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Group number -1
Group members-
SAMAYITA BHATTACHARYA 41C
NEILADRI DAS 30C
SURESH PANDA 51C
MOHAMMED KHALID KHAN 27C
CHARU SONI 13C
Bharti Airtel
India is currently the world’s second-largest telecommunications market with a subscriber base of 1.20 billion
and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly
and will contribute substantially to India’s Gross Domestic Product (GDP. As of January 2019, India has
witnessed a 165 per cent growth in app downloads in the past two years.
Market Size
With 604.21 million internet subscribers, as of December 2018, India ranks as the world’s second largest
market in terms of total internet users.
Further, India is also the world’s second largest telecommunications market, with total subscriber base of
1,183.51 million at the end of March 2019
Investment/Major development
• During the first quarter of 2018, India became the world’s fastest-growing market for mobile
applications. The country remained as the world’s fastest growing market for Google Play downloads
in the second and third quarter of 2018.
• Bharti Airtel is planning to launch 6,000 new sites and 2,000 km of optical fiber in Gujarat in 2018-19.
• The number of mobile wallet transaction increased 5 per cent month-on-month to 325.28 million in
July 2018.
• As of June 2018, BSNL is expected to launch its 5G services by 2020.
• Vodafone India and Idea Cellular have merged into ‘Vodafone Idea’ to become India’s largest telecom
company, as of September 2018.
Government Initiatives
The government has fast-tracked reforms in the telecom sector and continues to be proactive in providing
room for growth for telecom companies. Some of the other major initiatives taken by the government are as
follows:
• The Government of India is soon going to come out with a new National Telecom Policy 2018 in lieu of
rapid technological advancement in the sector over the past few years. The policy has envisaged
attracting investments worth US$ 100 billion in the sector by 2022.
• The Department of Information Technology intends to set up over 1 million internet-enabled common
service centres across India as per the National e-Governance Plan.
• FDI cap in the telecom sector has been increased to 100 per cent from 74 per cent; out of 100 per
cent, 49 per cent will be done through automatic route and the rest will be done through the FIPB
approval route.
• FDI of up to 100 per cent is permitted for infrastructure providers offering dark fibre, electronic mail
and voice mail.
• The Government of India has introduced Digital India programme under which all the sectors such as
healthcare, retail, etc. will be connected through internet.
About the company
Bharti Airtel Limited, known as Airtel, also is an Indian global telecommunications services company based in
Delhi, India. It operates in 18 countries across South Asia and Africa, and also in the Channel Islands. Airtel
provides GSM, 3G, 4G LTE, 4G+ mobile services, fixed line broadband and voice services depending upon the
country of operation. Airtel had also rolled out its VoLTE technology across all Indian telecom circles. It is
the second largest mobile network operator in India and the second largest mobile network operator in the
world with over 293.79 million subscribers.
Figure:1
Figure:2
The above figure shows that maximum contribution of revenue for Airtel comes from its wireless services
which also contributes the highest to its EBITDA.
Figure:3
Company Financials:
Figure:4
Based on market share of competitors, it is visible that Bharti Airtel has market share only second to Vodafone
Idea Ltd. which is the market leader.
EBITDA
25
20
15
10
5
0
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
-5
-10
-15
-20
-20
-30
-40
-50
-60
The cash flow from operations has decreased over last year which means the revenue of the company has
been decreasing due to the competition in the telecom industry.
BHARTI AIRTEL Income Statement Analysis
▪ Operating income during the year fell by 2.19 % on a year-on-year (YoY) basis.
▪ The company's operating profit decreased by 13.90% YoY during the fiscal 18-19. Operating profit
margins witnessed a fall and stood at 32.32% in FY 18-19 as against 36.7% in FY 17-18.
▪ Depreciation charges and finance costs increased by 10.92 % YoY and 18.09 % YoY, respectively.
▪ Other income grew by 17.04 % YoY.
▪ Net profit for the year declined by 22.71 % YoY.
▪ Net profit margins during the year declined from 2.6 % in FY 17-18 to 2.08 % in FY 18-19.
1. We observe that liabilities have increased over the year while assets have decreased.
2. The goodwill has increased over one year which is a good news for the company.
3. The total share holders equity has increased. Which is a good thing as it indicates the financial
health of the company
4. Total current liabilities increased by 18% which means operating cycle has increased
5. Other current assets has increased by 32%
6. Current portion of long term debt has increased by 56,000 approximately.
7. Short term loan has increased to meet short term obligations
8. Unsecured loans has increased by 139% that means risk of the lender has been increased.
9. Other reserves has increased by 34% which means transfer to reserves has been done more
compared to last year.
10. Long term borrowings increased by 18% which means company has taken a loan and its in
expansion mode.
11. Total contingent payable increased by 31% which is into 3 categories: possible , probable,
remote. Probable is being recorded in the balance sheet.
12. Rental expenses has grown by 20% , so probably company has taken another property on
rent or the cost of rent has increased.
Ratio Analysis:
1) Basic and Diluted EPS for Airtel is the same and = -Rs 4.58 which means that the company hasn’t
issued any dilutive instruments. Also negative EPS signifies that the company is losing money,
precisely Rs. 4.58 per stock.
2) The book value per share is Rs. 246.06 which is the summthe shareholders will receive per share if the
company were liquidated.
3) The dividend per share is Rs. 2.50 which means Rs 2.50 is paid as dividend for each share to the
shareholders.
1) Net profit margin is 0.50 which means that 0.50 unit of net profit is generated per unit of sales. Net
profit signifies gross profit minus Depreciation & Amortization expenses, interest expenses and tax
expenses.
2) Return on equity is 0.57 which means that the amount of return generated per unit of shareholder’s
equity is 0.57 units.
3) Return on capital employed is 2.32 which means that 2.32 units of return is generated per unit of
capital (both debt and equity) employed in the business.
4) Return on Assets is 212.51 which means for hundred units of asset employed in the business the
return generated is 212.51%.
5) Debt to Equity ratio is 1.76 which means the ratio between debt and equity in the capital structure of
the company is 1.76.
6) Asset turnover ratio is 0.42 which means that the amount of revenue generated per unit of assets
employed in the business is 0.42. It’s difference with return on assets is that ROA uses net income in
the numerator while Assets turnover ratio uses revenues in the numerator.
7) Gross profit margin is 5.3 which means that 5.3 units of gross profit is generated per unit of sales.
8) Operating profit margin is 31.72 which means that 31.72 units of operating profit is generated per
unit of sales.
Coverage ratios-
1) Interest coverage ratio is 0.48 which measures the company’s ability to pay for its interest expenses.
It gives how many times a company can pay its interest expenses with the given amount of earnings.
2) Debt coverage ratio is 0.21 which measures the company’s ability to repay its entire debt obligations.
It gives how many times a company can repay its entire debt (principal + interest) with its available
earnings.
Liquidity ratios-
1) Current ratio is 0.34 which gives the ratio of current assets to current liabilities of a company. As
current ratio is less than 1 it means that current liablities of Airtel are more than its current assets.
2) Quick ratio is also 0.34 which gives the ratio of currents assets without considering inventory to
current liabilities of a company. As quick ratio is equal to current ratio here it means Airtel has no
leftover inventory on its balance sheet.
Valuation ratios-
1) The enterprise value is given by Rs 216.643 bn which gives the market value of the business. It gives
the theoretical takeover price an investor would pay to acquire the company.
2) The EV/EBITDA is given by 17.26 which is used as a metric to find whether the company is overvalued
and undervalued relative to its peers.
3) The P/E is given by 418.5 which gives the ratio of a company's share price to the company's earnings
per share and is used to determine whether the company is overvalued or undervalued.
4) The churn rate is the average number of customers who quit their service per month. For Airtel it is
given by 2.8% which is lower than industry average.
5) The P/BV ratio is given by 1.35 and it is the ratio of the company’s share price to the company’s book
value. It is also used to find out if the company is overvalued or undervalued with respect to its peers.
EV/EBITDA
12
10.31
9.13 9.38 9.42 9.5
10 8.81
8.24
7.56
8 6.93 6.50 6.98
6.14
6
4
2
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019
ARPU (RS)
Churn Rate in %
7.3%
8.00%
7.00%
6.00%
4.13% 4.09%
5.00% 3.48%3.45%
3.27% 3.57% 3.67% 3.63% 3.81% 3.93% 3.34%
4.00% 2.76% 2.80%
3.00% 1.98%
2.00%
1.00%
0.00%
EBITDA
Despite of huge competition for the past several quarters, Bharti’s India wireless EBITDA saw a strong
turnaround in Q4FY19, up 32 per cent quarter-on-quarter (QoQ).
ARPU
After Jio’s entry into the Telecom sector, the existing ARPU had been fallen hugely and churn rate had
increased, however it decreased this quarter for Airtel. ARPU was up 4.2% QoQ to 123 ( from exit ARPU).
CHURN RATE
The churn rate has also decreased over the years meaning that less subscribers are switching from Airtel’s
network which is a good thing.
IPO
After the recent US$1.25bn equity raise, Bharti’s planned Africa IPO will enable further US$0.9bn deleveraging.
Growth Rate
Bharti’s 14 countries Africa operations are on the growth track and forecast is for 4% revenue growth and 6%
Ebitda growth in FY20.
Market Growth
Bharti Airtel is regaining lost revenue momentum and moving strategically with aggressive 4G network roll-
out, matching Jio on tariffs, mandating monthly recharge for low ARPU customers, strengthening balance
sheet etc.
Revenues from the telecom equipment sector are expected to grow to US$ 26.38 billion by 2020. The number
of internet subscribers in the country is expected to double by 2021 to 829 million and overall IP traffic is
expected to grow 4-fold at a CAGR of 30 per cent by 2021. The Indian Government is planning to develop 100
smart city projects, where IoT would play a vital role in development of those cities. The National Digital
Communications Policy 2018 has envisaged attracting investments worth US$ 100 billion in the
telecommunications sector by 2022. The Indian Mobile Value-Added Services (MVAS) industry is expected to
grow at a CAGR of 18.3 per cent during the forecast period 2015–2020 and reach US$ 23.8 billion by 2020. App
downloads in India are expected to increase to 18.11 billion in 2018F and 37.21 billion in 2022F.