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CONTENTS

Sr.
No.
TOPIC Page
No.
1 Executive summary 1
2 Objective and scope of the study 3
3 Company Profile 4
4 About Euity Analysis 11
! "esearch methodolo#y 1!
$ %heoretical &rame'or( 1)
) Analysis and *nterpretation of data 3+
, &indin#s $!
+ "ecommendation $)
1- .imitation $,
11 Assumptions $+
12 Conclusion )-
13 /iblio#raphy )1
0i1
CHAPTER I
EXECUTIVE SUMMARY
%he field of euity research is very vast and one has to loo( into various aspects
of the functionin# of the company to #et to any conclusion about the possible
performance of the company in the mar(et2 *nvestors li(e 'arren buffet made a fortune
out of investments in the stoc( mar(et3 'hich is uiet impossible 'ithout proper research
about the companies2 %he field of euity research is full of challen#es2 *t is your door to
fame3 fortune and3 above all3 professional challen#e2 *n a 'orld that is shrin(in# in si4e
due to information technolo#y and blurrin# boundaries bet'een nations3 the stoc( mar(et
5or the euities mar(et63 'hich is considered to be in its infant sta#e3 is all set to #ro' in
si4e2
%he project on 7Euity Analysis of %elecom 8ector9 'as carried out in Anand
"athi 8ecurities Pvt .td23 Pune3 a very 'ell (no'n company in the field of stoc( bro(in#
and capital mar(et services sector22 %he duration of the project 'as t'o months i2e from
1
st
:une 2--) to 31
st
:uly 2--)2 %hese t'o months 'ere not only limited to learnin# and
devotin# time to'ards euity research but it also provided an insi#ht on 'hat various
services such bro(in# houses provide and 'hat efforts are reuired to mana#e such
or#ani4ations2
%he reason behind choosin# this project is that it provides hands on experience
'ith 'hat #oes on in the stoc( mar(et on a day;to;day basis2 8ome value investors only
loo( at present assets<earnin#s and don=t place any value on future #ro'th2 Other value
investors base strate#ies completely around the estimation of future #ro'th and cash
flo's2 >espite the different methodolo#ies3 it all comes bac( to tryin# to buy somethin#
for less than its 'orth2
%he project initiated 'ith understandin# the mannerisms of the stoc( mar(et
tradin# follo'ed by the dynamics of the telecom sector2 8ome of the major players in
%elecom sector 'ere then chosen for further analysis2 %hese companies 'ere further
011
studied in detail 'ith respect to their financials and the mana#ement?s future plans
re#ardin# the functionin# of the company3 their expansion plans3 and various ne's about
these companies and their #lobal forays2
/ased on the complete study of the companies3 Bharti Airtel Limited .oo(ed
promisin# and 'ith a vie' to derive maximum value from the investment /harti Airtel
.imited3 the company 'ith stron# financials3 competent mana#ement personnel3
promisin# #lobal forays 'as recommended as a B!" or Hold# share2 VSNL3 a company
'ith not so stron# financials 'as seen to be too ris(y and 'as recommended as a 7Sell#
share2
021
CHAPTER II
OB$ECTIVE O% THE STU&Y
%o analy4e the telecom industry and find the future #ro'th opportunities2
%o carry out the company analysis of the selected companies and to su##est
'hether they are a viable investment option2
Also to loo( at the historical performance data of the company and estimate the
future performance of stoc(s2 .oo(in# at this information to #ain an insi#ht on the
company s future performance2 *t is a method of evaluatin# a security by attemptin#
to measure its future performance by examinin# related economic3 financial and other
ualitative and uantitative factors2 %o estimate a value that an investor can compare
'ith the security=s current price and fi#ure out 'hat sort of position to ta(e 'ith that
security2
SCOPE O% THE STU&Y
%he scope of this project is limited to only one sector i2e2 telecom 5service
provider6 sector2 %his project is concerned 'ith only one sector of companies in
the stoc( mar(et2 %he project does not extend its scope to any other sector of
companies2
Also3 the project is concerned 'ith only t'o companies from amon# the major
players in the %elecom sector i2e2 /harti Airtel .imited and @idesh 8anchar Ai#am
.imited 5@8A.62
031
CHAPTER III
COMPANY PRO%ILE
ANAN& RATHI SECURITIES PVT LT&.
Anand "athi 5A"6 is a leadin# full service securities firm providin# the entire
#amut of financial services2 %he firm3 founded in 1++4 by Br2 Anand "athi3 today has a
pan *ndia presence as 'ell as an international presence throu#h offices in >ubai and
/an#(o(2 A" provides a breadth of financial and advisory services includin# 'ealth
mana#ement3 investment ban(in#3 corporate advisory3 bro(era#e C distribution of
euities3 commodities3 mutual funds and insurance3 structured products ; all of 'hich are
supported by po'erful research teams2 %he entire firm activities are divided across
distinct client #roupsD *ndividuals3 Private Clients3 Corporates and *nstitutions and 'as
recently ran(ed by Asia Boney 2--$ poll amon#st 8outh Asia=s top ! 'ealth mana#ers
for the ultra;rich2 *n year 2--) Citi#roup @enture Capital *nternational joined the #roup as
a financial partner2
PHILOSOPHY'
Anand"athi tries and understands the financial needsE to offer personal advice
and expert analysis that one one needs for assets to #o Ftra mile2 %he ability to thin( far
ahead and formulate lon#;term strate#y coupled 'ith lon# hours of practice and research
are the (ey drivers 'hich ma(e 'ealth 'or( harder for you2
041
%he company believes that the (ey to build 'ealth lies in allocatin# assets across
various mar(ets3 financial instruments and industry sectors2 Geepin# this in mind it
levera#es its expertise in scientific asset allocation3 to help you maximi4e returns and
minimi4e ris(s2
SLO(AN D
)ehi*d e+er" ,!--e,,.!l I*+e,tor#
%he firm=s philosophy is entirely client centric3 'ith a clear focus on providin#
lon# term value addition to clients3 'hile maintainin# the hi#hest standards of excellence3
ethics and professionalism2
PRO&UCT AN& SERVICES'
/ealth Ma*ageme*t.
H Euities
I 8toc(s3 PB83 >erivatives3 Butual &unds
H &ixed *ncome
I /onds3 Butual &unds
H Commodities C Precious Betals
H .ife C Jeneral *nsurance
H "eal Estate Private Euity &und
H Currencies
H 8tructured Products C Capital;Juaranteed Aotes
HAlternative C Aon;correlated investments
I*+e,tme*t Ba*0i*g a*d Cor1orate %i*a*-e.
H Euity Capital Bar(et
I *PO<"i#hts<8econdary issues
I >elistin# C Open Offers
I /loc( >eals C Private Euity
0!1
I Bana#ement /uy;outs
H Advisory
I /usiness 8ale<>isposal
I BCA < :@s < 8trate#ic alliances
I @aluations
H >ebt Advisory
I "upee C &orei#n Currency
I >ebt "aisin# < Ae#otiation
I >ebt "estructurin#
I Creditor 8ettlement < O%8
&i,tri)!tio* a*d Bro0erage'
H Euities
H >erivatives
H Commodities
H *PO?s
H Butual &unds
H .ife C Aon;.ife *nsurance
H >epository 8ervices
H /onds
H @alue;add services
I bac(ed by independent research teams
I real;time support to clients
MILESTONES'
2334'
8tarted activities 'ith consultin# and institutional euity sales 'ith staff of 1!2
0$1
2335'
8et up a research des( and empanelled 'ith major institutional investors
2336'
*ntroduced investment ban(in# businesses
"etail bro(era#e services launched
2333'
.ead mana#ed first *PO and executed first B C A deal
7882'
*nitiated Kealth Bana#ement 8ervices
7887'
"etail business expansion recommences 'ith o'nership model
7889'
Kealth Bana#ement assets cross "s1!-- crores
*nsurance bro(in# launched
.aunch of Kealth Bana#ement services in >ubai
"etail /ranch net'or( exceeds !-
7884'
Commodities bro(era#e and real estate services introduced
Kealth Bana#ement assets cross "s3---crores
*nstitutional euities business relaunched and senior research team put in place
"etail /ranch net'or( expands across 1-- locations 'ithin *ndia
7885'
"eal Estate Private Euity &und .aunched
"etail /ranch net'or( expands across 2-- locations 'ithin *ndia
788:'
A" Biddle East3 KO8 acuires membership of >ubai Jold C Commodity
Exchan#e 5>JCF6
"an(ed amon#st 8outh Asia=s top ! 'ealth mana#ers for the ultra;rich by Asia
Boney 2--$ poll
"an(ed $th in &L2--$ for All *ndia /ro(er Performance in euity distribution in
0)1
the Mi#h Aet'orth *ndividuals 5MA*6 Cate#ory
"an(ed +th in the "etail Cate#ory havin# more than !N mar(et share
Completes its presence in all 8tates across the country 'ith offices at 3--O
locations 'ithin *ndia
7886'
Citi#roup @enture Capital *nternational pic(s up 1+2+N euity sta(e
"etail customer base crosses 1-- thousand
Establishes presence in over 3!- locations
CLIENTELE
I*d!,trial gro!1,'
Birla;, < /irla 8unlife3 Jrasim3 Mindalco3 *ndal3 *ndian "ayon3 *ndo Julf3 %rans'or(sE
Veda*ta< /alco3 Mindustan Pinc3 8terlite3 @edantaE

Tata;,< %ata *nvestments3 %*8CO3 %ata Botors3 %rent3 @8A.
M!lti*atio*al,'
/ayer3 Clariant3 Color Chem3 >atacraft3 Jodfrey Philips3 Joodlass Aerolac3
Aestle3Jrind'ell Aorton3 M..3 Guoni %ravel3 Quest *nternational3 8yn#enta3 %homas
Coo(3 Kartsila
Ba*0, = %I,'
Andhra /an(3 /o*3 /O/3 /oB3 Canara /an(3 M>&C .td3 *>&C3 J*C3 .*C3 PA/3 Rnited
/an(
0,1
Cor1orate, D
ACC3 /er#er3 /oots Piramal3 Century %extiles3 Cosmo &ilms3 C"*8*.3 Crompton
Jreaves3 >abur3 >atamatics3 >CB3 >eepa( &ertili4ers3 >8. 8oft'are3 East *ndia Motels3
Emami3 JE 8hippin#3 Jlobus3 Jodrej3 Jo(uldas Exports3 Jujarat Ambuja3 Jujarat
Pipavav3 MC. #roup3 Mimat 8in#(a 8iede3 *C*C* @entures3 *nfosys P&3 *%C3 :et Air'ays3
:indal Jroup3 .C%3 Baste(3 BCB3 AC>EF3 "adico Ghaitan3 "aymonds3 8onata
8oft'are3 @arun 8hippin#3 Kest Coast Paper3 Kipro
Pri+ate Clie*t,'
*ndividuals < &amilies across *ndia3 Biddle East and 8E Asia 5'ith minimum relationship
si4e of R8> 1 millionO < "s ! crores each6
Priorit" Clie*t,'
*ndividuals < &amilies 'ith minimum relationship si4e of "s !- lacs
Com1etitor,'
*n this field of financial services there are a 'hole lot of companies and a fe'
(eep addin# every year2 %o remain at the top of this sector is no mean tas( and there are a
lot of bi# companies 'hich provide stiff competition to Anand "athi 8ecurities in this
re#ard2 %he list of competitors 'ould includeD
Botilal Os'al
*ndia *nfoline
*ndiabulls
Jeojit
8hare(han
0+1
Bra*-he, a*d O..i-e,'
Cor1orate O..i-e'
:G 8omani /ld#3
/ritish Motel .ane3
/ombay 8amachar Bar#3
Bumbai 4-- -23
%elD O+1 22 $$3 ))--- &axD O+1 22 $$3 ))-)-
Bro0erage a*d Retail Head O..i-e'
/;23 8hubham Centre3
!
th
&loor3 Cardinal Jracious "oad3
Cha(ala3 Andheri 5E63
Bumbai 4-- -++
%elD O+1 22 4--1 3)-- &axD O+1 22 4--1 3))-
>e" Lo-atio*,'
Ae' >elhi
Ahmedabad
Chennai
Gol(ata
/an#alore
Myderabad
Pune
>ubai
/an#(o(
01-1
CHAPTER IV
E?UITY ANALYSIS
Professional investor 'ill ma(e more money C less loss than3 'ho let their heart
rule2 %heir head eliminate all emotions for decision ma(in#2 /e ruthless C calculatin#3
you are out to ma(e money2 >ecision should be based on actual movement of share price
measured both in money C percenta#e term C nothin# else2 Jreed must be avoided
patience may be a virtue3 but impatience can freuently be profitable2
*n E@!it" A*al",i,3 anticipated #ro'th and calculations are based on considered
&AC%8 C not on MOPE2 Euity analysis is basically a combination of t'o independent
analysis3 namely .!*dame*tal a*al",i, A Te-h*i-al a*al",i,. %he subject of Euity
analysis3 i2e2 the attempt to determine future share price movement C its reliability by
references to historical data is a vast one3 coverin# many aspect from the calculatin#
various %INANCIAL RATIOS3 plottin# of CHARTS to extremely sophisticated
indicators2
A #eneral investor can apply the principles by usin# the simplest of toolsD poc(et
calculator3 pencil3 ruler3 chart paper C your cautious mind3 'atchful attention2 *t should
be pointed out that3 this euity analysis does not discuss ho' to buy C sell shares3 but
does discuss a method 'hich enables the investor to arrive at buyin# C sellin# decision2
0111
E?UITY ANALYSIS
Economic Analysis *ndustry Analysis Company Analysis
&undamental Analysis %echnical Analysis
E-o*omi- A*al",i,'
An Economic analysis is the filter or scanner of the surroundin# at the time of
euity research3 'hich help the analyst to ma(e a rational decision2 *n the economic
analysis3 the follo'in# factors are considered as a 'hole 'ith a perspective of industry C
also considered 'ith a perspective of individual companyD
12 *nflation rates2
22 Economic #ro'th2
32 Jovernmental Exim C other policies re#ardin# businesses C industry2
42 .PJ 5liberali4ation3 privati4ation3 #lobali4ation6
!2 *nterest ratesD standards of returns for measurement2
$2 &** s perception to share mar(et2
)2 Political feel2
I*d!,tr" A*al",i,'
8ince each industry is uniue3 a systematic study of its specific features and
characteristics must be an inte#ral part of the investment decision process2 *ndustry
analysis should focus on the follo'in#D
8tructure of the industry2
Aature of the competition2
Aature and prospects of the demand2
Costs3 efficiency and profitability2
%echnolo#y and research2
Com1a*" A*al",i,'
*n the company analysis3 the investor assimilates the several bits of information
related to the company and evaluates the present and future values of the stoc(2 %he ris(
and return associated 'ith the purchase of the stoc( is analysed to ta(e better investment
0121
decisions2 %he present and future values of the stoc( are affected by a number of factors
such asD
Earnin#s
Capital structure
Bana#ement
Competitive ed#e
Operatin# efficiency
&inancial performance
%!*dame*tal A*al",i,'
&undamental analysis is the study of economic3 industry and company conditions
in an effort to determine the value of a company s stoc(2 &undamental analysis typically
focuses on (ey statistics in company s financial statements to determine if the stoc( price
is correctly valued2
Bost fundamental information focuses on economic3 industry and company
statistics2 %he typical approach to analy4in# a company involves four basic stepsD
1 >etermine the condition of the #eneral economy2
2 >etermine the condition of the industry2
3 >etermine the condition of the company2
4 >etermine the value of the company s stoc(
&undamental analysis facilitates comparison bet'een t'o companies2 *t reflects
the financial efficiency C financial position of a company2 &undamental analysis is
fruitful in preparin# plans for the future2 Mo'ever3 fundamental Analysis should not be
considerin# as the ultimate objective test but it may be carried further based on the
outcome C revelations about the cause of variations2 &undamental Analysis is helpful in
forecastin# li(ely position of company in near future2
&undamental analysis is a very po'erful analytical tool useful for measurin#
performance of an or#ani4ation2 %he ratio analysis concentrates on the inter;relationship
amon# the fi#ures appearin# in the financial and accountin# statements2 %he ratio
0131
analysis helps the investor to analy4e the past performance of the firm and to ma(e
further future projection re#ardin# financial position2 "atio analysis allo's interested
parties li(e shareholders3 investors3 creditors and #overnment to ma(e an evaluation of
financial aspect of a firm s performance2
&undamental Analysis consist of follo'in#D
8tudy of /alance sheet
8tudy of Profit and .oss a<c
8tudy of "atios
Te-h*i-al a*al",i,'
%echnical analysis refers to the study of mar(et #enerated data li(e prices and
volume to determine the future direction of prices movements2 %echnical analysis mainly
see(s to predict the short;term price travels2 *t is important criteria for selectin# the
company to invest2 *t also provides the base for decision;ma(in# in investment2 *t is one
of the most freuently used yardstic( to chec( and analy4e underlyin# price pro#ress2 &or
that matter a variety of tools are used2
%he %echnical analysis is helpful to #eneral investor in many 'ays2 *t provides
important C vital information re#ardin# the current price position of the company2
%echnical analysis involves the use of various methods for chartin#3 calculatin#
and interpretin# #raph C chart to assess the performances C status of the price2 *t is the
tool of financial analysis3 'hich not only studies but also reflectin# the numerical C
#raphical relationship bet'een the important financial factors2
%he focus of technical analysis is mainly on the internal mar(et data3 i2e2 prices C
volume data2 *t appeals mainly to short term traders2 *t is the oldest approach to euity
investment datin# bac( to the late 1+th century2
0141
RESEARCH METHO&OLO(Y
Re,ear-h is often described as an active3 dili#ent and systematic process of
inuiry aimed at discoverin#3 interpretin# and revisin# facts2 %his intellectual
investi#ation produces a #reater understandin# of events3 behavior or theories and ma(es
practical applications throu#h la's and theories2 %he term research is also used to
describe a collection of information about a particular subject3 and is usually associated
'ith science and scientific method2
BASIC RESEARCH'
/asic research is also called as fundamental or pure research2 *ts primary
objective is the advancement of (no'led#e and the theoretical understandin# of the
relations amon# the variables2 *t is exploratory and often driven by researcher?s curiosity
or interest2 *t is conducted 'ithout any practical end in mind2 /asic research often lays
do'n the foundation for further applied research2
APPLIE& RESEARCH'
Applied research is done to solve specific3 practical uestions2 *ts primary
objective is not to #ain (no'led#e for its o'n sa(e2 *t is usually descriptive in nature2 *t is
almost al'ays done on the basis of basic research2
As far as euity research is concerned there are t'o types of research methods
that are follo'edD
&undamental analysis
%echnical analysis
&inancial statement analysis is the bi##est part of &undamental analysis also
(no'n as uantitative analysis3 it involves loo(in# at historical performance data to
estimate the future performance of stoc(s 'hereas %echnical analysis does not care one
bit about the value of the company3 it is only interested in the price movements of the
company s share in the mar(et2
01!1
%his project deals 'ith the fundamental analysis aspect of the euity research2 %he
researcher in this project has tried to loo( into the details of the financial statements of
the companies3 the environment surroundin# the telecom sector3 the latest developments
in this re#ard3 the mana#ement discussions on the part of every company and the
#overnment policies concerned 'ith the telecom sector2
&ATA COLLECTION'
Primary data for a project is the first hand information re#ardin# the project bein#
studied2 *n this re#ard the primary data for this project 'ould be #ettin# the
necessary information from the company mana#ement by an intervie'3 telephonic
conversation or direct mail2
8econdary data for a project 'ould be the collection of information that has a
bearin# on the outcome of the project from secondary sources li(e ne's3 press
releases3 internet etc2
%he data collected for this project 'as from a secondary source2 %he data 'as
complied 'ith the help of sources li(e Ae's articles3 *nternet3 Capitaline soft'are2 *n this
research3 primary data could not be #athered as the company officials could not be
contacted for a one to one intervie' or a telephonic intervie'2
01$1
CHAPTER V
THEORETICAL %RAME/OR>
BASIC MO&EL O% A TELECOM COMPANY
A brief description of the four major se#ments that ma(e up the telecom industry
is as follo'sD
*2 /irele,,=Mo)ile=Cell!lar ,er+i-e,'
%he cellular mobile service providers 5CB8Ps6 ma(e available mobile telephone
services 'here by a customer on possession of a handset and obtainin# a connection by
'ay of 8*B card 5for J8B based technolo#y phones6 is able to connect to the net'or(
01)1
of the service provider2 %his is a 'ireless service that allo's the customer to connect
'ith other 'ireless customers as also 'ire line customers2 A CB8P derives its revenues
by 'ay of tariff char#es for out#oin# calls made by subscribers on its net'or(2
**2 %iBed li*e ,er+i-e,'
%he fixed 5'ireline6 services are dominantly provided for by the P8Rs 5/8A.
and B%A.6 in *ndia2 A customer can obtain a connection 'here by a 'ireline provides
him 'ith the last mile connectivity on the national telecom net'or(2 Althou#h this had
been a dominant mode of telecommunication in the past3 it is fast bein# replaced 'ith
mobile telephony3 'hich has the advanta#e of connectivity on the move2 %he
fundamental business of a fixed line operator is almost similar to that of a CB8P3 in
terms of A"PR and 8ubscriber base2
***2 I*ter*et=Broad)a*d'
%he *nternet services are provided either by telecom service providers or
independent *nternet service providers 5*8P6 'ho deal exclusively in providin# this
service2 %here are t'o forms of *nternet that are currently popular ; the dial;up
connections and the broadband connections2 Khile both these forms are used for
transmittin# and receivin# data3 a broadband connection 5*nternet access that allo's
minimum do'nload speed of 2!$ (ilo bits per second from the point of presence of the
service provider6 allo's you to transmit data at faster rate2
*@2 E*ter1ri,e ,er+i-e,'
%hese services are used by lar#e and medium corporates for data transfer bet'een
their offices and<or their suppliers= offices3 'hich may be spread in a city3 or a country3
or even across continents2 %he need of users to have a seamless connectivity 'ith their
associates is 'hat drives this business for telecom companies2 Considerin# that this
business ta(es care of data transfer needs of corporates3 'ho are not as =affordability=
conscious as the individuals3 telecom companies #enerally earn hi#her mar#ins on
Enterprise services than they earn on any of the other three business lines2 *% and /PO
sectors3 'hose business is so data dependent3 are the major users of Enterprise services2
01,1
TELECOM COMPANY < REVENUE ANALYSIS
.et us first ta(e up the revenue analysis of the various se#ments of the telecom
service providers and then move on to their cost structure2
A Cellular Bobile service provider 5CB8P6 derives its revenues by 'ay of tariff
char#es for out#oin# calls made by subscribers on its net'or(2 As such3 revenue for a
CB8P is simply a multiple of avera#e revenue per subscriber per month 5A"PR6 and
number of subscribers2 .et us no' understand 'hat determines the A"PR?s and
subscriber base2
A+erage Re+e*!e Per U,er CARPUD'
Avera#e revenue per subscriber per month3 or A"PR3 is the amount of money that
a CB8P #enerates per subscriber per month2 *t can be obtained by dividin# the total
'ireless revenues by number of subscribers and then dividin# the output by number of
months in a period 5i2e23 3 months for a uarter and 12 months for a year=s calculation of
A"PR62 %o even out the volatility in A"PRs3 if any3 it is better to arrive at the fi#ure by
avera#in# the 'ireless revenues and subscriber base for the latest t'o years2 Mo'ever3
considerin# the rapid pace of subscriber addition for *ndian CB8Ps3 A"PR calculated as
dividin# the trailin# 12;months 'ireless revenues by latest subscriber base is also an
appropriate fi#ure2 &or instance3 if a CB8P has earned a total of "s !-3--- m as 'ireless
revenues in the past 4 uarters 5or trailin# 12 months6 and its current subscriber base
stands at 2- m3 its A"PR 'ill be "s 2-, per month 5"s !-3--- m of 'ireless revenues
divided by 2- m subscribers divided by 12 months62
Another 'ay to arrive at A"PR is to multiply the avera#e number of minutes of
usa#e 5BOR6 per subscriber per month 'ith the per minute tariff2 Bost of the *ndian
CB8Ps #enerally disclose their BORs and per minute tariff and as such3 these can be
used to determine the A"PR2
%he A"PR in current industry scenario is decreasin# day;by;day due to the
decline in the mar#ins and also competition2
01+1
S!),-ri)er,'
Jro'th in a CB8P=s subscriber base is dependent on several factors3 the (ey
amon#st them bein#D
Economic #ro'thD Kith #ro'th in the economy3 and the conseuent increase in
activity3 it reuires people to be in touch even 'hen on the move2 %his brin#s out a
pressin# need for o'nin# mobile<cellular phones2 %hus3 'ith a #ro'th in economic
activity there 'ill be more and more people subscribin# to telecom services3 thus leadin#
to #ro'th in subscriber base for CB8Ps2
"isin# income levelD As the real income levels in a society rise3 more and more
people are able to afford usa#e of cellular phones2 Also3 'ith risin# incomes3 as personal
consumption expenditure 5as percenta#e of income6 reduces3 the consumer does not feel
the pinch of risin# telephone bill3 thus havin# the propensity to tal( more3 thus leadin# to
hi#her BORs for telecom services providers2
AffordabilityD Khile there may be a need to be in constant touch as outlined by the
above t'o factors3 it is the increased affordability that really increases the demand for
such services2 %he affordability is interplay of lo'er tariff char#es and availability of
cheaper handsets2 Khile lo'er handset costs ma(e mobile more affordable at the entry
level thus allo'in# more people to be a part of the =mobile community=3 lo'er tariffs
allo' for an increased usa#e of telecom services3 'hile not havin# such an overbearin#
impact on telephone bills2
Apart from the usual ; economic #ro'th and risin# income levels ; the #ro'th of
the *nternet business is dependent uponD
PC 1e*etratio*'
*nternet penetration in *ndia is currently at very lo' levels3 as compared to its
developin# peers2 %his is set to ta(e off 'ith the rise in PC penetration3 'hich 'ill a#ain
be a conseuence of affordability in terms of lo'er PC costs and reduced cost of data
transfer2 %he cost of data transfer depends on 'hether one is usin# a dial;up or a
broadband connection2 %he dial;up pac(a#e entails a fixed char#e for *nternet access and
a variable char#e for the telephone connection2 On the other hand3 tariffs for broadband
02-1
are usually desi#ned on the basis of uantum of data transmission2 As there is
rationalisation of these tariffs #oin# for'ard3 *nternet 'ill become more affordable and
this 'ill drive #ro'th3 as the recurrin# expenditure 'ill reduce2
Pare*tal e*-o!rageme*t'
An interestin# chan#e that has come is the 'ay parents no' loo( at computers2
%he a#e of a typical computer user has dropped si#nificantly as parents increasin#ly
realise the #ro'in# importance of computers in education in the years to come2 8o3 unli(e
most products 'here children are tar#eted to drive sales of consumer durables3 in the case
of computers3 it is the parents 'ho are #oin# all out to ensure that their child #ro's up to
be a computer literate2 %hus3 'ith computers comin# into homes3 it 'ill not be lon#
before parents 'ill 'ish their children to be 'ired to the 'eb o'in# to the rich source of
information2
0211
TELECOM COMPANY E COST ANALYSIS
After discussin# the revenue aspects of telecom service providers3 let us no'
understand the major cost heads for these companies2 %hese cost heads can be bro(en up
into re#ulated and non;re#ulated costs2 Entry fee3 access deficit char#e and license fee are
re#ulated2 On the other hand3 sales3 #eneral and administrative 58JCA6 and employee
expenses are non;re#ulated in nature2
E*tr" .ee'
%he companies providin# national and international lon# distance 5A.> and *.>6
services are reuired to pay a flat entry fee of "s 2! m each 5from earlier fees of "s 13---
m and "s 2!- m respectively62 %hese fees are to be paid to the central #overnment for
obtainin# a license for providin# these services2
A--e,, de.i-it -harge'
%he #overnment also collects from the cellular operators an access deficit char#e2
%he char#e payable is 12!N percent of non;rural annual #ross revenue 5AJ"6 of the
telecom service providers and the amount collected is used to subsidise the telecom
service provided by /8A. in rural areas2
Li-e*,e .ee,'
%elecom companies are reuired to pay an annual license fee of $N of their AJ"
to the Jovernment of *ndia2 .icenses offered to the telecom players are for a limited
period of time and these are reuired to be rene'ed on expiry2
S(AA eB1e*,e,'
%elecom companies incur expenditure in the form of advertisement costs for
enhancin# their visibility and also to ma(e their brand more appealin# to the consumers2
0221
Expenses are also incurred on customer acuisition and on maintenance of telecom
euipment and net'or(2
Per,o**el eB1e*dit!re'
%hese are costs incurred for maintainin# the staff for executin# the telecom
companies= mar(etin# strate#ies3 for #eneral administrative purposes3 for maintenance
and repair of telecom infrastructure3 and customer relationship mana#ement in call
centers2
Apart from these operatin# costs3 telecom companies also incur cost for servicin#
debt and tax payments2 %elecom is an operatin# levera#e play 5indicates that each ne'
subscriber 'ill come at a hi#her profitability than the previously added subscriber63 and3
as such3 the benefits of faster subscriber addition are directly seen on companies=
improvin# operatin# profitability 5as fixed costs are apportioned over a lar#er subscriber
base62
0231
>EY %INANCIAL METRICS'
/efore investin# in a telecom stoc( 5or for that matter any stoc(63 an investor
must closely loo( at the (ey financial operatin# and profit ratios of the company2 %he
ratios are nothin# but an arithmetical representation of a company=s financial data that
help in #au#in# the health of the company2 Gey ratios to be loo( at for a telecom
company are as under2 *t is important to loo( at these ratios for 3;! years in the past3
considerin# that most telecom companies in *ndia do not have a history before that2
8ales #ro'th
Avera#e revenue per user
8ubscriber #ro'th
E/*>%A mar#ins or Operatin# mar#ins 058ales ; Operatin# expenditure6<8ales61
*nterest covera#e 0Profit before interest and tax<*nterest1
Aet profit mar#ins 0Aet profits<8ales1
Earnin#s per share
E/*>%A per share
>ebt to euity
"eturn on euity 0PA%<Euity or Aet 'orth1
"eturn on capital employed 0P/*%<Capital employed3 'hich is Euity O >ebt1
&ree cash flo' 0Profit after tax O >epreciation ; >ividend C >ividend %ax ; Capex
;Kor(in# capital chan#es1
Apart from these3 investors should also compare other (ey ratios li(e receivable days3
'or(in# capital turnover and asset turnover3 amon#st others to arrive at a final vie' on
the company 5not the stoc(S62
*mportantly3 these ratios must not be loo(ed at in isolation and one should loo( at the
past data as 'ell to arrive at a trend3 'hich shall #ive a better perspective of the
company=s performance over the years2 Also3 an investor must compare ratios of the
0241
company 'ith the industry leader and its peers to #au#e a company=s relative
performance2
TELECOM SECTOR IN IN&IAN ECONOMY
I*diaF emergi*g a, a maGor 1la"er'
*n 1+)!3 the >epartment of %elecom 5>o%6 'as separated from PC%2 >o% 'as
responsible for telecom services in entire country until 1+,! 'hen Bahana#ar %elephone
Ai#am .imited 5B%A.6 'as carved out of >o% to run the telecom services of >elhi and
Bumbai2 *n 1++-s the telecom sector 'as opened up by the Jovernment for private
investment as a part of .iberalisation;Privati4ation;Jlobali4ation policy2 %herefore3 it
became necessary to separate the Jovernment=s policy 'in# from its operations 'in#2
%he Jovernment of *ndia corporatised the operations 'in# of >o% on October -13 2---
and named it as /harat 8anchar Ai#am .imited 5/8A.62 Bany private operators3 such as
"eliance *ndia Bobile3 %ata %elecom3 Mutch3 /P.3 /harti3 *dea etc23 successfully entered
the hi#h potential *ndian telecom mar(et2
(roHth o. mo)ile te-h*olog"'
*ndia has become one of the fastest #ro'in# mobile mar(ets in the 'orld
021
2 %he
mobile services 'ere commercially launched in Au#ust 1++! in *ndia2 *n the initial !;$
years the avera#e monthly subscribers additions 'ere around -2-! to -21 million only and
the total mobile subscribers base in >ecember 2--2 stood at 1-2! millions2 Mo'ever3
after the number of proactive initiatives ta(en by re#ulator and licensor3 the monthly
mobile subscriber additions increased to around 2 million per month in the year 2--3;-4
and 2--4;-!2
Althou#h mobile telephones follo'ed the Ae' %elecom Policy 1++43 #ro'th 'as
tardy in the early years because of the hi#h price of hand sets as 'ell as the hi#h tariff
structure of mobile telephones2 %he Ae' %elecom Policy in 1+++3 the industry heralded
several pro consumer initiatives2 Bobile subscriber additions started pic(in# up2 %he
number of mobile phones added throu#hout the country in 2--3 'as 1$ million3 follo'ed
02!1
by 22 millions in 2--43 32 million in 2--! and $! million in 2--$ and over 1-- million
by mid of 2--)2 %he only countries 'ith more mobile phones than *ndia 'ith 1!$231
million mobile phones are China I 4-, million and R8A I 1,! million2
*ndia has opted for the use of both the J8B 5#lobal system for mobile
communications6 and C>BA 5code;division multiple access6 technolo#ies in the mobile
sector2 *n addition to landline and mobile phones3 some of the companies also provide the
K.. service2
%he mobile tariffs in *ndia have also become lo'est in the 'orld2 A ne' mobile
connection can be activated 'ith a monthly commitment of R8T ! only2 *n 2--! alone 32
million handsets 'ere sold in *ndia2 %he data reveals the real potential for #ro'th of the
*ndian mobile mar(et2
PRESENT SCENARIO
Althou#h *ndia=s tele;density has improved from under 4N in Barch 2--1 to over
1,N at the end of Barch 2--)3 'e are 'ay behind other developin# nations2 %he total
annual telecom revenue is estimated to be over "s $!- bn2
%he cellular telephony se#ment has emer#ed as the fastest #ro'in# se#ment in the
*ndian telecom industry2 %he mobile subscriber base 5J8B and C>BA combined6
has #ro'n from 12+ m at the end of &L-- to 14- m at the end of :uly 2--)2 A sle' of
tariff reduction in the past fe' years has helped the se#ment to #ain in scale2 %he
cellular se#ment is playin# an important role in the industry by ma(in# itself
available in the rural and semi urban areas 'here teledensity is the lo'est2
As far as the *nternet services are concerned3 *ndia currently has a subscriber base of
$2+ m users2 Of this3 around 1+N is accounted for by broadband users 5UV2!$ (bps62
%he A"PR for this se#ment 'as "s 21- at the end of &L-$2 P8R major3 /8A. holds
02$1
the top spot 'ith a mar(et share of 42N3 follo'ed by B%A. 'ith a share of 12N32
%his is follo'ed closely by 8ify3 'hich ran(s third 'ith a mar(et share of 11N2
On the international basic telephony front3 the end of @8A.=s monopoly in 2--2
brou#ht three private players in the international basic telephony business and the
immediate effect 'as the fall in tariffs2 *n the first six months only3 the tariffs fell by
!-N and the trend is li(ely to continue2 Kith the most favored customer status #iven
to @8A. by fixed line majors li(e /8A. and B%A. #oin# a'ay3 the se#ment has
been 'itness to fierce competition2
>EY POINTS'
S!11l"'
*ntense competition has resulted in prompt service to the subscribers2 Mo'ever3
smaller to'ns and villa#es continue to have 'aitin# periods on account of non;
availability of adeuate infrastructure2
&ema*d'
Jiven the lo' penetration levels in the country and continuously fallin# tariffs3
demand 'ill continue to remain hi#her in the foreseeable future across all the se#ments2
Barrier, To E*tr"'
o Mi#h capital investments
o Older and 'ell;established players 'ho have a nation 'ide net'or(
o .icense fee
o Continuously evolvin# technolo#y3 and
o &allin# tariffs2
02)1
Bargai*i*g PoHer O. S!11lier,'
*mproved competitive scenario and commoditi4ation of telecom services has led
to reduced bar#ainin# po'er for services providers2
Bargai*i*g PoHer O. C!,tomer,'
A 'ide variety of choices available to customers both in fixed as 'ell as mobile
telephony has resulted in increased bar#ainin# po'er for the customers2
Com1etitio*'
%he entry of fourth cellular player and commencement of K.. services has
resulted in intense competition in the bi##er cities2 "educin# tariffs 'ill hurt the ne'
entrants3 as they 'ill be unable to recover their hi#h capital investments2
CHART SHO/IN( TOTAL TELECOM SUBSCRIBER BASE'
0
50
100
150
200
250
N
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.

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f

S
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(
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1999 2000 2001 2002 2003 2004 2005 2006 2007
year
Total Telecom Subscriber Base
Subscriber Base
02,1
58ourceD %"A*6
%he *ndian telecom industry is 'itnessin# rapid rise in subscriber base3 than(s to
multiple #ro'th drivers li(eD
improvin# demo#raphics
lo'er handset prices
expansion by 'ireless operators
infrastructure sharin#
lo'er re#ulatory levies2
SECTOR CONTRIBUTION TO SENSEX (RO/TH'
SECTOR CONTRIBUTION TO SENSEX (RO/TH
4.80%
2.80% 2.70%
2.40%
2.10%
1.20%
0.90% 0.90% 0.80% 0.70% 0.60%
0.40%
19.40%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
%
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CONTRIBUTION TO SNS!
58ourceD Berill .ynch "esearch6
02+1
%he 8ensex has #ro'n immensely since 2--! and is still increasin#2 Currently it
has reached 1!3---2 %his #ro'th 'ould not have been possible 'ithout the help and
support of the various sectors in the industry2 One of the sectors 'hich has a major
contribution in this #ro'th is the %elecom 8ector2 *n the last year3 8ensex #re' by 1+24N
'hereas the contribution of %elecom sector 'as seen to be 42,N2
TREN&S IN IN&IAN CELLULAR SERVICES
Cell!lar S!),-ri)er Ba,e
Operator Bay=2--) Bay=2--$ @ar2 5N6
/8A. 5216 2)++441- 1,---+-, !$N
/harti Airtel 5236W 4-)43)2! 21,$-212 ,$N
*dea 5116 1!2$$$1, ,-$2+$1 ,+N
Mutchison Essar 51,6T 1,-,34$$ 11-4-)+) $4N
8pice Communication 526 3--)11, 2-2)!!1 4,N
B%A. 2!4),+! 2-+)4), 21N
/P. Bobile 516 2-+13!3 1)+2+$$ 1)N
>ishnet Kireless 5)6 1,)44,1 4244)! 342N
"eliance %elecom 5236X 4-144-4 2-4+2!4 +$N
Total Cell!lar S!),-ri)er
)a,e 298:86355 65738837 69I
So!r-e' COAI A AUSPI
&i#ure in the brac(ets denotes the current operatin# circles
W *nclude the K.. subscribers
X *nclude the J8B 8ubscribers in ) telecom circles3 the subscribers of "eliable *nternet
in Gol(ata circle and the K.. subscribers
T *ncludes the subscribers of /P. Cellular but excludes subscribers of /P. Bobile
Bumbai
03-1
Cellular Subscriber base
0
50
100
150
200
250
300
350
400
450
/
8
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"a#$2006
"a#$2007
5 8ourceD Cellular Operators Association of *ndia6
*ndian %elecom subscriber base has increased rapidly by 4)N to touch
21,2,! million in Bay 2--)3 from 14,23+ million in Bay 2--$2 %he sur#e in
subscriber based 'as po'ered by impressive )3N spurt in J8B cellular subscriber
base to 13-2$1 million in Bay 2--) from )!22+ million in Bay 2--)2 Aevertheless3
the country has been 'itnessin# sustained fall in Avera#e "evenue Per Rnit 5A"PR6
from "s 3)! per unit in 8eptember 2--! to "s 33! per unit in 8eptember 2--$2
Aevertheless3 than(s to stron# #ro'th in subscriber base3 increasin# non voice
revenues and lo'erin# fixed cost per unit3 the *ndian telecom service sector is set to
report buoyant #ro'th in revenues and profitability in the short to medium term2
0311
MAR>ET<SHARE O% THE MA$OR PLAYERS IN THE TELECOM SECTOR'
Pla"er, Mar0et<,hare
CID
/harti Airtel 22
"eliance Communication 2-23
/8A. 1!2+)
Mutch 1-24
*dea ,2!$
%ata teleservices +2)
Others 132-)
Total 288
&rom the chart #iven above3 it is observed that /harti Airtel leads the race 'ith a
major mar(et share i2e2 22N2 %he reason behind this is the 'idespread net'or(3 hu#e
subscriber base3 plethora of services3 pace 'ith the ne' technolo#y3 etc2 'hereas reliance
communication bein# a comparatively late entrant has attained a si#nificant mar(et share2
As competition amon# the existin# players is hu#e3 it ma(es the role of ne' players
unnoticeable2 %he major players in the telecom industry cover almost ,$2+3N of the
mar(et share2
RE(ULATORY CHAN(ES
0321
W A--e,, &e.i-it Charge CA&CD regime'
A revised A>C re#ime has been implemented '2e2f2 April -13 2--) 'herein
revenue;share A>C reduced to -2)!N of AJ" and per;minute A>C on out#oin# *.>
calls has been abolished2 A>C on incomin# calls reduced to "s212-- per minute2 %he
revised estimate for A>C for 2--);-, is "s2 2-2! bn
W U*i+er,al Ser+i-e O)ligatio* CUSOD Te*der'
%he >o% has finally extended the R8O subsidy to 'ireless net'or(s 'ith the
successful conclusion of biddin# under the R8O scheme2 )3+!4 to'ers are entitled to the
subsidy ; in 1+ service areas 5except Betros62
W Natio*al roami*g tari..'
>omestic roamin# tariffs have been revised 'ith effect from &ebruary 1!3 2--)2
Rnder the ne' structure3 there is no rental<surchar#e for national roamin# and lo'er
ceilin# for the =per;minute char#es= for roamin# calls2 *ncomin# 8B8 'hile roamin# is
free thou#h out#oin# 8B8 rates continue under forbearance2
W S!),-ri)er re<+eri.i-atio*'
*n Aovember 2--$3 >o% directed all service providers to complete the re;
verification of their entire prepaid subscriber base by Barch 313 2--)3 in terms of
collation of their identity<address proofs and updatin# of their database 'ith subscriber
details2 As >o% had imposed a penalty of "s213--- per unverified subscriber after the
expiry of the deadline3 most operators had to disconnect some subscribers 'hose
documentary proofs could not be collected until Barch 313 2--)2
W I*-rea,e i* %oreig* &ire-t I*+e,tme*t C%&ID -a1 .rom 43I to 64I'
On Aovember -33 2--!3 Jovernment of *ndia announced;enhancement of &>*
ceilin# from 4+N to )4-N in the telecom sector3 subject to certain preconditions2 *n
vie' of the complications involved in implementation of the preconditions3 >o% had
#ranted several extensions to the telecom licensees to ensure compliance2 On April 1+3
0331
2--) >o% finally notified the &>* limit 'ith a deadline of :uly 1,3 2--) to report
compliance2
W Term, a*d Co*ditio*, o. re,ale i* IPLC ,egme*t'
>o% has accepted the recommendations of %"A* on the terms and conditions on
'hich resellin# of international band'idth is to be permitted in *ndia2 %he broad
conditions include entry fee at "s21- mn2 .icense &ee at $N of AJ"3 term of license
bein# 1- years and identical terms for &>* ceilin# as applicable to *.>Os2
W Port Charge, Reg!latio*'
*n &ebruary 2--)3 %"A* amended the existin# Port Char#es "e#ulation 2--13 by
reducin# the port char#es payable by private operators to /8A.<B%A. '2e2f2 April -13
2--)2 Another si#nificant chan#e is that the slab rate for ports shall no' be determined on
the basis of the demand made and not on the basis of ports finally allotted by /8A.2
W Reg!latio* o* ?oS .or )road)a*d ,er+i-e,'
*n October 2--$3 %"A* issued a re#ulation on Qo8 for broadband services
offered by all access and internet service providers pursuant to a public consultation
conducted in :une 2--$2 %his re#ulation 'as implemented on :anuary -13 2--)2
W TRAI de-i,io* o* I*ter-o**e-t U,age Charge .or Short Me,,age Ser+i-e
CSMSD'
On Au#ust 213 2--$3 %"A* published its decision to refrain from specifyin# any
termination char#e for 8B83 thus leavin# it under the &orbearance= cate#ory2 At the same
time %"A* has expressed its concern that the tariff for premium rate 8B8 *s hi#h and
apparently unrelated to cost3 hintin# to operators to voluntarily reduce these tariffs
W TRAI de-i,io* o* roami*g re+e*!e ,hari*g'
After a public consultation3 %"A* published its decision on 8eptember 113 2--$
disallo'in# any revenue sharin# on roamin# calls2 %"A* reiterated that the termination
char#es prescribed by them are cost based and since no additional cost is incurred in
0341
terminatin# roamin# traffic3 there is no justification for hi#her payout to the terminatin#
net'or(2
W Reg!latio* .or i*ter-o**e-tio* o. I*tellige*t NetHor0, CIND o. all ,er+i-e
1ro+ider,D
On Aovember 2)3 2--$3 %"A* issued a re#ulation mandatin# all service
providers to provide interconnection to all eli#ible service providers so that subscribers of
all access providers can access the *A services offered by other service providers2
8ervice providers are reuired to enter into reciprocal and non;discriminatory a#reements
for technical and commercial aspects of such connectivity 'ithin three months2
W Cha*ge, i* the NL& a*d IL& li-e*,e,'
%here have been si#nificant chan#es in the A.> and *.> licenses recently2
%he entry fees for these licences have been substantially reduced to "s22! million each
for *.> and A.> licences3 'hich has already led to a number of ne' players enterin# the
field2
03!1
RECENT &EVELOPMENTS
%he /harti #roup=s application for direct;to;home 5>%M6 broadcastin# is all set to
be cleared and soon the #roup may be issued a letter of intent 5.o*6 for the >%M
service2 "ecently3 clarifications 'ere sou#ht from /harti on its forei#n direct
investment 5&>*6 component and the euity structure3 in connection 'ith its >%M
proposal2
Anil Ambani;promoted "eliance /lue Ba#ic is expected to launch its >%M
service soon2 8un %@ is also in the ueue for >%M2 As a#ainst the multi;operator >%M
scenario in *ndia3 in most countries3 >%M attracts only one or t'o players2
*dea Cellular and Ao(ia 8iemens Aet'or(s announced si#nin# of a R8> !--
million J8B net'or( expansion contract2 Rnder the contract3 Ao(ia 8iemens Aet'or(
'ill expand *dea Cellular?s J8B<JP"8<E>JE net'or(s to cover population centres
across six more circles2 %he 2;year contract includes supply and services of J8B
euipment3 *ntelli#ent Aet'or(3 @alue Added 8ervices and Circuit and Pac(et core
euipment2 Ao(ia 8iemens Aet'or(s 'ill deploy the latest state of art euipment li(e
flexi /%83 mini;ultra base stations3 "elease 4 architecture3 media #ate'ays and B88
servers2
8pice Communications promoted by >ilip Bodi3 part of the / G Bodi #roup and
providin# cellular services in the states of Punjab and Garnata(a3 has lined up a public
issue to raise "s 4$4 crore at lo'er band 5"s 416 and "s !2- crore at upper band 5"s
4$62 %he net proceeds from the issue are intended to be used for part repayment of lon#;
term debt3 for payment of A.> and *.> license fee and related capital expenditures to
set up base infrastructure for A.><*.>2
%he /an#alore;based value;added services 5@A86 provider OnBobile is plannin#
to tap the capital mar(et 'ith an initial public offerin# 5*PO6 of "s !--;$-- crore2 %he
company?s maiden offer is expected to open durin# the current financial year and it
intends to invest the proceeds for its foray into the Kireless Application Protocol
5KAP6 and Jeneral Pac(et "adio 8ervice 5JP"86 se#ments2 %he company 'as
03$1
incubated by *nfosys %echnolo#ies in 2---3 and at present the *% major holds a 14 per
cent sta(e in it2
PROSPECTS O% TELECOM SECTOR
As far as the fixed line business #oes3 the lo' penetration levels in the country and the
increasin# demand for data based services such as the *nternet 'ill act as major
catalysts in the #ro'th of this se#ment3 'hich has touched !- m subscribers by the end
of &L-$ 5includin# K.. subscribers62 %he hu#e mar(et share of public sector
behemoths3 B%A. and /8A. 5to#ether they account for ,2N of the total fixed line
connections6 is li(ely to #et reduced further as the penetration by private players
spreads2 *n spite of this the P8Rs 'ill continue to retain their dominant position this is
on account of hi#h capital investments reuired in settin# up a nation 'ide net'or(2 As
a result3 the private sector players 'ill have to rely on (ey business centers and poc(ets
of hi#h urbani4ation for their #ro'th2
*ncreasin# choice and one of the lo'est tariffs in the 'orld have made the cellular
services an attractive proposition for the avera#e consumer2 %he se#ment has #ro'n at
over )3N LoL in &L-$2 *t is bein# estimated that durin# the tenth five;year plan3
around 312$ m subscribers 'ould jump onto the cellular band'a#on all over *ndia and
this 'ould entail an investment to the tune of "s 2!224 bn2 Policy measures li(e
lo'erin# of taxes on the cellular industry and benefits of enhanced &>* limits shall
further the prospects of the cellular industry2
%he *nternational .on# >istance 5*.>6 telephony business is expected to 'itness
increased competition 'ith the entry of private players2 Already3 private players li(e
/harti3 "eliance and >ata Access have started providin# *.> services and this has
pulled the tariffs si#nificantly do'n2 Althou#h increased competition 'ill result in
depressed revenues in the near term3 lo' tariffs 'ould ultimately result in increased
volumes and hi#her usa#e2
%a(in# the competition further in the *.> space 'here 'e sa' hu#e tariffs fall last year
due to the entry of private players3 %"A* has 'ritten to the Binistry of
%elecommunication and *nformation %echnolo#y to permit resale of *P.C2 *f the move
03)1
#oes throu#h3 apart from increasin# competition in this space3 it is expected that the
band'idth prices 'ill come do'n by a further 2-;2!N2 %his move is also believed to be
a step for'ard in openin# up the *.> sector
SELECTION O% THE COMPANY
After understandin# the dynamics of the telecom sector and the various issues
revolvin# around it3 three companies 'ere chosen from a #roup of players in the telecom
sector2 8uch companies have been chosen 'hich sho'ed consistent performance in the
past and 'ere also fundamentally sound2
8ome of the major players in %elecom sector are as follo'sD
/harti Airtel
/P. Bobile Comm2
Escorts telecomm2
Mutchison Essar
*dea Cellular
B%A.
"eliance Communication
8pice %elecommunication
%ata %eleservices
@8A.
%ime 52 months duration6 bein# a major constraint3 t'o companies 'ere chosen
from the 'hole telecom sector2 Companies chosen for further analysis areD
Bharti Airtel
VSNL
03,1
CHAPTER VI
&ATA ANALYSIS AN& INTERPRETATION
BHARTI AIRTEL LIMITE&
/harti Airtel .td 5&ormerly (no'n as %ele;@entures 5/%@.66 'as incorporated
on )th :uly3 1++!3 for promotin# investments in diversified telecom service projects2 %he
company 'as formed as a ,-D2- joint venture bet'een the /harti Jroup throu#h its
subsidiary /harti %elecom and 8%E% *nternational Aetherlands A@3 a company promoted
by %elecom *talia3 *taly2
/harti Airtel has ba##ed the =/est Emer#in# Bar(et Carrier= a'ard at the %elecom
Asia A'ards 2--)2 %he J8B service provider 'as adjud#ed best from amon# a list of 3-
telecom companies in the Asia Pacific re#ion2 Earlier3 /harti Airtel had 'on the =/est
*ndian Carrier= a'ard for t'o consecutive years3 in 2--! and 2--$2 %he company
introduced ne' products li(e /lac(/erry 'ireless solution3 Airtel .ive and the company
'as the first 'ireless services operator to introduce "in# bac( tones5Mello %unes62
Also the company entered into the partnerships 'ith the leadin# companies li(e
Ao(ia3 8iemens3 Ericsson and */B for its net'or( plannin#3 supply C mana#ement and
for its *% reuirements respectively2 >urin# 2--!;2--$3 @odafone acuired 1-N
economic interest in the company by 'ay of subscription of convertible debentures in
/harti Enterprises .td3 representin# an indirect economic interest in /harti Airtel .td and
acuisition of direct interest in the company from Karbur# Pincus ..C2 %he company
also si#ned a mana#ed capacity expansion contract 'ith Ericsson to provide mana#ed
services and expand its J8B<JP"8 net'or( into rural *ndia in 1! circles2
03+1
BUSINESS OVERVIE/'
/harti is one of *ndia=s leadin# private sector service;provider of telecom services
'ith more than 2- million customers in *ndia and is the first to have an all *ndia presence2
%he company is structured into three main units3 Bobile 8ervices 'hich offers J8B
Bobiles 8ervies and *nfotel 8ervices 'hich provides broadband C %elephone3 lon#
distance and enterprise services 'hich offers carriers and corporates2 All the services of
company is been provided under brand name A*"%E.2
%he company 'as first J8B Operator to have more than ten million customers
and also the first telecom company to cover all the 23 telecom circles of *ndia2 %he
Company has a presence in 43$)$ census to'ns and in 2-)332) non;census to'ns and
villa#es3 coverin# an addressable population of !+N of the total population2 Kith this
covera#e facility the company became the first operator to have an All;*ndia footprint2
BUSINESS RIS>'
%he business is subject to extensive re#ulation by the JovernmentE 'hich could
have an adverse effect on the business2 %echnical failures and natural disasters could
dama#e the telecommunication net'or(s2 Chan#es in available technolo#y could increase
competition and the capital costs2
MAR>ET RIS>'
%here is very little mar(et ris( in this se#ment3 considerin# the ever increasin#
demand of the telecom services2 %here have been substitutes for telecom services li(e the
Postman3 'hich has been available for years but the demand for it is #ettin# decreased
'hereas the demand for telecom services has never been affected due to that2 %here is a
permanent mar(et for the product3 and it does not face any serious mar(et ris(2
VOLUME BASE& BUSINESS'
%he profits of the company are totally based on the volume of their business2 %he
more efficiently they provide the service3 their turnover 'ill increase accordin#ly and
04-1
thereby addin# additional profits to the company?s account2 Kith the expansion
underta(en by the company in recent times3 it is slated to ma(e the most of this situation2
%UTURE %ORECAST'
*n lon# term the demand for telecom services is expected to rise further2 %he
reasons bein# the lo' tariffs3 technolo#y3 focus on rural areas3 ever increasin# population3
etc2 %elephony penetration in urban areas is uite hi#h as compared to rural penetration
and as of no' this is been ta(en into consideration by various players2 %echnolo#y is also
expected to improve a lot in the years to come3 'hich 'ould help not only in cost
reduction but also in providin# services efficiently2
MANA(EMENT OVERVIE/'
*t is evident that the mana#ement of the company is very experienced and the
company loo(s to be in safe and able hands2 %he mana#ement structure of /harti Airtel is
as follo'sD
0411
PRICE IN%ORMATION'
Pri-e I*.ormatio*
BSE513;-);-)6 "s2 ,,-2)!
NSE513;-);-)6 "s2 ,,12+
P=E x 3)2!
EPS "s2 2122)
Mar0et Ca1. "s2 *n Cr 1$$+3-22
57/ High at BSE "s2 +$-
57/ LoH at BSE "s2 41-
0421
COMPARATIVE CHART O% BHARTI AIRTEL /ITH SENSEX'
Comparative Chart of Bharti Airtel ith S!NS!"
0
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&rom the chart #iven above3 it is observed that there has been an upside trend in
the 8EA8EF as 'ell as the 8hare price of /harti Airtel2 /ut the rise in the value of /harti
Airtel is more than that of 8EA8EF2
ONE YEAR PRICE MOVEMENT O% BHARTI AIRTEL'
0431
One year $rice movement of Bharti Airtel
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%he Chart #iven above sho's a consistent rise in the price of /harti Airtel in the
previous one year2 8ome minor fluctuations 'ere observed durin# the year but it did not
affect the price movement to a remar(able extent2 %he stoc( observed an uptrend durin#
the year and is expected to rise further2
PRO$ECTE& PRO%IT AN& LOSS ACCOUNT
ProGe-ted O1erati*g I*-ome Stateme*t CR,. I* Cr,.D
Year Mar 8:C27D Mar 86C27D Mar 8JC27De
INCOME '
Aet 8ales 11323124) 1)3,!12$- 2$,)12+
Other *ncome 1),2!$ ,-24$ 2$,2)2
0441
Total I*-ome 22F922.39 2JF898.2: 76248.:7
EXPEN&ITURE '
"a' Baterials !4242 !32+! ,1221-!+
Po'er C &uel Cost 2$2+, 3+2)2 !+2)+-2$
Employee Cost )!42++ 131-22-3 1$!,2,)+
Other Banufacturin# Expenses 434-42), $3)-+2!, 1--++2,+
8ellin# and Administration Expenses 1333-2-) 13+)32$4 2+)-2+-,
Biscellaneous Expenses $)12+2 ,-1213 12-!2+3$
.essD Pre;operative Expenses Capitalised -2,! 12, 22)-+!2+
Total EB1e*dit!re 6F747.92 28F:6J.75 2:869.3
Operatin# Profit 43-$+2$2 )33!12+1 11-$$2)2
*nterest 23$2,1 2,22-) 3-32!,
Jross Profit 33,322,1 )3-$+2,4 1-)$3214
>epreciation 13!4)2-2 234$,24) 4!322-!
Pro.it Be.ore TaB 7F7J5.63 4F:82.96 :792.83
%ax 2)32)1 !$,214 )$+23$!
Re1orted Net Pro.it 7F827.8J 4F899.79 54:2.675
No. o. Share, 2FJ34F:29F39: 2J3624J4:4 2J3624J4:4
Ear*i*g, Per Share 28.:7 72.76 7J.63
Mar0et 1ri-e o. ,hare 498.75 63J.56 2863.:9
P=E Ratio 48.5 96.5 96.5
Net Re+e*!e,'
%he net revenues of the company are #ro'in# at an avera#e rate of !-2!2N per
year2 As the industry is under the #ro'th sta#e3 this may help in boostin# the revenues
further2 8ome of the reasons behind this are declinin# prices due to competition3
increasin# rural penetration3 technolo#y3 etc2
04!1
)+-32-3
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%urnover
EB1e*,e,D
%he expenses of the company are #ro'in# but the company is able to (eep them
'ithin permissible limits3 'hich 'ould enable the company to earn hi#her operatin#
profit2
O1erati*g Pro.it'
%he operatin# profit of the company as a percenta#e of net revenues is constantly
above 3-N3 'hich indicates that even thou#h the company is operatin# on a lar#er scale
the operations of the company are bein# carried out 'ith utmost efficiency2 %he
profitability of the company has not ta(en a beatin# and real income of the company
continues to loo( #ood2
Pro.it a.ter TaB'
%he company is bein# able to mana#e its financin# very 'ell and on that account
has mana#ed to retain more interest of its shareholders2 An increase in the interest
payments by the company is reflected in the profit after tax of the company2 *nspite of
this3 the PA% sho's a consistent #ro'th in the future years2
04$1
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O1erati*g 1ro.it )e.ore taB'
%he operatin# profit before tax of the company is increasin# consistently every
year2 %his is a very #ood si#n for the company that the operatin# profit of the company is
ever increasin#2 *t sho's that the performance of the company in terms of their
operations is #ood2 %he company is not only increasin# its business in terms of volume
but it is also reali4in# more profits or in other 'ords its mar#ins have not dropped2
PRO$ECETE& BALANCE SHEET
ProGe-ted Bala*-e Sheet CR,. I* Cr,.D
Year Mar 8: Mar 86 Mar 8Je
SOURCES O% %UN&S '
8hare Capital 13,+32,, 13,+!2+3 13,+!2+3
"eserves !34!$23, +3!$224! 123+4+23-
04)1
Total Shareholder, %!*d, 6F958.7: 22F45J.9J 24FJ45.79

Total &e)t 4F667.J4 5F7J5.J3 6F755.:2

Total Lia)ilitie, 27F797.78 2:F393.83 77F288.J4

APPLICATION O% %UN&S '
Net Blo-0 29FJ2J.:8 78F584.9J 73F829.68
.ease Adjustment - - -
Capital Kor( in Pro#ress 2343$24, 234)-2,, 23!-!24)
*nvestments 24)2+! 14)214 +)211
Current Assets3 .oans C Advances 3334$23! !34332)2 ,331-2--
%otal Current .iabilities )343-22, 1133,-2+) 1)3,2!244
Net C!rre*t A,,et, <4F8J9.39 <5F346.75 <3F525.44
Total A,,et, 27F797.78 2:F393.83 77F288.J4
%he capital structure of the firm is stable i2e2 there is proportionate rise in the
shareholders? funds and the debts of the company2 As the current liabilities in the form of
creditors are more3 it si#nifies the credit'orthiness of the company2 Also3 there is a
consistent increase in the fixed assets of the company2
PRO$ECTE& CASH %LO/ SUMMARY
ProGe-ted Ca,h %loH S!mmar" CR,. I*. Cr,D
Year Mar<8: Mar<86 Mar<8J
Cash and Cash Euivalents at /e#innin# of
the year 3,4214 3-)243 !)12$1
Aet Cash from Operatin# Activities 4$31233 ,1-)2+! 13343234
Aet Cash Rsed in *nvestin# Activities ;!-,423+ ;)+)!2-! ;14+!42,
Aet Cash Rsed in &inancin# Activities 3)$23! 34-213 242-4+2
Aet *nc<5>ec6 in Cash and Cash Euivalent ;)$2)1 4)32-3 ;1!3-231
Cash and Cash Euivalents at End of the year 986.49 6J8.4: 2987.36
04,1
Total -a,h .rom o1eratio*,'
%he total cash flo' from operations for the company is also increasin#2 %he rise in
cash flo' from operations increases considerably in the years 2--) and 2--,2 %his is a
#ood si#n for the company2 %he rise in the cash flo' from the operations si#nifies that the
company is able to extract maximum value from its available resources2 %he company
has mana#ed to maintain its mar#ins and thus not allo'ed its operatin# profit to dip2
On loo(in# at the operatin# profit before tax and the total cash flo' from
operations it is clear that the cash position of the company is secure2 %he company loo(s
to be in a cash rich position2 %he cash flo' statement of the company indicates that the
company is mana#in# its cash position very 'ell and the inflo's of cash are very 'ell
mana#ed by the company and it is also evident that the company is allocatin# adeuate
cash to increase their fixed assets2
>e" %i*a*-ial Ratio,'
>e" Ratio, %orm!lae Mar<8: Mar<86 Mar<8Je
E/*%>A "atio E/*%>A < *ncome -23$ -241 -241
Aet Profit "atio PA%< *ncome -21, -223 -22
>ebt;Euity "atio >ebt < Euity -2,3 -2!4 -24+
Current "atio
Current Assets <
Current .iabilities -24$ -24) -24)
*nterest Cover E/*% < *nterest 1-2) 1)231 212!3
"eturn on Euity 5N6 PA% < Euity 2)23) 3!22 3$2,
"eturn on Capital E/*% < Capital 2-22$ 2,2,3 2+2!)
04+1
Employed 5N6 Employed
EBIT&A or O1erati*g Pro.it Margi*'
%he operatin# profit mar#in in true sense is the indicator of the company?s actual
operatin# efficiency2 %he company has increased its sales considerably but if there is no
rise in the operatin# profit mar#in then there is a lac( of efficiency on the part of the
company2 *n this case the company?s operatin# profit mar#in is consistently over 3-N2
%his means that even thou#h the company is underta(in# hu#e expansions it has
maintained its operatin# profit mar#in2
Net Pro.it Margi* Ratio'
%he net profit mar#in ratio measures the overall efficiency of production3
administration3 sellin#3 financin#3 pricin#3 and tax mana#ement2 After loo(in# at the
company?s net profit mar#in3 one can say that it is consistent3 'hich is considered to be
favorable2
&e)t<E@!it" Ratio'
%he debt;euity ratio sho's the relative contributions of creditors and o'ners2
%he debt;euity ratio of the company is declinin#3 and is expected to still lo'er do'n2
%he lo'er the debt;euity ratio3 the hi#her the de#ree of protection enjoyed by the
creditors2
C!rre*t Ratio'
%he current ratio measures the ability of the firm to meet its current liabilities;
current assets #et converted into cash durin# the operatin# cycle of the firm3 and provide
the funds needed to pay current liabilities2 Even thou#h the current ratio of the firm is
consistent but it is much lo'er than the #eneral norm i2e2 1233 in *ndia2
0!-1
I*tere,t Co+erage Ratio'
*nterest Covera#e "atio3 a major determinant of bond ratin# is 'idely used by
lenders to assess a firm?s debt capacity2 Mi#h interest covera#e ratio si#nifies the ability
of the firm to meet its interest burden even if the P/*% suffer a considerable decline2
*nterest Covera#e ratio in case of /harti Airtel is uite favorable as it is increasin#
consistently2
Ret!r* o* E@!it"'
%his ratio measures the profitability of euity funds invested in the firm2 /harti
Airtel has a favourable "eturn on Euity as it is increasin# every year i2e2 from 2)23) it
has reached 3$2, in 2years duration2 %his ratio is of #reat interest to the euity
shareholders2
Ret!r* o* Ca1ital Em1lo"ed'
%he "OCE measures the profitability of the capital employed i2e2 shareholder?s
funds plus the total debt 5both short term as 'ell as lon# term62 /harti Airtel has attained
a sharp rise in "OCE in 2--) but is expected to #ive comparatively lo' returns in 2--,
due to comparatively lo' P/*% and increasin# interest2
Ear*i*g, 1er ,hare'
%his ratio indicates the actual profit left for the o'ners of the company i2e2
shareholders2 A #ro'in# EP8 sho's that the company is contributin# to the shareholders
value2 A #ro'in# EP8 leads to increase in the value 5price6 of the company in the mar(et2
%hus3 it can be said that /harti is contributin# consistently to the shareholders value2
P=E Ratio'
*t is the parameter to jud#e the proper valuation of the company in the mar(et2
Mi#her P<E sho's that the mar(et is valuin# the company at a hi#her multiple2 %his is the
'idely used parameter by the mar(et for jud#in# the over or under valuation of the
company for investment purpose2 A lo'er P<E is considered one of the most important
criteria for the selection of the company by the investors2 %he P<E ratio of /harti is
0!11
decreasin# from 4-2! to 3)2!3 'hich is a #ood si#n from the point of vie' of the
shareholders2
SHAREHOL&IN( PATTERN'
5A8 OA :un 2--)6 Ao2 of 8hares 0N1
&orei#n !+,3)4233-12-- 312!$
*nstitutions ),3)++3)142-- 421!
Jovt Moldin# - -
Aon Promoter Corp2 Mold2 3+31$333+)2-- 22-$
Promoters 131!!3$4!3$),2-- $-2+2
Public C Others 243)+)33)42-- 1231
%otals 13,+)314,34$42-- 1--
%UTURE PROSPECTS'
%he company has already completed the testin# of *P%@ in AC" re#ion and 'ill
launch in select part in AC" re#ion in Aovember;>ecember this year and in the
next calendar year in other parts of the country2
%he company plans a T,bn spread by 2-1- and 2!N of the mar(et share i2e2
approximately 12! million subscriber base2
/harti Airtel si#ned a memorandum of Rnderstandin# 'ith Ao(ia 8iemens
Aet'or(s for R8> +-- Billion in :uly 2--)2 %his is an expansion contract across
Airtel?s mobile3 fixed Aet'or( platforms2 Ao(ia 8iemens Aet'or(s 'ill expand
Airtel?s J8B net'or( in ei#ht circlesE its A.> and *.> net'or( 'ith 12, million
Aext Jeneration Aet'or( 5AJA6 ports and its *nternational Callin# Card prepaid
service capacity by 42! million ne' users2
0!21
%he company is ma(in# major investments in international infrastructure and
#oin# to buy full o'nership of the i2i cable2
Company expects to achieve )2;)4N population covera#e till Barch 2--, from
current level of $2N2
%he company has filed the scheme of de;mer#er for approval of the Monourable
Mi#h Court of Ae' >elhi of its passive telecom 5mobile6 infrastructure to /harti
*nfratel3 its 'holly o'ned subsidiary2 %he company expects the demer#er to ta(e
place in October 2--)2
Currently the company has 4---- telecom to'ers and expected to reach about
$!--- to'ers by Barch 2--,2 After demer#er 'ith $!--- to'ers3 /harti *nfratel
'ould be the bi##est to'er company in the 'orld2
VI&ESH NI(AM SANCHAR LIMITE&2
@idesh 8anchar Ai#am .td 5@8A.6 'as incorporated in 1st April 1+,$ as a JO*
company3 to ta(e over the activities of the erst'hile Overseas Communication 8ervices
5OC86 and 'ith a vie' to provide *nternational %elecommunication 8ervices to and from
*ndia2 %he company too( control and mana#ement of all international telecommunication
services from OC83 a >epartment of the Binistry of Communications2 @8A. is the
leadin# *ndian provider of *nternational .on#;distance 5*.>6 and *nternet related
services2 @8A. is the first company to introduce retail internet services in *ndia in 1++!2
*nitially3 JO* 'as holdin# !22+)N sta(e in @8A.2 *n &ebruary 2--23 JO*
divested 2!N sta(e to the %ata Jroup as a strate#ic partner alon# 'ith the ri#ht to mana#e
the company2 B<s2Panatone &invest .imited3 a company 'hich is o'ned by various %ata
Jroup companies pic(ed the sta(e at a price of "s22-2 per share2 &ollo'in# JO*=s
0!31
subseuent open offer of further 2-N euity of @8A.=s3 the tata #roup has become the
bi##est shareholder 'ith a holdin# of over 4!N3 'hile the JO* sta(e in @8A. came
do'n to 2$212N2 %he company offers its products and services under the brand name
%ata *ndicom in *ndia2
BUSINESS OVERVIE/'
%he company operates under three business se#ments in *ndia; Kholesale @oice3
Enterprise and Carrier >ata and other services2 %he company provides value added
telecommunication services such as international telephony3 leased channels3 dial;up
internet3 broadband3 net telephony3 national lon# distance3 enterprise data3 frame relay
and *nternet 8ervices2 Apart from these services the company is also providin# %@
uplin(in# services3 transponder leasin# services etc2 @8A.=s main #ate'ay centres are
located at Bumbai3 Ae';>elhi3 Gol(ata and Chennai2 %he international
telecommunication circuits are derived via *ntelsat and *nmarsat satellites and 'ide band
submarine cable systems e2#2 &.AJ3 8EA;BE;KE;2 and 8EA;BE;KE;32
@8A. is the first *ndian service provider to enter in to a Kireless /roadband
roamin# alliance 'ith an international operator 8tar Mub3 'hich is 8in#apore=s second
lar#est info;communication company2 %he company one of the leadin# player in the
#ro'th of Ki;&i hotspot industry in *ndia has the lar#est public hotspot net'or( in india
'ith over 2!- hotspots2
BUSINESS RIS>'
%he business is subject to extensive re#ulation by the JovernmentE 'hich could
have an adverse effect on the business2 %echnical failures and natural disasters could
dama#e the telecommunication net'or(s2 Chan#es in available technolo#y could increase
competition and the capital costs2
MAR>ET RIS>'
%here is very little mar(et ris( in this se#ment3 considerin# the ever increasin#
demand of the telecom services2 %here have been substitutes for telecom services li(e the
Postman3 'hich has been available for years but the demand for it is #ettin# decreased
0!41
'hereas the demand for telecom services has never been affected due to that2 %here is a
permanent mar(et for the product3 and it does not face any serious mar(et ris(2
VOLUME BASE& BUSINESS'
%he profits of the company are totally based on the volume of their business2 %he
more efficiently they provide the service3 their turnover 'ill increase accordin#ly and
thereby addin# additional profits to the company?s account2 Kith the expansion
underta(en by the company in recent times3 it is slated to ma(e the most of this situation2
%UTURE %ORECAST'
*n lon# term the demand for telecom services is expected to rise further2 %he
reasons bein# the lo' tariffs3 technolo#y3 focus on rural areas3 ever increasin# population3
etc2 %elephony penetration in urban areas is uite hi#h as compared to rural penetration
and as of no' this is been ta(en into consideration by various players2 %echnolo#y is also
expected to improve a lot in the years to come3 'hich 'ould help not only in cost
reduction but also in providin# services efficiently2
PRICE IN%ORMATION'
Pri-e I*.ormatio*
BSE 52);-);-)6 "s2 4!12,!
NSE 52);-);-)6 "s2 4!-2+
P=E x 2)2+$
EPS "s2 1!2$,
Mar0et Ca1. "s2 *n Cr
1144,24!
57/ High at BSE "s2 !1!
57/ LoH at BSE "s2 342
0!!1
COMPARATIVE CHART O% VSNL /ITH SENSEX'
&rom the chart #iven above3 it is observed that there has been an upside trend in
the 8EA8EF as 'ell as the 8hare price of @8A.2 /ut the rise in the value of @8A. is
more than that of 8EA8EF2
O*e Year Pri-e mo+eme*t o. VSNL'
0!$1
%he chart #iven above sho's some fluctuations 'hich can prove unfavourable
from investorss? piont of vie's2 %here is not much movement in the stoc( price and even
if its there (eeps on fluctuatin#2 Also3 it can be said that the stoc( volumes traded on the
exchan#e is uite less2
PRO$ECTE& PRO%IT AN& LOSS ACCOUNT
ProGe-ted Pro.it A Lo,, A=C CR,. I* Cr,.D
Year Mar 8:C27D Mar 86C27D Mar 8JC27D
INCOME '
Aet 8ales 33),-2+! 43-412,3 43))23
Other *ncome 24!2)! 21221, 1322$+
0!)1
Total I*-ome 4F87:.68 4F754.82 4583.33
EXPEN&ITURE '
"a' Baterials - - -
Po'er C &uel Cost 3$2+2 432-+ 4$2$$
Employee Cost 2-)2++ 2$$22$ 2,,23$
Other Banufacturin# Expenses 232,!2-! 233),22+ 24)3242
8ellin# and Administration Expenses 2!42!4 22124 2442+!
Biscellaneous Expenses 1+423 23421 2!32!3
.essD Pre;operative Expenses
Capitalised - - -
Total EB1e*dit!re 7F36J.J8 9F249.24 998:.37
Operatin# Profit 13-4)2+- 1311-2,) 12-32-)
*nterest 12, $2+1 )24,
Jross Profit 13-4$21- 131-32+$ 11+!2!+
>epreciation 3!+23, 3+1233 43423,
Pro.it Be.ore TaB :J:.67 627.:9 6:2.72
%ax 2-)21, 2442-) 2$-2)1
Re1orted Net Pro.it 463.54 4:J.5: 588.5
No. o. Share, 2+$1+!1,2 2,!------ 2,!------
Ear*i*g, Per Share 2:.23 25.:J 26.5:
Mar0et 1ri-e o. ,hare 485.32 49J.45 438.3J
P=E Ratio 75.86 76.3: 76.3:
Net Re+e*!e,'
%he net revenues of the company are #ro'in# at an avera#e rate of ,2!N per year2
%he revenues of the company under'ent a sudden fall in 2--4 due to the entry of various
ne' players in the industry2 /ut after that the company is tryin# to re#ain its earlier
position by #ro'in# at a medium pace but 'ith consistency2 As the industry is under the
#ro'th sta#e3 this may help in boostin# the revenues further2 8ome of the reasons behind
this are declinin# prices due to competition3 increasin# rural penetration3 technolo#y3 etc2
0!,1
EB1e*,e,D
%he expenses of the company are #ro'in# but the company is able to (eep them
'ithin permissible limits3 except the sellin# expenses 'hich are expected to increase
comparatively more due to need arisen for more mar(etin#2 Rltimately3 this 'ould enable
the company to earn not only hi#her profit but also increase the subscriber base2
O1erati*g Pro.it'
%he operatin# profit of the company as a percenta#e of net revenues is constantly
above 2-N3 'hich indicates that even thou#h the company is operatin# on a lar#er scale
the operations of the company are bein# carried out 'ith utmost efficiency2
Pro.it a.ter TaB'
%he #ro'th in PA% is not consistent3 it is uite fluctuatin# as is observed over a
period of time2 Also the amount of interest is much more hi#h as compared to the interest
that 'as paid some fe' years bac(2
0!+1
O1erati*g 1ro.it )e.ore taB'
%he operatin# profit before tax of the company is increasin# consistently every
year2 %his is a positive si#n for the company that the operatin# profit of the company is
ever increasin# thou#h at a lo' pace as compared to the other players in the industry2 *t
sho's that the performance of the company in terms of their operations is satisfactory2
PRO$ECTE& BALANCE SHEET
ProGe-ted Bala*-e Sheet CR,. I* Cr,.D
Year Mar8:C27D Mar86C27D Mar8JC27D
SOURCES O% %UN&S '
8hare Capital 2,! 2,! 2,!
"eserves %otal !3))$21) $3-)42!- $3!1+2$)
Total Shareholder, %!*d, :F8:2.26 :F953.58 :FJ84.:6
8ecured .oans - - -
Rnsecured .oans +,22! 1+)2$1 2212-4
Total &e)t 3J.75 236.:2 772.84
Total Lia)ilitie, :F253.47 :F556.22 6F994.54
0$-1

APPLICATION O% %UN&S '
Aet /loc( 33--,2!! 331!421) 33!-1213
.ease Adjustment - - -
Capital Kor( in Pro#ress 14)2,1 34-244 !-)22$
*nvestments 234++234 23$)32!, 33-342!1
Current Assets3 .oans C Advances 234112$1 2331$2)3 232$+212
%otal Current .iabilities 13,322,- 13,!$213 13+))24,
Aet Current Assets !),2,1 4$-2$ 2+12$4
Total A,,et, :F253.47 :F556.22 6F994.54
%he increase in debts of the company is more as compared to the euity2 %he
Company is continuously ma(in# investments but there is no remar(able increase in the
profits made by the company2 Also3 the net current assets held by the company are
reducin# every year3 the reason bein# risin# current liabilities and simultaneously
reducin# current assets2 %he Capital Kor( in Pro#ress is increasin# continuously over a
period of time2
PRO$ECTE& CASH %LO/ SUMMARY
ProGe-ted Ca,h %loH S!mmar" CR,. I* Cr,.D
Year Mar<86 Mar<8J
Cash &lo' 8ummary
Cash and Cash Euivalents at /e#innin# of the year 2442!3 2$,2+,
Aet Cash from Operatin# Activities !!+213 ,,+2-2
Aet Cash Rsed in *nvestin# Activities ;$4)2,3 ;4+122,
Aet Cash Rsed in &inancin# Activities ;!22)+ ;232)!
Aet *nc<5>ec6 in Cash and Cash Euivalent ;14124+ ;13$211
Ca,h a*d Ca,h E@!i+ale*t, at E*d o. the "ear 289.84 2:8.64
Total -a,h .rom o1eratio*,'
0$11
%he total cash flo' from operations for the company is also increasin#2 %he rise in
cash flo' from operations increases considerably in the years 2--) and 2--,2 %his is a
#ood si#n for the company2 %he rise in the cash flo' from the operations si#nifies that the
company is able to extract maximum value from its available resources2 %he company
has mana#ed to maintain its mar#ins and thus not allo'ed its operatin# profit to dip2
On loo(in# at the operatin# profit before tax and the total cash flo' from
operations it is clear that the cash position of the company is secure2 %he cash flo'
statement of the company indicates that the company is mana#in# its cash position very
'ell and the inflo's of cash are very 'ell mana#ed by the company and it is also evident
that the company is allocatin# adeuate cash to increase their fixed assets2
>e" Ratio, %orm!lae Mar<8: Mar<86 Mar<8J
E/*%>A "atio E/*%>A < *ncome -22, -22) -22)
Aet Profit "atio PA% < *ncome -213 -212 -211
>ebt;Euity "atio >ebt < Euity -2-1 -2-2 -2-2
Current "atio
Current Assets <
Current .iabilities 1232 122! 121!
*nterest Cover E/*% < *nterest 3,22!1 1-4213 1-22))
"eturn on Euity 5N6 PA% < Euity )2+ )23) )23!
"eturn on Capital
Employed 5N6
E/*% < Capital
Employed 1123$ 11231 1122+
EBIT&A or O1erati*g Pro.it Margi*'
%he operatin# profit mar#in in true sense is the indicator of the company?s actual
operatin# efficiency2 %he company has increased its sales but still there is no rise in the
operatin# profit mar#in2 %his si#nifies lac( of efficiency on the part of the company even
if the company?s operatin# profit mar#in is consistently over 2-N2 As the company is
0$21
underta(in# hu#e expansions it has maintained its operatin# profit mar#in but it is lo' as
compared to the other players in the industry22
Net Pro.it Margi* Ratio'
%he net profit mar#in ratio measures the overall efficiency of production3
administration3 sellin#3 financin#3 pricin#3 and tax mana#ement2 After loo(in# at the
company?s net profit mar#in3 one can say that it is declinin# over a period of years3 'hich
is considered to be unfavorable2
&e)t<E@!it" Ratio'
%he debt;euity ratio sho's the relative contributions of creditors and o'ners2
%he debt;euity ratio of the company is increasin# since 2--)3 and is expected to stay
constant2 %he lo'er the debt;euity ratio3 the hi#her the de#ree of protection enjoyed by
the creditors2 /ut in this case the debt;euity ratio is increasin# that means the de#ree of
protection enjoyed by the creditors is comparatively lo'2
C!rre*t Ratio'
%he current ratio measures the ability of the firm to meet its current liabilities;
current assets #et converted into cash durin# the operatin# cycle of the firm3 and provide
the funds needed to pay current liabilities2 %he current ratio of the firm is declinin# every
year and also it is lo'er than the #eneral norm i2e2 1233 in *ndia2
I*tere,t Co+erage Ratio'
Mi#h interest covera#e ratio si#nifies the ability of the firm to meet its interest
burden even if the P/*% suffer a considerable decline2 *nterest Covera#e ratio in case of
@8A. is uite unfavorable as it is decreasin#2 Also it is been observed that there 'as a
sudden fall in the interest covera#e ratio in &L-)2
Ret!r* o* E@!it"'
0$31
%his ratio measures the profitability of euity funds invested in the firm2 @8A.
has #ot an unfavourable "eturn on Euity as it is decreasin# every year i2e2 from )2+ it
has reached )23! in 2years duration2 %his ratio bein# of #reat interest to the euity
shareholders3 they may loose interest in the company due to declinin# "oE2
Ret!r* o* Ca1ital Em1lo"ed'
%he "OCE measures the profitability of the capital employed i2e2 shareholder?s
funds plus the total debt 5both short term as 'ell as lon# term62 @8A. has attained a
continuous decline in "OCE in previous t'o years and is expected to #ive comparatively
lo' returns in 2--, due to comparatively lo' P/*% and increasin# interest2
Ear*i*g, 1er ,hare'
%his ratio indicates the actual profit left for the o'ners of the company i2e2
shareholders2 A #ro'in# EP8 sho's that the company is contributin# to the shareholders
value2 *n case of @8A.3 the EP8 is expected to increase in &L-, but as observed in the
earlier years3 there is no consistency in EP82
P=E Ratio'
*t is the parameter to jud#e the proper valuation of the company in the mar(et2
Mi#her P<E sho's that the mar(et is valuin# the company at a hi#her multiple2 %his is the
'idely used parameter by the mar(et for jud#in# the over or under valuation of the
company for investment purpose2 A lo'er P<E is considered one of the most important
criteria for the selection of the company by the investors2 %he P<E ratio of @8A. is
increasin# from 2!2-) to 2)2+$3 'hich is not a #ood si#n from the point of vie' of the
shareholders2
SHAREHOL&IN( PATTERN'
5A8 OA :un 2--)6 8hares 0N1
&orei#n 233-)432-22-- ,21
0$41
*nstitutions 3$3$3,3!,$2-- 122,$
Jovt Moldin# - -
Aon Promoter Corp2 Mold2 13!3,3,!22-- -2!4
Promoters 21)32)23-)$2-- )$224
Public C Others $34)$32,42-- 222,
%otals 2,!3---3---2-- 1--
%UTURE PROSPECTS'
%he company has dra'n up major plans this year to further enhance the footprint
to over 1--- hotspots ; brin#in# the internet much more close to the lar#e *ndian
travellin# and on the move population2
%he Company has dra'n major plans to enable international roamin# for business
travellers by levera#in# the alliance2
CHAPTER VII
%IN&IN(S
BHARTI AIRTEL LT&
I*+e,tme*t ratio*ale'
At CBP ,,-2)! 5as on 13 :une 2--)6 the share price trades at 4124 times 5on the
basis EP8 of &L2--) i2e2 2122)6 and at 3-2!+ times 5on the basis EP8 of &L 2--,e i2e2
2,2)+62 * predict that the share prices 'ould rise from ,,-2)! to 1-)+2$3 in a span of ,
months to 1- months2
NeH te-h*ologie, a*d 1aradigm,'
%he trend to'ards adoption of Aext Jeneration Aet'or(s 5AJA6 is #lobal and
the discussions in *ndia are still at a preliminary sta#e2 %echnolo#ies li(e %riple Play3
'herein a sin#le cable can deliver voice3 data and video on demand and *P%@3 provide
the company 'ith a uniue opportunity2
0$!1
(lo)al .ora"'
8ri .an(a is the first international operation of /harti Airtel and is in line 'ith
the Company=s plan to expand its telecom operations internationally in select mar(ets2
/harti Airtel is in the process of preparin# a detailed business plan for rollin# out J8B
operations in 8ri .an(a 'ithin the next financial year2
Stro*g ,trategi- 1art*er,hi1,'
8in#tel continues to be an investor and a strate#ic alliance partner and the
company expects to levera#e the stren#ths and experience of 8in#tel in years to come
VI&ESH SANCHAR NI(AM LIMITE&
I*+e,tme*t Ratio*aleD At CBP 4!12,! 5as on 2) :une3 2--)6 the share price
trades at 2,2,2 5on the basis EP8 of &L 2--)e i2e1!2$,6 and at 111 times 5on the
basis EP8 of &L 2--,e i2e2 1)2!$62
%he increased competition in *ndia 'ith the >o% issuin# *.> licences to ne'
players3 some of 'ho 'ere @8A.=s customers earlier3 is expected to shrin( the
Company=s addressable mar(et and hence affect this business adversely2
%he #ro'th in broadband subscribers has been slo'er than that in mobile
subscribers2 %he predominant reasons are the limited access to last mile net'or(s
that limits the ability to serve retail customers and the inability to demonstrate an
adeuate value proposition except to enterprises and a small #roup of individuals2
0$$1
An important concern for the Company in its voice business continues to be the
lac( of direct access to end customers2
%he implementation of the CAC re#ime has not fallen in place so far3 due to
technical and other reasons2 %he delay in implementation of the CAC re#ime is a
cause of concern for @8A.2
CHAPTER VIII
RECOMMEN&ATIONS
On completion of the company analysis3 * feel that /harti Airtel is fundamentally
a very stron# company and has a tremendous #ro'th potential2 * recommend
Anand "athi 8ecurities .td2 and all its clientele to B!"=Hold the company?s
shares and derive maximum value from it2
Accordin# to me3 the fundamentals of @8A. are 'ea(2 %he company has made
hu#e investments in domestic mar(et as 'ell as in international mar(ets but still
there is no si#nificant rise in the profits made by the company and also the P<E
ratio is risin#2 * recommend to Sell the shares of @8A. as the rise in price is
expected to be uite lo'
0$)1
CHAPTER IX
LIMITATIONS
Khile conductin# the research * 'as unable to collect data from primary source
'hich * feel 'ould have had a bearin# on the outcome of the research2 %hrou#h
intervie's 'ith the concerned authorities * could have #ot first hand information
about the company and this could have certainly #iven me a broader perspective
on the company?s future plans2
&uture chan#es are lar#ely unpredictableE more so 'hen the economic and
business environment is buffeted by freuent 'inds of chan#e2 *n an environment
characteri4ed by discontinuities3 the past record proves to be a poor #uide to
future performance2
0$,1
%he mar(et behavior if irrational may #ive rise to I under;valuations for extended
periodsE over;valuations from unjustified optimism and misplaced enthusiasm for
unreasonable len#ths of time2 %he slo' correction of under or over valuation
poses a threat to the analysis2
CHAPTER X
ASSUMPTIONS
%o arrive at a tar#et price of the soc(s mentioned above3 follo'in# assumptions 'ere
madeD
12 %he estimated #ro'th in sales is calculated by ta(in# Compound Annual Jro'th
"ate for last five years2
22 %he Operatin# Profit Bar#in is assumed to be constant3 to arrive at operatin#
profit fi#ure2 /y (eepin# the OPB N constant 'e can arrive at the operatin#
profit for next year2
32 >epreciation rate is assumed to be constant3 due lac( of availability of facts about
assets3 method of calculatin# depreciation3 depreciation is assumed to be constant2
0$+1
42 *nterest and tax rate are ta(en as per the current rates2 %hat helped to arrive at
more accurate fi#ures2
!2 Profit earnin# ratio is assumed to be constant2 As EP8 is calculated from
estimated profits3 tar#et price is calculated by (eepin# P<E constant
CONCLUSION
8tron# #ro'th in subscriber base3 increasin# non voice revenues and lo'erin#
fixed cost per unit3 the *ndian telecom service sector is set to report buoyant
#ro'th in revenues and profitability in the short to medium term2
%here are t'o (ey drivers for the #ro'th in this business2 &irst3 the enhanced
capability of the Company to deliver services on a #lobal basis is attractin# ne'
customers and openin# up ne' mar(ets2 8econd3 there is si#nificant #ro'th in the
existin# customers= businesses #lobally2
/harti Airtel3 one of the major payers in the telecom service provider industry has
attained a si#nificant mar(et share in the country 'ith its 'idespread net'or(3
0)-1
hu#e subscriber base and uality service2 Also3 the company to ma(e its presence
felt all across the #lobe3 is spreadin# its 'in#s to international mar(ets2
@8A.3 a company strivin# to ma(e its presence felt in domestic as 'ell as
international mar(et is la##in# behind in the race a#ainst the ne' players2 %he
reason behind this is the inability of the company to operate efficiently due to the
lar#e number of its subsidiaries3 because of 'hich there is no direct access to its
end customers
BIBLIO(RAPHY
/EBSITES'
o '''2rathi2com
o '''2#oo#le2com
o '''2capitalline2com
o '''2bseindia2com
o '''2nseindia2com
o '''2trai2#ov2in
BOO>S'
o *nvestment Analysis and Portfolio Bana#ement; Prasanna Chandra2
o 8ecurity Analysis and Portfolio Bana#ement I Punithavathy Pandian
0)11
0)21

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