Decision making

Helps in Financial forecast and planning



Helps in Communicating

Helps in Co-ordination

Helps in Control

(B) Utility to share holders and investors

(C) Utility to Creditors

(D) Utility to Employees

(E) Utility to Government

Types of Ratios used:

Current Ratio :

Current Ratio is the indicator of the firm’s commitment to meet its short-term

liability. Current Assets mean assets that will either be used up or converted

into cash within a year’s time. Current liabilities mean liabilities payable

within a year or during the operating cycle, which ever is longer.

Quick Ratio :

The Quick ratio is also termed as “Acid-Test Ratio”. This ratio is ascertained

by comparing the liquid assets (i.e., assets which are immediately convertible

in to cash without much loss) to current liabilities. Prepaid expenses and stock

are not taken as liquid assets. This may be expressed as:



Gross Profit Ratio :

These ratios express the relationship between gross profit and net sales.

Gross Profit = Sales – Cost of goods sold (Including Operating Expenses) –

Depreciation – Amortization

Net Profit Ratio :

This ratio helps in determining the efficiency with which affairs of the

business are being managed. An increase in ratio over previous period

indicates improvement in the operational efficiency of the business provided

the gross profit ratio is constant.

Operating Ratio :

This ratio is complementary of Net Profit Ratio. In case Net Profit is 20 %, it

means Operating Ratio is 80 %.

Debtor Turnover Ratio :

Debtors constitute an important constituent of current assets and therefore the

quality of debtors to a great extent determines a firm’s liquidity. Debt



collection period indicates the extent to which the debts have been collected in

time. It gives the average debt collection period.

Inventory Turnover Ratio :

This ratio is also known as stock turnover ratio establishes the relation

between the cost of goods sold during the year and average inventory held

during the year.

Fixed Assets Turnover Ratio :

A high fixed assets turnover ratio indicates efficient utilization of fixed assets

in generating sales. A firm whose plant and machinery are old may show

higher fixed assets turnover ratio than the firm which has purchased them

recently.

Debt Equity Ratio :

The Debt Equity Ratio is determined to ascertain the soundness of the long

term financial policies of the company. It is also known as “External –

Internal” Equity Ratio.

Earnings Per Share :



The profitability of the firm from the point of view of ordinary shareholders

can be measured in terms of number of equity shares. This is known as

Earnings Per Share

Comparative Balance Sheet or Comparative Financial Statement :

Any financial statement that reports the comparisons of data of two are more

consecutive accounting periods is known as “Comparative Financial

Statement”. According to A.F.Foulke “Comparative financial statement are

statements of the financial position of the business so designed as to provide

time prospective to the consideration of various elements of financial position

embodied in such statements”. Such a statement spotlights trends and

establishes relationship between items that appear on the same row of a

comparative balance sheet. It discloses changes in items on financialstatements over time in both rupees and percentage form. Each item on a row

for one fiscal period is compared with same item in a different period.

Much valuable information is obtained from financial statement in this

manner. The analyst will get benefit from such comparative study particularly

because he/she will discover the key factors which have affected profitability

or financial position of the concern.



“AN ANALYSIS ON WORKING CAPITAL MANAGEMENT &

RATIOS

Objectives & Scope of the study

• To study the working capital of Bharti Airtel Limited

Secondary Objective :

• To find out the size of working capital and to measure its liquidity and

operational efficiency by using ratio analysis

• To make an element wise analysis of working capital and to identify the

elements responsible for variations in working capital

• To evaluate the performance of the company through Net Assets,

inventory, Receivables and cash management

• To analyze the relationship existing between liquidity and profitability



Methodology and Procedure of Work :

The project work was carried on along with the expert guidance fromcompany’s Finance Team and Legal & Regulatory Team, while collecting &

collating the information & models in the endeavor of preparing the project.

The source of information is purely from Secondary Data, fetched out from s

ites like – Google, Airtel.in & other Finance management publications.

Micro-soft application is used extensively for entire project work. Spread

sheet in MS-Excel used to compute Comparative Statements & Working

Capital Analysis. And Flow charts, Line Diagrams were computed for graphical presentation to give a feel of comprehensive understanding in the

project. MS-Word used to draft the entire project, placing Tables & Diagram

wherever necessary in describing.

Key insights on the back ground of evolution of Tele-communication & the

telecommunication Industry in India were fetched from “Google”, “the

information searching engine”. And about the company (Bharti Airtel Ltd),

the latest information and abstracts were derived & used as source for preparing the project. These were indeed easy if search options were applied

accurately, to fetch from the internet & intranet tool while preparing the

introduction to the project. However, the data on figures for the last three

years from the annual reports of the company were meticulously derived for

computing various ratios & interpreting the results with the guidance from the

Finance Managers, were the key time consumer apart from giving the project

“The conclusion”.

The secondary data which was to an extent easily available had a very goodinfluence on my project in terms of getting the relevant data & information in

time. And Secondly, it gave me immense opportunity & pleasure to explore

the content in understanding the subject matter in context to my academics.

Despite of the heavy work load & audit schedules, the finance & legal

personnel’s were able to manage with their time to cooperate with me in

various clarifications & fact establishments in the accomplishment of the

project.



Chapter – 4

DataAnalysis & Interpretation



Schedule of changes in working capital for the year ended

2005 - 2006

Particulars 2005 (Rs. In ' 000 ) 2006 (Rs. In ' 000 )

Effects in Working Capital

Increase

(Rs. In '000)

Decrease

(Rs. In '000)

Current Assets :

Inventories

3,15,83

8 1,77,444

1,38,

394

Sundry Debtors

71,57,44

3 1,07,61,709

36,04,26

6

Cash & Bank Balance

38,41,35

2 30,74,285

7,67,

067

Loans & Advances

1,06,76,09

5 1,55,29,497

48,53,40

2

Total (A)

2,19,90,72

8 2,95,42,935

8,4,57,6

68

9,05,

461

Current Liabilities :

Sundry Creditors & Other

Current Liabilities

4,20,79,83

4 6,46,55,783

2,25,75,

949

Provisions

11,19,91

0 23,35,851

12,15,

941

Total (B)

4,31,99,74

4 6,69,91,634

- 2,37,91,

890

Grand total ( A+B) 21,209,016

3,74,48,699

84,57,66

8

2,46,97,

351

(Increase) / Decrease in

Working Capital

1,62,39,683

1,62,39,6

83

21,209,016 21,209,016

2,46,97,3

51

2,46,97,

351

Interpretation

The working capital has substantially increased in 2006. The decreased in

current assets is greater than current liabilities. This is due to strategic

partnership with Ericsson. This could be one of the main reasons why the

working capital reflects adverse



Schedule of changes in working capital for the year ended

2007 - 2008

Particulars 2007 (Rs. In ' 000 ) 2008 (Rs. In ' 000) Effects in Working Capital

Increase

(Rs. In '000)

Decrease

(Rs. In '000)

Current Assets :

Inventories 4,78,14

5

5,68,60

7 90,462

Sundry Debtors 1,87,32,95

8

2,77,64,57

2 90,31,614

Cash & Bank Balance 78,04,60

5

50,29,39

0 27,75,215

Loans & Advances 1,74,39,05

8 2,91,47,541 1,17,08,483

Total (A) 4,44,54,76

6 6,25,10,110 2,08,30,559 27,75,215

Current Liabilities :Sundry Creditors & Other

Current Liabilities 9,42,94,23

1

11,90,02,13

9 2,47,07,908

Provisions 41,52,48

0 20,98,762 20,53,718

-

Total (B)

9,84,46,711 12,11,00,901 20,53,718 2,47,07,908

Grand total ( A+B)

5,39,91,94

5

5,85,90,79

1

2,28,84,

277

2,74,83,

123

(Increase) / Decrease in

Working Cpaital

4,598,846

4,598,8

46

539,91,945

53,991,945

27,483,1

23

27,483,

123

Interpretation :



The Current Asset has increased compared to the previous year. However, the

Current Liability is substantially higher than the current year’s Current Asset.

This resulted in considerable amount of decrease in working capital. This is

due to strategic partnership with Ericsson. This could be one of the main

reasons why the working capital reflects adverse.



Ratios : -

Current Ratio :

Interpretation :

There is no hard or fast rule, conventionally, a current ratio of 2:1 (current

assets twice the current liabilities) is considered satisfactory. The logic

underlying the convention rule is that even with a dropout of 50% in value of

current assets a firm can meet its obligations, i.e., 50% margin of safety is

assumed to be sufficient to ward off the worst situation.

Generally the levels of current ratio vary from industry to industry depending

on specific industry characteristics. Also firm differs from the industry ratio

because of its policy.

In Bharti Airtel Limited, the current ratio is 0. 72 times i.e,, the current asset is

less than current liabilities. The current liability is high because of sundry

creditors. This is due to strategic partner .

Year Ratio (Times)

2008 0. 57

2009 0. 69

2010 0. 72



Chart showing the Current Ratio of Bharti Airtel Limited for the year

ended 2008 – 20010

Current Ratio

0.57

0.720.69

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

2008 2009 2010

R a t i o ( T i m e s )



Quick Ratio :

Interpretation :

Generally Quick Ratio of 1:1 is considered satisfactory as a firm can easily

meet all current claims. It vary from industry to industry depending on

specific industry characteristics. Also differ from the industry ratio because of

its policy.In Bharti Airtel Limited, the Quick Ratio is below the standard no of

1:1 in all the years during the period of study (2008 – 2010). It is because of

strategic partnership with Ericsson.

Year Ratio (Times)

2008 0. 55

2009 0. 65

2010 0. 72



Chart showing the Quick Ratio of Bharti Airtel Limited for the year

ended 2008 – 2010

Quick Ratio

0.55

0.72

0.65

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

2008 2009 2010

R a t i o

( T i m e s )



Gross Profit Ratio :

Interpretation :

In interpreting the gross profit ratio at is important to observe any trend, but in

making comparison between companies at is vital to appreciate that the gross

profit ratio varies considerably from industry to industry. In telecom Gross

profit is very high considering Low operating cost and high depreciation on

capex led by them. Gross profit of 45-50% is highest among all the industries.

In Bharti Airtel, the Gross Profit Ratio is high during the year 2008 and low

during the year 2010. As major expense is towards depreciation which is

fixed cost. Company will loss more with decrease in business. It is visible

from above trend. Gross Profit ratio will increase with increase in business

due to benefit of scale.

In interpreting the gross profit ratio at is important to observe any trend, but in

making comparison between companies at is vital to appreciate that the gross

profit ratio varies considerably from industry to industry. In telecom Gross

profit is very high considering Low operating cost and high depreciation on

capex led by them. Gross profit of 45-50% is highest among all the industries.

In Bharti Airtel, the Gross Profit Ratio is high during the year 2008 and lowduring the year 2010. As major expense is towards depreciation which is

Year 2008 2009 2010

Percentage

( %)29.08 29.33 27.97



fixed cost. Company will loss more with decrease in business. It is visible

from above trend. Gross Profit ratio will increase with increase in business

due to benefit of scale

Chart showing the Gross Profit Ratio of Bharti Airtel Limited for the year

ended 2008– 2010

Gross Profit Ratio

27.97

29.0829.33

25

26

27

28

29

30

31

32

33

34

35

2008 2009 2010

P e r c e n t a g e ( % )



Net Profit Ratio :

Interpretation :

In interpreting the Net Profit Ratio at is important to bear in mind that such

ratio varies from firm to firm. When we compare the gross and the net profit

margins we can gain a good impression of their non-production and non-direct

costs such as administration, marketing and finance costs. The Net Profit

Ratio provides clear picture of how efficiently the firm maintains control over

its total expenses.

The Net Profit Ratio of Bharti Airtel Limited is high during the year 2010 &

low during the year 2008. The net profit ratio has gone up to 26.40% in 2010compared to 2008 & 2009, respectively. It indicates the efficiency of the

management in increasing the profit. As mentioned above the benfit is for

increase in scale of business. Fixed cost will get observed over more revenue

hence there will be increase in Net profit ratio with increase in revenue

Year 2008 2009 2010

Percentage

( %)23.99 22.58 26.40



Chart showing the Net Profit Ratio of Bharti Airtel Limited for the year

ended 2008 – 2010

Net Profit Ratio

26.40

23.99

22.58

15

18

21

24

27

30

2008 2009 2010




Operating Ratio :

Interpretation :

Operating Ratio monitor the various expenses incurred related to sales. A

high operating ratio would indicate low profitability, while a low ratio is a

indication for high profitability. The Operating Ratio should be low to leave a

portion of sales to give fair return to the investors.

Note: The smaller the ratio, the greater the organization's ability to generate

profit if revenues decrease. When using this ratio, however, investors should

be aware that it doesn't take into account debt repayment or expansion

Bharti Airtel Limited has 60 % margin on operating expenses. The Operating

Ratio is 41.37 % in 2008 which is less than the margin. This shows the Airtel

has well managed the operating cost.

Year 2008 2009 2010

Percentage

( %)41.37 38.74 38.89



Chart showing the Operating Ratio of Bharti Airtel Limited for the year

ended 2008– 2010

Operating Ratio

38.89

41.37

38.74

35

37

39

41

43

45

47

49

2008 2009 2010




Debtor Turnover Ratio :

Interpretation :

Receivable Turnover Ratio which indicates the number of times that the

average outstanding net receivables is turned over, or converted into cash

through collections during the year. Receivables turnover is the period

required for one complete cycle; from the time receivables are recorded

through collection, to the time new receivables are recorded. On the other

hand, a longer credit period granted to creditors would adversely effect the

firm’s liquidity position.

The debtor turnover ratio has increased in all the years during the period under

study. Though it has increased, still with the growth in the business &

receivables, it indicates that the company’s strength in debtor management.

The operation of debtors is through channel partners in postpaid. The debtor

is zero in prepaid operation because they are paid through demand draft. The

operation of prepaid is through Distributors – Retailers – Customers.

Year 2008 2009 2010

Ratio ( Times ) 12.28 12. 78 15.73



Chart showing the Debtors Turnover Ratio of Bharti Airtel Limited for the year

ended 2008 – 20010

Debtors Turnover Ratio

15.73

12.2812.78

8

10

12

14

16

18

2008 2009 2010




Inventory Turnover Ratio :

Interpretation :

The liquidity of inventories is measured by the number of times per year that

inventory is converted into cost of goods sold. Hence it is a device to measure

the efficiency of the inventory management. Inventory turnover ratio rates

vary tremendously by the nature of the business.

Bharti Airtel Limited, average inventory holding period is one day. In

telecom inventory will only include sim inventory which will be nominal in

comparision to revenue. . Capex inventory will be grouped under fixed assets.

Year 2008 2009 2010

Ratio ( Times ) 453.06 547.83 1307.05



Fixed Assets Turnover Ratio :

Interpretation :

This ratio measures the efficiency in utilization of fixed assets. The ratio of

sales to fixed assets measures the turnover of plant and machinery. A high

fixed assets turnover ratio indicates efficient utilization of fixed assets in

generating sales.

There has been constant decrease in fixed assets turnover ratio of Bharti Airtel

Limited though absolute figure of sales have down up. There is an decrease

year after year. In 2010, it has increased by 19 %. The sales include the

capital work in not progress. It means decrease in the investment in fixed

assets has brought about commensurate loss.

Year 2008 2009 2010

Ratio ( Times ) 1.03 1.00 0.81



Debt Equity Ratio :

Interpretation :

Either too high or too low a ratio may be disadvantageous. Too high suggests

that management is not taking advantages of opportunities to maximize its

profit through borrowings. Too low suggests undue exposure to risks of

bankruptcy and to a fixed burden of interest expenses in the event of period of

relatively low profit. As a rule of thumb, debt equity ratio of less than 1 is

taken as acceptable, but this is not based on any scientific analysis.

In Bharti Airtel Limited, the Debt Equity Ratio is not close to 1 which is not

good for company. The debt is 0.14 times in total equity. The managementhas not taken advantage of the opportunities to maximize profit through

borrowings.

Year 2008 2009 2010

Ratio ( Times ) 0.33 0.28 0.14



Chart showing the Debt Equity Ratio of Bharti Airtel Limited for the year

ended 2008 – 2010

Debt Equity Ratio

0.14

0.33

0.28

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

2008 2009 2010




Earnings Per Share :

Interpretation :

This is well known and widely used indicator of profitability because it can

easily be compared to the previous EPS figure. The earnings per share

represent average amount of net income earned by single equity share.

Earnings per share are generally considered to be the single most important

variable in determining a share's price. It is also a major component of the

price-to-earnings valuation ratio.

The Earnings Per Share of Bharti Airtel Limited is has been consistently

increasing in 2009and it decreased in 2010. This shows the equity share

capital is being effectively used in 2009 but not in 2010. This is also getting

impacted with No-dividend policy of Bharti. Bharti has never declared

dividend so share holder is not getting benefited with the decresation in EPS.

Year 2008 2009 2010

Earnings Per Share

(Amount in Rs.)32.90 40.79 24.82



Chart showing the Earnings Per Share of Bharti Airtel Limited for the year

ended 2008 – 20010

Earnings Per Share

24.82

32.90

40.79

20

25

30

35

40

45

2008 2009 2010

A m o u n t ( I n R s )



Comparison of Balance Sheet

.

Comparative Balance sheet of Bharti Airtel Limited for the year ended

2005 - 2006

Particulars 005 (Rs. In ' 000 ) 2006 (Rs. In ' 000 )

Increase /

(Decrease) (Rs. In

'000)

Increas

e /

Decreas

e in %

Assets

Current Assets :

Inventories 3,15,838 1,77,444 1,38,394 43.8

Sundry Debtors 71,57,443 1,07,61,709 36,04,266 50.36

Cash & Bank Balances 38,41,352 30,74,285 7,67,067 19.97

Loans & Advances 1,06,76,095 1,55,29,497 48,53,402 45.46

Total (A) 2,19,90,728 2,95,42,935 75,52,207 34.34

Fixed Assets 10,75,94,459 15,34,81,269 4,58,86,810 42.65

Investments 93,18,953 71,96,981 21,21,972 22.77

Miscellaneous Expenses 5,83,483 79,400 5,04,083 86.39

Profit and Loss Account 78,64,333 - 78,64,333 100.00

Total (B) 12,53,61,228 16,07,57,650 3,53,96,422 28.24

Grand Total (A + B) 14,73,51,956 19,03,00,585 4,29,48,629 29.15

Liabilities


Current Liabilities 4,20,79,834 6,46,55,783 2,25,75,949 53.65

Provisions 11,19,910 23,35,851 12,15,941 108.57

Total (C) 4,31,99,744 6,69,91,634 2,37,91,890 55.07

Long Term Liabilities :

Share Capital 1,85,60,889 1,89,38,793 3,77,904 2.04

Reserve & Surplus 3,46,39,403 5,43,95,531 1,97,56,128 57.03

Secured Loans 3,95,98,760 2,86,33,707 1,09,65,053 27.69

Unsecured Loans 1,03,44,149 1,93,29,201 89,85,052 86.86

Deferred Payments 10,09,011 18,90,459 8,81,448 87.36

Employee Compensation - 1,21,260 1,21,260 100.00

Total (D) 10,41,52,212 12,33,08,951 1,91,56,739 18.39

Grand Total (C + D) 14,73,51,956 19,03,00,585 4,29,48,629 29.15



Interpretation :

The analysis of the above comparative Balance sheet reveals that the monetary

balance in each account has increased between 2005 – 2006, with exception of

inventories, cash & bank balance, investment. The significant changes which

have occurred in specific balance account during the two years are :

There is 50.36 % increase in sundry debtors, 45.46 % increase in loans

and advances, 43.82 % decrease in inventories, 19.97 % decease in cash

& bank balance.

There is 34.34 % increase in current assets and subsequently there is also

55.07 % increase in current liabilities. This change has affected the

liquidity of the company.

There has been increase in share capital and reserve & surplus by 2.04 %

and 57.03 % respectively. This is might due to fresh issue of shares &

retained earnings.




2006 - 2007

Particulars 2006 (Rs. In ' 000 ) 2007 (Rs. In ' 000 )Increase / Decrease (Rs.

In '000)

Increase

/

Decrease

in %

Assets

Current Assets :

Inventories 1,77,444 4,78,145 3,00,701 169

.46

Sundry Debtors 1,07,61,709 1,41,85,170 34,23,461 31

.81

Cash & Bank Balances

30,74,285 78,04,605

47,30,320 153

.87

Loans & Advances

1,55,29,497 2,19,86,846 64,57,349

41

.58

Total (A)

2,95,42,935 4,44,54,766 1,49,11,831

50.

48

Fixed Assets

15,34,81,269 21,68,14,497 6,33,33,228

41

.26

Investments

71,96,981 70,58,179 1,38,802

1.9

3

Miscellaneous Expenses

79,400 26,630 52,770

66.4

6

Profit & Loss a/c

Total (B)

1,60,757,650 2,23,899,306 6,31,41,656 39.28

Grand Total (A + B)

19,03,00,585 26,83,54,072 7,80,53,487 41.02

Liabilities


Current Liabilities

6,46,55,783 9,42,94,231 2,96,38,448

45

.84

Provisions

23,35,851 41,52,480 8,16,629

77

.77

Total (C)

6,69,91,634 9,84,46,711 3,14,55,077

46.

95


Share Capital

1,89,38,793 1,89,59,342 20,5490

.11

Reserve & Surplus

5,43,95,531 9,51,73,342 4,07,77,811

74

.97

Secured Loans

2,86,33,707 26,64,475 25,969,232

90.6

9

Unsecured Loans

1,93,29,201 5,04,43,577 3,11,14,376

160

.97

Deferred Payments

18,90,459 23,66,621 4,76,162

25

.19

Employee Compensation

121,260 3,00,004 1,78,744

147

.41

Total (D)12,33,08,951 16,99,07,361 4,65,98,410 37.79

Grand Total (C + D) 19,03,00,585 26,83,54,072 7,80,53,487 41.02



Interpretation :





There is 169.46 % increase in inventories, 74. 07 % increase in sundry

debtors, 153.87 % increase in Cash & Bank balance. It is observed

during the study period, some portion of the inventory is capitalized for

internal use

There is Parallel increase in both Current Asset & Current Liabilities

respectively to 50.47 % & 49.96 %

There has been a marginal increase in share capital by 0.11 % and

increase in reserve & surplus by 74.96 %. The secured loans have

decreased by 90.69%. However, there is sharp increase of 160.97% of

Unsecured Loans. There is shift in the approach by the company for

deriving funds from the financial market, observed in the study.




2007 - 2008

Particulars 2007 (Rs. In ' 000 ) 2008 (Rs. In ' 000 ) Increase / (Decrease)

(Rs. In '000)

Increase /

Decrease in

%

Assets

Current Assets :

Inventories

4,78,145 5,68,607 90,462

18.9

2

Sundry Debtors

1,87,32,958 2,77,64,572 9,031,614

48.2

1

Cash & Bank Balances

78,04,605 50,29,390 27,75,215

35.56

Loans & Advances

1,74,39,058 2,91,47,541 1,17,08,483

67.1

4

Total (A)

4,44,54,766 6,25,10,110 1,80,55,344

40.6

2

Fixed Assets

21,68,14,497 21,78,17,263 10,02,766

0.4

6

Investments

70,58,179 10,95,28,528 10,24,70,349

1,451.8

0

Miscellaneous Expenses

26,630 2,034 24,596

92.36

Total (B)

22,38,99,306 32,73,47,825 10,34,48,519

46.2

0

Grand Total (A + B)

26,83,54,072 38,98,57,935 12,15,03,863

45.2

8Liabilities


Current Liabilities

9,42,94,231 11,90,02,139 2,47,07,908

26.2

0

Provisions

41,52,480 20,98,762 20,53,718 49.46

Total (C)

9,84,46,711 12,11,00,901 2,26,54,190

23.0

1


Share Capital

1,89,59,342 1,89,79,074 19,732

0.1

0

Reserve & Surplus9,51,73,342 18,28,59,525 8,76,86,183

92.13

Secured Loans

26,64,475 5,24,244 21,40,231

80.32

Unsecured Loans

5,04,43,577 6,51,79,172 1,47,35,595

29.2

1

Deferred Payments

23,66,621 6,38,684 17,27,937

73.01

Employee Compensation

3,00,004 5,76,335 2,76,331

92.1

1

Total (D)

16,99,07,361 2,,68,57,034 9,88,49,673

58.1

8

Grand Total (C + D)

26,83,54,072 38,98,57,935 12,15,03,863

45.2

8



Interpretation :





There is marginal increase of 18.92 % in inventories, 48. 21 % increase

in sundry creditors, 67.14 % increase in loans and advances and a dip in

cash & bank balance of 35.56%. Investment has substantial increase of

1451. 80%

Both, Current Assets & Current Liabilities has upward trend of 40. 62 %

& 46. 20%, respectively

There is hardly any impact on share capital. However, there is increase

in reserve & surplus by 92.13 %. The secured loans have decreased by

further 80. 32%.

There is increase of 92. 11% in Employee compensation. This is due to

additional ESOPs outstanding

There is hardly any impact on fixed assets during the year, observed

during the period under study.



Chapter – 5

Findings & Recommendation



Findings :-

Gross Working Capital of the company shows increasing trend during

the period of study.

Net Working Capital of the company shows in negatively increasing

trend. This is because the Working capital is funded from Long-Term

Fund. This is because of the strategic partnership policy with Ericsson.

Atleast 98% of the Current Liability is from Ericsson as most of the

funds are utilized for Network Expansion (Capex) which involves

Installations of MSC, BTS, cables & various connectivity related

expenses. And the Partner is paid accordingly as per the business

agreement.

Working Capital Turnover Ratio of the company shows the decreasing

trend, because the sundry creditors in current liabilities are high. This is

due to commitment or strategic partnership with Ericsson.

It was observed from the analysis that the largest average share in

working capital was sundry debtors. Due to credit given to subscribers

for 1 month.

The share of loans and advances in working capital was 67.14% in 2008

and it is responsible for variations in working capital of different years

under the period of study.



The overall performance of the company regarding inventory

management is progressive in terms of utilization of inventories during

the period of study.

Findings in Ratios :-

the current ratio is 0. 72 times i.e,, the current asset is less than current

liabilities. The current liability is high because of sundry creditors.

Quick Ratio of 1:1 is considered satisfactory as a firm can easily meet all

current claims. It vary from industry to industry depending on specific

industry characteristics. Also differ from the industry ratio because of

its policy.In Bharti Airtel Limited, the Quick Ratio is below the standard

no of 1:1 in all the years during the period of study (2008 – 2010).

The Net Profit Ratio of Bharti Airtel Limited is high during the year

2010 & low during the year 2008. The net profit ratio has gone up to

26.40% in 2010 compared to 2008 & 2009, respectively. It indicates the

efficiency of the management in increasing the profit. As mentioned

above the benfit is for increase in scale of business.

The debtor turnover ratio has increased in all the years during the period

under study. Though it has increased, still with the growth in the

business & receivables, it indicates that the company’s strength in debtor

management. The operation of debtors is through channel partners in

postpaid.



There has been constant decrease in fixed assets turnover ratio of Bharti

Airtel Limited though absolute figure of sales have down up. There is

an decrease year after year. In 2010, it has increased by 19 %. The sales

include the capital work in not progress. It means decrease in the

investment in fixed assets has brought about commensurate loss.

The Earnings Per Share of Bharti Airtel Limited is has been increasing

in 2009and it decreased in 2010. This shows the equity share capital is

being effectively used in 2009 but not in 2010.



Recommendations :

Since most of the working capital is sourced through Long-Term Fund,

especially in most of the scenario the credit being extended from

Strategic Partner, Ericsson, the resources & utilization of them needs to

be met optimistically to increase Gross Profit margin.

Company is working with negative working capital. This is very risky.

In the persent secenario as business is increasing at very fast pace there

is no problem in meeting the short term liabilities. But this will be riskier

in case where company will not be able to increase revenue significately.

It also shows risk taking ability of company.

Cash and Bank balance of the company is low and it is advisable for the

company that it should maintain a minimum balance to meet their day to

day capex and opex needs.

The company has collected the debt promptly. However, more credit &

collection measures need to be taken to improve the average collection

period which is reflecting in 2008.

The company has not given any dividend to share holder since listing

over stock exchange. Till the time company is able to provide good

increase in EPS and revenue its viable.



Company should raise funds through short term sources for short

termrequirement of funds, which comparatively economical as compare

to long term funds.

Company should take control on debtors collection period which is

major part of current assets.

Company has to take control on cash balance because cash is non

earning assets and increasing cost of funds.

Company should reduce the inventory holding period with use of zero

inventory concepts.

Over all company has good liquidity position and sufficient funds to

repaymentof liabilities. Company has accepted conservative financial policy

and thus maintaining more current assets balance. Company is increasing sales

volume per year which supported to company for sustain 2nd position in the

world.



Chapter – 6

Limitation of the study



Limitations of the study

Following limitations were encountered while preparing this project:

1) Limited data:-

This project has completed with annual reports; it just constitutes one part

ofdata collection i.e. secondary. There were limitations for primary

datacollection because of confidentiality.

2) Limited period:-

This project is based on five year annual reports. Conclusions

andrecommendations are based on such limited data. The trend of last five

yearmay or may not reflect the real working capital position of the company

3) Limited area:-

Also it was difficult to collect the data regarding the competitors and their

financial information. Industry figures were also difficult to get.



Limitations of Ratio Analysis :

The ratio analysis is one of the most powerful tools of financial tools of

financial management. Though ratios are simple to calculate and easy to

understand, they suffer from some serious limitations.

Limited use of single ratio

Lack of adequate standards

Inherent Limitations of accounting

Change of accounting procedure

Window dressing

Personal bias

Incomparability

Absolute figures distort

Price level changes

Ratios no substitute



Chapter - 7

Conclusion



Working capital is a capital required to manage day to day operations of the

business. Management of adequate working capital is essential as it has direct

impact on profitability and liquidity.

The entire Working Capital structure in this study has different dimension.

That is, as studied in this topic, the Net working capital is increasing in the

negative trend though there is enough of profit generated & capital employed.

This is because of the partnership with Strategic Partner (Ericsson/Nokia).

Payment to strategic partner is based on revenue generated and 98% of current

liability is pertains to them. So there is no major threat visible on day to day

operation of company.

The performance of the company during the period under study was

encouraging. Sundry debtors are the major components of current assets in

determining the size of working capital. The company was managing its

receivables satisfactorily as there was no heavy locking of funds in

receivables. Company is utilizing fund flow to meet its capex need and day to

day deployement of network. As this is directly linked to generation of

revenue so its good to have negative working capital till the time business is

growing at very high pace. In case of economy/idutrial slowdown company

has to improve on there working capital management.



On the basis of this assignment’s data we can say that there will be benefit to

investors to invest their money in telecom industry because telecom industry

is

growing industry.And Indian government is also providing various facilities in

the development of telecom industry. In India Bharti Airtel is growing

company. On the basis of its various ratios like Current ratio, Quick ratio , Net profit margin ratio, Inventory turnoverratios, Account receivable ratio ,

Earning per share we can say that company has good profitability condition,

good liquidity position, good market condition because earning per share is

increasing every year.



Chapter - 8

Refrences



References

Wesites :-

www.airtel.in

www.airtelindia.co.in

www.moneycontrol.com

www.wikipedia.com

www.google.com

Books & Magazine :-

Management Accounting Principles and Practices, Vikas Publishing House, M.A.Sahaf

Principles of Management accounting, Sultan Chand & Sons, Dr. S. Maheshwari.

Financial Management, ICAI, New Delhi

http://www.airtel.in/

http://www.airtelindia.co.in/

http://www.moneycontrol.com/

http://www.wikipedia.com/

http://www.google.com/

http://www.airtel.in/

http://www.airtelindia.co.in/

http://www.moneycontrol.com/

http://www.wikipedia.com/

http://www.google.com/

Rinki Project

Documents

Transcript of Rinki Project