Financial Reporting and Analysis Project

Contents Topic 1. 2. 3. 4. 5. 6. Introduction Balance Sheet P/L Account Horizontal Analysis Vertical Analysis Ratio Analysis Page No. 3 4 5 6 9 12

Introduction

Name of the company Idea Cellular Ltd. Industry - Telecommunication Founded 1995 Popularly known as Idea Brand Ambassador Mr. Abhisek Bachhan Headquarters Santacruz East, Mumbai, India Products Mobile Telephony, Wireless Broadband Parent Companies Aditya Birla Group (49.05%) Axiata Group Berhad (15%) Providence Equity (10.6%) No. of employees 6481 (As of 2011) Website www.ideacellular.com Financial Year to be analysed 2011-12

Balance sheet Balance Sheet as of March 31,2012

P/L Account Statement of Profit & Loss for the year ended March 31,2012

Horizontal analysis Equity and Liabilities

Particulars March 31, 2012 March 31, 2011 Increase (Decrease) Amount Percent 55.70 5982.63 6038.36 10333.96 2657.24 2241.35 158.70 15391.25 (1673.62) (6021.44) 9822.84 2.48 2130.26 23559.87 0.17% 6.62% 4.89% 13.64% 92.58% 98.40% 12.89% 18.73% (9.88)% (16.85)% 34.97% 4.08% 2.64% 8.23%

Shareholder Funds Share Capital 33088.45 Reserves & 96256.93 Surplus Total 129345.38 Non-Current Liabilities Long-term 86121.56 Borrowings Deferred Tax 5527.39 Liabilities (Net) Other Long4519.08 term Liabilities Long Term 1389.63 Provisions Total 97557.66 Current Liabilities Short-term 15260.14 Borrowings Trade Payables 29703.76 Other Current 37910.31 Liabilities Short-term 63.28 Provisions Total 82937.49 Net Total 309840.53

33032.75 90274.30 123307.02 75787.60 2870.15 2277.73 1230.93 82166.41 16933.76 35725.20 28087.47 60.80 80807.23 286280.66

Assets
Particulars Non-Current Assets
Tangible Assets Intangible Assets Capital Work-InProgress Non-Current Investments Long-term Loans & Advances Total 168938.21 68494.36 6332.73 16368.07 25824.03 285957.4 142538.67 48777.57 35491.86 16368.07 13634.19 256810.36 26399.54 19716.79 (29159.1) 0 12189.84 29147.04 18.52% 40.42% (82.16)% 0 89.40% 11.34%

March 31, 2012

March 31, 2011

Increase (Decrease) Amount Percent

Current Assets
Current Investments Inventories Trade Receivables Cash & Bank Balances Short-term Loans & Advances Other Current Assets Total 0 529.39 8075.54 1341.9 13918.62 17.68 23883.13 9360 522.16 5347.49 4515.35 9717.22 8.08 29470.3 (9360) 7.23 2728.05 (3173.45) 4201.4 9.6 (5587.17) (100.00)% 1.38% 51.02% (70.28)% 43.24% 118.81% (18.96)%

Net Total

309840.53

286280.66

23559.85

8.23%

P&L ACCOUNT
Particulars INCOME
Service Revenue Sale of Trading Goods Other income Total Cost of trading goods sold Personnel Expenditure Network Expenses & IT infrastructure Cost License Fees & WPC Charges Roaming & Access Charges Subscriber Acquisition & Service Expenditure Advertisement & Business Promotion Expenditure Administration & Other Expenses Total Profit Before Finance Charges, Depreciation, Amortization & Taxes Finance & Treasury Charges (Net) Depreciation Amortization of Intangible Assets PROFIT BEFORE TAX Provision for taxes Current Provision for taxes Deferred Provision for taxes MAT Credit PROFIT AFTER TAX 192753.18 0 470.15 193223.33 153327.77 0.25 561.95 153889.97 39425.41 (0.25) (91.8) 39333.36 25.71% (100.00)% (16.34)% 25.56%

March 31, 2012

March 31, 2011

Increase (Decrease) Amount Percent

OPERATING EXPENDITURE
0 8588.27 56592.56 23231.83 32798.75 20540.75 0.2 7288.83 48724.57 17728 24754.48 16427.53 (0.2) 1299.44 7867.99 5503.83 8044.27 4113.22 (100.00)% 17.83% 16.15% 31.05% 32.50% 25.04%

4210.76 4132.04 150094.96

3848.38 3837.32 122609.31

362.38 294.72 27485.65

9.42% 7.68% 22.42%

43128.37 9078.04 20194.55 5433.16 8422.62 1808.11 2657.24 (1808.11) 5765.38

31280.66 2487.35 17229.95 2500.15 9063.21 1580.9 613.79 (1577.45) 8445.97

11847.71 6590.69 2964.6 2933.01 (640.59) 227.21 2043.45 (230.66) (2680.59)

37.88% 264.97% 17.21% 117.31% (7.07)% 14.37% 332.92% 14.62% (31.74)%

vertical analysis Equity and Liabilities

Particulars March 31, 2012 March 31, 2011 Common size percentages 2012 2011
10.67% 31.07% 11.54% 31.53%

Shareholder Funds
Share Capital Reserves & Surplus 33088.45 96256.93 33032.75 90274.30

Total 129345.38 Non-Current Liabilities

Long-term Borrowings Deferred Tax Liabilities (Net) Other Long-term Liabilities Long Term Provisions Total 86121.56 5527.39 4519.08 1389.63 97557.66 15260.14 29703.76 37910.31 63.28 82937.49

123307.02
75787.60 2870.15 2277.73 1230.93 82166.41 16933.76 35725.20 28087.47 60.80 80807.23

41.74%
27.79% 1.78% 1.46% 0.45% 31.49% 4.93% 9.57% 12.23% 0.02% 26.77%

43.07%
26.47% 1.01% 0.79% 0.49% 28.70% 5.92% 12.48% 9.81% 0.02% 28.23%

Current Liabilities
Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions Total

Net Total

309840.53

286280.66

100%

100%

Assets
Particulars Non-Current Assets
Tangible Assets Intangible Assets Capital Work-InProgress Non-Current Investments Long-term Loans & Advances Total 168938.21 68494.36 6332.73 16368.07 25824.03 285957.4 0 529.39 8075.54 1341.9 13918.62 17.68 23883.13 142538.67 48777.57 35491.86 16368.07 13634.19 256810.36 9360 522.16 5347.49 4515.35 9717.22 8.08 29470.3 54.52% 22.11% 2.04% 5.28% 8.33% 92.29% 0.00% 0.17% 2.61% 0.43% 4.49% 0.01% 7.71% 49.79% 17.04% 12.40% 5.72% 4.76% 89.71% 3.27% 0.18% 1.87% 1.58% 3.39% 0.00% 10.29%

March 31, 2012

March 31, 2011

Common size percentages 2012 2011

Current Assets
Current Investments Inventories Trade Receivables Cash & Bank Balances Short-term Loans & Advances Other Current Assets Total

Net Total

309840.53

286280.66

100%

100%

10

P&L ACCOUNT
Particulars INCOME
Service Revenue Sale of Trading Goods Other income Total Cost of trading goods sold Personnel Expenditure Network Expenses & IT infrastructure Cost License Fees & WPC Charges Roaming & Access Charges Subscriber Acquisition & Service Expenditure Advertisement & Business Promotion Expenditure Administration & Other Expenses Total Profit Before Finance Charges, Depreciation, Amortization & Taxes Finance & Treasury Charges (Net) Depreciation Amortization of Intangible Assets PROFIT BEFORE TAX Provision for taxes Current Provision for taxes Deferred Provision for taxes MAT Credit PROFIT AFTER TAX 192753.18 0 470.15 193223.33 153327.77 0.25 561.95 153889.97 99.76% 0.00% 0.24% 100.00% 99.63% 0.00% 0.37% 100.00%

March 31, 2012

March 31, 2011

Common size percentages 2012 2011

OPERATING EXPENDITURE
0 8588.27 56592.56 23231.83 32798.75 20540.75 0.2 7288.83 48724.57 17728 24754.48 16427.53 0.00% 5.72% 37.70% 15.48% 21.85% 13.69% 0.00% 5.72% 37.70% 1.03% 21.85% 13.69%

4210.76 4132.04 150094.96

3848.38 3837.32 122609.31

28071.73% 2.75% 100.00%

28071.73% 2.75% 100.00%

43128.37 9078.04 20194.55 5433.16 8422.62 1808.11 2657.24 (1808.11) 5765.38

31280.66 2487.35 17229.95 2500.15 9063.21 1580.9 613.79 (1577.45) 8445.97

100.00% 21.05% 46.82% 12.60% 19.53% 4.19% 6.16% (4.19)% 13.37%

100.00% 7.95% 55.08% 7.99% 28.97% 5.05% 1.96% (5.04)% 27.00%

11

Ratio analysis
Profitability Ratios Ratio Gross Profit Ratio Operating Profit Ratio Net Profit Ratio Return on Assets Return on Equity Earning per Share 2012 22.37% 9.08% 2.99% 1.86% 4.46% 0.17 2011 20.40% 7.53% 5.51% 2.95% 6.85% 0.25

Note : Assume gross profit as Profit before finance charges, depreciation, amortization & taxes.

Analysis :
Gross Profit Ratio : A small increase in the gross profit ratio indicates that there has been an increase in sales without an equal corresponding increase in cost. Operating Profit Ratio : Indicates that sales are increasing faster than costs. On comparing the ratios for 2012 and 2011, we can comprehend that sales have increased at a faster rate than the year before. Net Profit Ratio : A decrease in the net profit ratio suggest that companys net income has come down as compared with the sales. This is probably because of a significant increase in the finance & treasury related expenses, as the net earnings in 2012 are less than in 2011. Return on Assets : Again the same reason as above, the net income in 2012 is less than that in 2011, even though the value of the assets have increased. A decrease in the return on assets will lead to less investors investing in the company, and is a sure sign of trouble around the corner. Return on Equity : Return on equity has also decreased compared to the previous year, suggesting that the company is having problems in milking profits from their operations. Also as a result, potential investors will be less keen to invest in the company in the future. Earning per Share : A decrease in the earning per share depicts a decrease in the profitability of the company. We can also predict that the share prices of the company are sure to come down in the coming months.
12

Liquidity Ratios Ratio Current Ratio Quick Ratio Debt Equity Ratio Fixed assets to long term debts Interest Coverage Ratio
Analysis :
Current Ratio : Is a measure of general liquidity. A decrease in the current ratio signifies that the ability of the firm to pay its obligations as and when they become due, has lessened comparatively. Hence the margin of safety or cushion available to the creditors has also decreased. Quick Ratio : A decrease in the quick ratio means the company's ability to meet day-to-day operating expenses and satisfy short term obligation as they become due has decreased. This signifies that the assets are not being managed well by the company. Debt Equity Ratio : An increase in the debt equity ratio means a lot of debt is being used to finance increased operations. Could be harmful in the future if the cost of this debt financing outweighs the return that the company generates on the debt through investment and business activities. Fixed assets to long term debts : This measures the amount of fixed assets available as backing for long-term debts. A decrease in this ratio means that the company would have more trouble in getting rid of their long-term debts. Interest coverage Ratio : It provides a quick picture of a company's ability to pay the interest charges on its debt. A huge decrease in this ratio means that the company does not have a good safety margin for paying its interest for any period, and is not in an excellent position to weather possible financial storms.

2012 28.79% 28.16% 66.58% 2.83 1.93

2011 36.47% 35.82% 61.46% 2.99 4.64

13

Activity Ratios Ratio Assets Turnover Ratio Fixed Assets Turnover Ratio Inventory Turnover Ratio Inventory Holding Period Debtors Turnover Ratio Average Collection Period Creditors Turnover Ratio Average Payment Period Return on capital employed
Note :
Sales = Service Revenue + Sale of Trading goods Purchases = Network Expenses and IT outsourcing cost + License Fees and WPC Charges + Roaming & Access charges +Subscriber Acquisition & Servicing Expenditure

2012 62.21% 79.07% 364.10 1 day 23.87 15.29 days 4.48 81.47 days 8.12%

2011 53.56% 67.60% 293.64 1.24 days 28.67 12.73 days 3.01 121.26 days 5.80%

Analysis :
Assets turnover ratio : Fixed assets turnover ratio : Inventory turnover ratio : Inventory holding period : Debtors turnover ratio : Average collection period :
14

 Creditors turnover ratio : Average payment period : Return on capital employed :

15