Financial Accounting: Bharti Airtel Limited

Financial Accounting Bharti Airtel/u107092/u107093/u107094
Financial Accounting
Project Report on
Bharti Airtel Limited
Submitted by: Nidhi Agarwal (u107092) Niraj

Kumar Mall (u107093) Nishith Sahu(u107094)
1
Table of Contents
1. ACKNOWLEDGEMENTS 4
2. OBJECTIVE 5
3. EXECUTIVE SUMMARY 5
4. ENVIRONMENT ANALYSIS 6
4.1 GOVERNMENT POLICIES 6
4.2 NEW TELECOM POLICY, 1994 6
4.3 NEW TELECOM POLICY, 1999 7
4.4 BROADBAND POLICY, 2004 8
5. INDIAN ECONOMY AND THE TELECOM SECTOR 11
5.1 GUIDELINES FOR FOREIGN DIRECT INVESTMENT IN TELECOM
SECTOR 18
5.2 TRAI GUIDELINES AND OBJECTIVES 20
5.3 TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL
(TDSAT) 21
5.4 CELLULAR OPERATORS ASSOCIATION OF INDIA (COAI) 21
6. COMPANY ANALYSIS 22
6.1 ABOUT THE COMPANY 22
6.2 CAPITAL STRUCTURE OF BHARTI-AIRTEL 27
6.3 FINANCIAL STATEMENTS 30
6.4 ACCOUNTING POLICIES 32
7. Ratio Analysis 38
7.1 LIQUIDITY RATIOS 38
7.1.1 Current Ratio 38
7.1.2 Liquid Ratio 39
7.1.3 Absolute Cash Ratio 40
7.1.4 Debtor Days 40
7.1.5 Creditor Days 41
7.1.6 Inventory Days 42
7.2 SOLVENCY RATIOS 42
7.2.1 Debt Ratio 43
7.2.2 Equity Ratio 43
7.2.3 Debt to Equity Ratio 44
7.2.4 Interest Coverage Ratio 45
7.2.5 Debt Service Coverage Ratio 46
7.3 PROFITABILITY RATIOS 47
7.3.1 Gross Profit (PBDITA) / Sales Ratio 47
7.3.2 Operating Profit (PBIT) / Sales Ratio 48
7.3.3 Net Profit (PAT) / Sales Ratio 49
7.4 RETURN ON INVESTMENT 50
7.4.1 RONW 50
7.4.2 ROCE 51
7.4.3 ROTA 51
7.4.4 EPS 52
7.5 EFFICIENCY RATIOS 53
2
7.5.1 Total Assets Turnover Ratio 53

7.5.2 Debt Turnover Ratio 54
7.5.3 Fixed Asset Turnover 55
7.5.4 Current Asset Turnover 56
7.5.5 Inventory Turnover 57
8. DUPONT ANALYSIS 59
8.1 THE DUPONT RATIO DECOMPOSITION 60
8.1.1 Profitability: Net Profit Margin (NPM: PBIT/Sales) 60
8.1.2 Operating Efficiency or Asset Utilization: Total Asset Turnover
(Sales/Total Assets) 60
8.1.3 Leverage: The Leverage Multiplier (Total Assets/Capital Employed) 61
8.2 HIGHLIGHTS OF DUPONT ANALYSIS 62
9. CASH FLOW ANALYSIS 67
10. CALCULATION OF EVA 70
11. CONCLUSION 71
12. APPENDIX 73
13. REFERENCES 75
3
1. ACKNOWLEDGEMENTS
We wish to express our heartfelt gratitude and immense respect to Dr. D.V.Ramana, our
Faculty and Mentor in Financial Accounting. His threadbare explanation of the minutest
of concepts helped in generating a lot of interest in the subject.
We would also like to thank XIMB for providing the necessary infrastructure which
made our work easier.
4
2. OBJECTIVE
The basic objective of doing the project is to analyze the financial statements of a
company, analyze the environment in which it is operating and evaluate its performance
over the last 3 years. Hence a thorough Environment Industry & Company analysis is
done to understand the external factors influencing the company.
3. EXECUTIVE SUMMARY
The environmental analysis would include analyzing the Indian economy, government
policies, FDI norms with regard to telecom sector, TRAI’s objectives & guidelines,
COAI data and demography related to cellular coverage.
Industry covered Factors behind the telecom growth, Industry Structure (services),
Technologies, recent growth trends in the Telecom Sector, GSM Coverage in India and
Outlook for the Sector.
Then we moved to company analysis where we studied that its strategic business group
primarily consists of two services namely mobile and infotel services. Infotel services can
further be classified into Broadband & Telephone services, Enterprise services and Long
distance services. We also studied the shareholding pattern, recent developments in the
company and the accounting policies of the company.
To analyse the performance of the company specifically we covered the following topics:
1. Ratio Analysis
2. Du Pont Analysis
3. Cash Flow Analysis
We also did a thorough analysis of its competitors like BSNL & VSNL to get a feel of
how the company is doing though in some places we were handicapped by the
unavailability of financial statements of the competitors.
5
4. ENVIRONMENT ANALYSIS
4.1 GOVERNMENT POLICIES
The telecom sector in India is at present governed by the legislations viz, The Indian
Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933. The reforms process
in the telecom sector in India began in early 80s with allowing manufacture of customer
premise equipment by private sector.
Telecom Services in the Metro cities of Delhi & Mumbai were corporatised under
Mahanagar Telephone Nigam Ltd. (MTNL) and International Telecom Services were
corporatised under Videsh Sanchar Nigam Ltd (VSNL). Subsequently, Center for
Development of Telematics (C-DOT) was set up in 1984 to develop indigenous
technology. While the initial mandate of C-DOT in 1984 was to design and develop
digital exchanges and facilitate their large scale manufacture by the Indian Industry, the
development of transmission equipment was also added to its scope of work in 1989. To
accelerate decision making Government also set up a High Powered Telecom
Commission in 1989.
To meet the resource requirement and achieve the nation’s telecom targets, the
government decided to invite the participation of private players, and the telecom sector
was opened up in 1992. The policy abolished the regime of public sector supremacy and
paved the way for private participation in the economy. Gone were the days of 2 year
waiting period to get a telephone connection.
4.2 NEW TELECOM POLICY, 1994
In 1994, the Government announced the National Telecom Policy which defined certain
important objectives, including availability of telephone on demand, provision of world
class services at reasonable prices, ensuring India’s emergence as major manufacturing /
6
export base of telecom equipment and universal availability of basic telecom services to
all villages. It also announced a series of specific targets to be achieved by 1997. The
NTP 1994 targeted 1 PCO per 500 urban population and coverage of all 6 lac villages.
NTP 1994 also recognized that the required resources for achieving these targets would
not be available only out of Government sources and concluded that private investment
and involvement of the private sector was required to bridge the resource gap. The
Government invited private sector participation in a phased manner from the early
nineties, initially for value added services such as Paging Services and Cellular Mobile
Telephone Services (CMTS) and thereafter for Basic Telephone Services (BTS). After a
competitive bidding process, licenses were awarded to 8 CMTS operators in the four
metros, 14 CMTS operators in 18 state circles, 6 BTS operators in 6 state circles and to
paging operators in 27 cities and 18 state circles. VSAT services were liberalized for
providing data services to closed user groups. Licenses were issued to 14 operators in the
private sector.
4.3 NEW TELECOM POLICY, 1999
Since some of the targets set in the telecom policy of 1994 remained unfulfilled, a new
Telecom policy was brought about in 1999. The New Policy Framework focused on
creating an environment, which enabled continued attraction of investment in the sector
and allowed creation of communication infrastructure by leveraging on technological
development. The main objectives of NTP-1999 were:
¾ Availability of affordable and effective communications for the citizens.
¾ To achieve a tele-density of 7 by the year 2005 and 15 by the year 2010; to
improve rural tele-density from the level of 0.4 to 4 by the year 2010.
¾ Create a modern, efficient and world class Telecommunications infrastructure
taking into account the convergence of IT, Media, Telecom and Consumer
Electronics.
7
¾ Convert Public Call Offices (PCOs) into Public Tele-info Centers having multi-
media capability like ISDN Services, Remote Database Access, Government and
Community Information Systems etc.
¾ Transform in a time-bound manner, the Telecommunications Sector to a greater
competitive environment in both urban and rural areas providing equal
opportunities and level playing field for all players.
¾ Strengthen Research and Development efforts in the country and provide an
Impetus to build world class manufacturing capabilities.
¾ Protect Defense and Security interest of the country.
¾ Enable Indian Telecom Companies to become truly Global Players.
Towards this end, the New Policy Framework divided the telecom service sector as
follows –
¾ Cellular Mobile Service Providers, Fixed Service Providers and Cable Service
Providers, collectively referred to as ‘Access Providers’
¾ Radio Paging Service Providers
¾ Public Mobile Radio Trunking Service Providers
¾ National Long Distance Operators
¾ International Long Distance Operators
¾ Other Service Providers
¾ Global Mobile Personal Communication by Satellite (GMPCS) Service Providers
¾ V-SAT based Service Providers
The policy led to rapid expansion of telecom services, steep reduction in tariffs,
advancement of technology etc.
4.4 BROADBAND POLICY, 2004
Recognising the potential of ubiquitous Broadband service in growth of GDP and

enhancement in quality of life through societal applications including tele-education, tele-
medicine, e-governance, entertainment as well as employment generation by way of high
speed access to information and web-based communication, Government finalized a
8
policy to accelerate the growth of Broadband services. Some of the major points taken up
in the policy on the technology front were:
¾ Greater emphasis on optical fibre-technologies & Digital-subscriber lines(DSL)
on copper loop
¾ Cable TV network can be used as franchisee network of the service provider for
provisioning Broadband services.
¾ Very Small Aperture Terminals (VSAT) and Direct-to-Home (DTH) services
would be encouraged for penetration of Broadband and Internet services with the added
advantage to serve remote and inaccessible areas.
¾ Invest in newer technologies and incorporate them at the earliest.
National Internet Exchange of India (NIXI) was set up by DIT, Government of India to
ensure that Internet traffic, originating and destined for India, should be routed within
India. The policy targets 20m broadband subscribers by 2010.
The government policies over the period can be summed up and shown as below:
Pre-reform Partial Deregulation Further Deregulation Take-off

Pre-1994 1994-1999 1999 - 2002 2002 onwards
• MTNL - • 4 private fixed • Licenses converted to • Calling Party

Mumbai and Delhi; service providers with revenue sharing Pays
DTS elsewhere less than 1% market • Private sector share less • CDMA launch
• No mobile share than 5% in revenue terms • 3-6 operators in
service • 2 GSM mobile • Competition in NLD and each circle
• NLD - DoT per/ players in each ILD • Intra-circle
BSNL ILD - VSNL circle
• Licenses on Revenue share merger guidelines
• 13 players start
mobile service • 4 mobile operators / circle • Unified Licensing
• National Telecom • NTP 1999
Policy (NTP) 1994 • BSNL formed 2001 • Broadband policy
• TRAI constituted • Internet Telephony 2002
2004
1997 • FDI - 74% 2005
• FDI - 49 %
National Telecom New Telecom Unified Licensing

Policy, 1994 Policy, 1999 Regime
9
Some of the other policy initiatives are:

¾ Deregulation virtually complete and Unified Licensing regime
¾ Interconnection Usage Charge framework in place
¾ Exemption from customs duty for import of Mobile Switching Centres
¾ Comprehensive Spectrum policy and 3G policy on the anvil
Independent regulation has been a critical factor in the growth.
2006
Number portability
Convergence
2005
TRAI’s recommendations Unified Licensing
Quality of Service regulation
Rural Telephony
2004
Intra-circle merger guidelines
Internet / broadband penetration
2003
Calling Party Pays Regime Unified Access Licensing
Reference Interconnect Order
2002
• ILD opened to competition
• Internet Telephony allowed.
Mature regulatory regime and an enabling policy
• Reduction in License fees framework already in place
10
5. INDIAN ECONOMY AND THE TELECOM SECTOR
1. The Indian Economy is galloping at a fast pace over the last few years.
2. It has clocked over 9% growth for the last many years.
3. Such a growing economy offers vast growth opportunities for the telecom industry. The
telecom market has grown rapidly in the last few years.
Subscriber growth
180 164
In CAGR– 38%
Millions 120 98
76
60 53
44
0
2002 2003 2004 2005 Aug-06
Revenue growth
20
20
CAGR - 21% 15
15
11
$Billio
10
10 9
n
0
2002 2003 2004 2005 2006
¾ Revenues ~ USD 19.5 bn (FY 2006)
11
o CAGR (FY 2002-06) - 21%

o Have doubled in last 3 years
¾ Subscribers ~ 160 million (Aug 2006)

o CAGR (FY 2002-06) - 38 %
o Nearly quadrupled since FY 02
o 5-6 million being added every month
¾ Tele-Density - 14.8 (Aug 2006)

o Has doubled in 3 years
o Target set for 2007 under NTP 1999 achieved during FY 2005
And is poised to be the second-largest network globally by 2008
Te le com Subs cr ibe r s - Countr y w is e De ce m be r 2005

China
800 743
600
subscribers
USA
400 360
Japan Rus Ind

Germany
mn.
200 153 130 125

134
12
Mobile telephony continues to be the key growth driver.
Subscriber Growth - Mobile vs Fixed

175
140 143
Mn. subscribers
105
70 52
42 43
38
35 41
7 13 34 41
0
2002 2003 2004 2005 2006
Fixed (mn. subs) Mobile (mn. subs)
Wireless emerging as the preferred mass market format service providers focus on
Internet / broadband access to improve fixed line ARPU
¾ Progressive regulation
o Migration to revenue sharing
o Calling Party Pays (CPP) regime
o Unified access licensing
o Intra-circle merger guidelines
¾ Intensifying competition
o 3 to 6 players per circle
o Presence of CDMA and GSM providers
o Significant share of private sector
¾ Growing affordability
o ARPUs among lowest in the world
13
o Lower cost of ownership due to Low cost / used handsets

o Success of the pre-paid format
Growing network coverage is triggering further market expansion
Segment Cellular reach (2003-04) Cellular reach (End 2006 - Est.)

Locations Population Locations Population
Urban ~ 1700 of 5200 200 million ~ 4900 towns 300 million
towns out of nearly
5200 towns
Rural Negligible Negligible ~ 350,000 out of 450 million
607,000 villages
Support from Universal Service Obligation Fund envisaged for shared network
infrastructure creation in uncovered rural areas
14
Vibrant and competitive telecom market
Subscribers Jul 06
Share (%)
(mn)
Company Presence
Fixed Mobile Fixed Mobile
Government owned. Has ramped up

BSNL GSM services. National presence 37.4 17.7 74.7% 19.6%
(except Mumbai and Delhi)
Government owned. Operates in
MTNL 3.8 2.0 7.7% 2.3%
Delhi and Mumbai.
Integrated operator, with presence in
Bharti all sectors. Largest mobile services 1.4 19.6 2.7% 21.7%
provider.
Integrated operator. Plans expansion
Reliance of GSM network apart from being 3.0 17.3 6.0% 19.2%
the largest private CDMA operators.
Pure play GSM operator in 11
Hutch 15.4 17.0%
circles.
IDEA Pure play GSM operator in 6 circles 7.4 8.2%
Integrated operator (along with
VSNL) with presence in all
TTS 4.0 4.9 8.0% 5.4%
segments. Provides CDMA services
in 20 circles
Operates in 2 circles. Announced
Aircel Plans to expand GSM footprint in 2.6 2.9%
North and North east
Spice Pure play GSM player in 2 circles 1.9 2.1%
Others 0.4 1.4
Total 50 90
15
Broadband and internet connectivity are on the verge of take-off.
Broadband subscriber growth

2.00
1.5 1.38
Mn. subscribers
6-fold
growth
0.75
0.18
0
Mar-05 Mar-06 Nov-06
Several Indian firms are gaining a foothold in the global market.

¾ Many Indian service providers are acquiring scale in the International Long
Distance market through acquisitions
o Acquisitions - FLAG by Reliance, Tyco and Teleglobe by Videsh Sanchar
Nigam Limited
o VSNL is now the world's fifth largest carrier of voice globally
o Reliance’s FLAG network connects with 28 countries. FLAG’s FALCON
cable system when completed would connect 12 countries with 25
international cable landing stations
¾ Investments in Infrastructure
o Bharti-Singtel and VSNL investments in undersea cable
¾ Emerging as Integrated telco, positioning themselves as full service providers
o Tata teleservices-VSNL, Bharti, Reliance have end-to-end presence in
ILD, NLD and Access; BSNL has announced plans to get into ILD
o Focus on corporate connectivity - IPLCs, Frame relay, VPNs
o Strong thrust on internet and broadband - both corporate and retail
segments
16
Key Indian Companies
th
• BSNL - Incumbent service provider and World's 7 largest
Telecommunications Company providing comprehensive range of telecom services in India
• Services include Wire line, CDMA mobile, GSM Mobile,
Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc.
• MTNL - State owned operator covering the cities of Mumbai an

Delhi
• Provides both fixed and mobile services
• Bharti Airtel - Integrated operator with presence in all

segments
• Leads the mobile segment in the country
• Reliance Communications - Largest player in India in the

CDMA segment
• Plans a GSM network
• Tata Teleservices - Integrated operator (with VSNL) with

presence in all segments
• Provides CDMA services in 20 circles
17
5.1 GUIDELINES FOR FOREIGN DIRECT INVESTMENT IN

TELECOM SECTOR
The government has liberalized the FDI rules in the telecom sector. The FDI ceiling has
been raised from 49% to 74% in certain telecom services (such as Basic, Cellular,
Unified Access Services, National/International Long Distance, V-Sat, Public Mobile
Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services
(GMPCS) and other value added services). The remaining 26 per cent will be owned by
resident Indian citizens or an Indian Company (i.e. foreign direct investment does not
exceed 49 percent and the management is with the Indian owners). 100% FDI permitted
under automatic route in the manufacturing sector
The majority Directors on the Board including Chairman, Managing Director and Chief
Executive Officer (CEO) shall be resident Indian citizens, enforced through licence
agreement.
1. Singapore Telecom (SingTel) made an investment of US$1.07 B through a Mauritius

entity for a stake in Bharti Televentures.
2. Vodafone acquired a 10% stake in Bharti Televentures for 6700 crore rupees(
approximately US$ 1.5B)
3. Subsequently, Vodafone made an investment of $12 US B when it acquired a
controlling 67% stake in Hutch Essar.
All these have helped the Indian telecom market grow at an astonishing pace.
¾ It is the fastest growing market in the world
¾ About 6 million mobile subscribers are added every month
¾ The mobile sector has grown from around 10 million subscribers in 2002 to reach
150 million subscribers by early 2007 registering an average growth of 90% yoy.
¾ The overall fixed and mobile subscribers have risen to more than 200 million by the
first quarter of 2007.
18
¾ Currently, the Indian Telecom market is valued at US$100 B. Two telecom

players dominate this market- Bharti Airtel with 27% market share and Reliance
Communication with 20% market share.
In the mobile phone market there are basically two technologies that are used: GSM
and CDMA. GSM is the dominant technology that is used.
GSM and CDMA subscription numbers:
GSM CDMA
GSM Annual CDMA Subscribers
Year Subscribers Annual
growth (millions)
(millions) growth
2000 3.1 94% - -
2001 5.05 76% - -
2002 10.5 91% 0.8 -
2003 22.0 110% 6.4 700%
2004 37.4 70% 10.9 70%
2005 58.5 57% 19.1 75%
2006 105.4 80% 44.2 131%
2007 180.0 71% 85.0 92%
19
5.2 TRAI GUIDELINES AND OBJECTIVES
The Telecom Regulatory Authority of India (TRAI) was formed in January 1997 with a
view to providing an effective regulatory framework and adequate safeguards to ensure
fair competition and protection of consumer interests. The Government is committed to a
strong and independent regulator with comprehensive powers and clear authority to
effectively perform its functions.
Objectives
¾ Access to telecommunications is of utmost importance for achievement of the
country’s social and economic goals. Availability of affordable and effective
communications for the citizens is at the core of the vision and goal of the telecom
policy
¾ Strive to provide a balance between the provision of universal service
to all uncovered areas, including the rural areas, and the provision of high level services
capable of meeting the needs of the country’s economy
¾ Encourage development of telecommunication facilities in remote, hilly and tribal
areas of the country
¾ Create a modern and efficient telecommunications infrastructure
taking into account the convergence of IT, media, telecom and consumer electronics
and thereby propel India into becoming an IT superpower
¾ Convert PCOs, wherever justified, into Public Teleinfo centres
having multimedia capability like ISDN services, remote database access, government
and community information systems etc
¾ Transform in a time bound manner, the telecommunications sector to a
greater competitive environment in both urban and rural areas providing equal
opportunities and level playing field for all players
¾ Strengthen research and development efforts in the country and
provide an impetus to build world class manufacturing capabilities
¾ Achieve efficiency and transparency in spectrum management
¾ Protect defense and security interests of the country
20
5.3 TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

(TDSAT)
With a view to further strengthen the regulator the TRAI Act, 1997 was amended in the
year 2000 and a separate body viz., The Telecom Dispute Settlement and Appellate
Tribunal (TDSAT) was constituted for resolution of disputes in Telecom Sector. The
appellate tribunal consists of a chairperson and two members appointed by the Indian
Parliament. The selection of Chairperson and members of the Appellate tribunal is made
by the Central Government in consultation with the Chief Justice of India.
The TDSAT is empowered to adjudicate any dispute between:

¾ Licensor and a Licensee.
¾ Two or more Service Providers.
¾ A Service Provider and a Group of Consumers.
5.4 CELLULAR OPERATORS ASSOCIATION OF INDIA (COAI)
The Cellular Operators Association of India (COAI) was constituted in 1995 as a

registered, nonprofit, nongovernmental society dedicated to the advancement of
communication, particularly modern communication through Cellular Mobile Telephone
Services.
With a vision to establish and sustain a world-class cellular infrastructure and facilitate
affordable mobile communication services in India, COAI’ main objectives are to protect
the common & collective interests of its members. Keeping the mandate given to it,
COAI is the official voice for the Indian Cellular industry and on its behalf it interacts
with: the policy maker, the licensor, the regulator, the spectrum management agency and
the industry (telecom / nontelecom) associations.
21
6. COMPANY ANALYSIS
6.1 ABOUT THE COMPANY
Company Profile
Bharti Airtel is one of India's leading private sector providers of telecommunications
services based on an aggregate of 48,853,758 customers as on August 31, 2007,
consisting of 46,814,745 GSM mobile and 2,039,013 broadband & telephone customers.
The businesses at Bharti Airtel have been structured into three individual strategic
business units (SBU’s) - mobile services, broadband & telephone services (B&T) &
enterprise services. The mobile services group provides GSM mobile services across
India in 23 telecom circles, while the B&T business group provides broadband &
telephone services in 94 cities. The enterprise services group has two sub-units - carriers
(long distance services) and services to corporates. All these services are provided under
the Airtel brand.
Company shares are listed on The Stock Exchange, Mumbai (BSE) and The National
Stock Exchange of India Limited (NSE).
Vision & Promise

By 2010 Airtel will be the most admired brand in India:
¾ Loved by more customers
¾ Targeted by top talent
¾ Benchmarked by more business
22
Company History
Bharti Tele-Ventures was incorporated on July 7, 1995 as a company with limited
liability under the Companies Act, for promoting telecommunications services. Bharti
Tele-Ventures received certificate for commencement of business on January 18, 1996.
The Company was initially formed as a wholly-owned subsidiary of Bharti Telecom
Limited. The chronology of events since Bharti Tele-Ventures was incorporated in 1995
is as follows:
Calendar year & Events
1995
Bharti Cellular launched cellular services 'AirTel' in Delhi
1997
British Telecom acquired a 21.05% equity interest in Bharti Cellular
1998
Bharti Telecom and British Telecom formed a 51%: 49% joint venture, Bharti
BT Internet for providing Internet services
2002
Comes out with issue of 18.53 crore equity shares through book building route
with a floor price of Rs 45 per share, received bid for 18.55 crore shares. Through
the issue, it becomes the first company in India to come out with 100% book
building issue
2004
Bharti Tele-Ventures enters into a three year service agreement with Ericsson
2005
Bharti inks $125-m deal with Nokia for rural network expansion
Bharti Tele Ventures announces agreement with Vodafone
2007
Bharti Airtel, telecom major, has come out with a slew of initiatives including
buying out SingTel's 50 per cent stake in joint venture under sea cable company
Network i2i for $110 million.
23
Organization Structure
24
Awards and Recognition

¾ Wireless service provider of the year 2005 at the Frost and Sulivan Asia- Pacific
ICT awards
¾ Competitive service provider of the year 2005 at the Frost and Sulivan Asia- Pacific
ICT awards
¾ The Forbes Global 2000 list for the year 2007 ranked Bharti at 1149
Market Performance
Market Capitalization (as on July 13, 2007)
Approx. Rs. 1,670 billion Closing BSE share price = Rs. 880.75
¾ Sales : $2.62 Billion
¾ Profits : $0.46 Billion
¾ Assets : $4.46 Billion
¾ Market Value : $41 Billion
Highlights for Full Year ended March 31, 2007

¾ Overall customer base crosses 3.9 crore.
¾ Highest ever-net addition of 1.8 crore customers in a year.
¾ Market leader with a market share of all India wireless subscribers at 22.9% (20.4%
last year)
¾ Total Revenues of Rs. 18,520 crore (up 59% Y-o-Y)
¾ EBITDA of Rs. 7,451 crore (up 72% Y-o-Y).
¾ Cash Profit of Rs. 7,307 crore (up 79% Y-o-Y).
¾ Net Profit of Rs. 4,257 crore (up 89% Y-o-Y).
25
In News:
¾ Recently Sunil Bharti's Airtel launched its calling card in America especially for the
NRI (Non-resident Indians) and people calling from America to India at a cheaper rate
as compared to the tariff offered by other providers.
¾ On February 12, 2007 Vodafone sold its 5.6% stake in AirTel back to AirTel for
US $1.6 billion; and purchased a controlling stake in rival Hutchison Essar.
¾ In its monthly press release, following statistics have been presented for end of
April 2007.
¾ Bharti Airtel added the highest ever net addition of 53 lakh customers in a single
quarter (Q4-FY0607) and also the highest ever net addition of 1.8 crore total
subscribers in 2006-07
¾ The company will invest up to $3.5 billion this fiscal (07-08) in network
expansion.
¾ It has an installed base of 40,000 cellsites and 59% population coverage
¾ After the proposed network expansion, an additional 30,000 towers will result in the
company achieving 70% population coverage
¾ Bharti has over 39 million users as on March 31, 2007
¾ It has set a target of 125 million subscribers by 2010
¾ Prepaid customers account for 88.5% of Bharti’s total subscriber base, an increase
from 82.7% a year ago
¾ ARPU has dropped to Rs 406
¾ Non-voice revenues, (SMS, voice mail, call management, hello tunes and Airtel
Live) constituted 10% of total revenues during Q4, lower than 10.7% in the Q4 of the
previous year
¾ Blended monthly minutes of usage per customer in Q4 was at 475 minutes
¾ Has completed 100% verification of its subscribers and in the process
disconnected three lakh subscribers
26
6.2 CAPITAL STRUCTURE OF BHARTI-AIRTEL
1. Capital
The capital structure of Bharti-Airtel is explained below:
(In ‘000 Rs.) 2007 2006 2005

Authorised Capital 25,000,000 25,000,000 25,000,000
Issued Capital 18,959,342 18,938,793 18,533,668
Paid up Capital 18,959,342 18,938,793 18,533,668
Share-holding Pattern:
% of share holding
25.05%
45.48% Promoter holding

Institutional
investor Others
29.47%
2. Nominal Value of Capital
• Face Value – The face value of shares remains constant at Rs. 10 throughout
this period.
• Change in Face value- There is no change in the face value.
27
3. Issue Price of shares
Share Premium
The Share premium at the beginning of financial year 2005 is Rs. 31,254,879,000. It
changed to Rs. 38,754,546,000 by the end of the financial year and to Rs. 39,259,225,000
at the end of financial year 2006. While no new shares were issued the change is due to
other reasons which are illustrated below.
4. Dividend Distribution
For the year ending 2005-2006

The directors believe that there are tremendous growth opportunities available to the
telecom sector and the Company should leverage these by further expanding and
strengthening its existing network. This will enhance shareholder value in the long-term.
Accordingly, the directors did not recommend any dividend for the year ended March 31,
2006, in view of the proposed investments in network expansion and operations.
However this does not explain the change in share capital. The change in share capital
can be explained by the following:
¾ The Company allotted 2,722,125 Equity Shares of Rs. 10/- each upon merger of
Bharti Cellular Limited (BCL) into the Company. During the year the Company allotted
18,242,237 equity shares upon conversion of Foreign Currency Convertible
Bonds (FCCBs) by their holders.
¾ During the year ended March 31, 2006 the Company had also issued 20,088,445
equity shares of Rs. 10/- each fully paid up to M/s. Shyam Cellular Infrastructures Projects
Limited upon conversion of Optionally Convertible Redeemable
Debentures (OCRDs).
28
For the year ending 2006-2007
The company did not declare any dividends because of the reasons as mentioned
previously. But during the year,
¾ The Company allotted 165400 equity shares on exercise of stock options to the
employees of the company under the Company’s ESOP Scheme 2005.
¾ The Company also allotted 1889453 equity shares upon conversion of Foreign
Currency Convertible Bonds (FCCBs) by their holders.
Due to these the corporate actions, the issued, subscribed and paid-up equity share capital
increased from 1,893,879,304 (March 31, 2006) to 1,895,934,157 equity shares as of
March 31, 2007.
5. Rights Issue
No rights issue was brought out for the period 2005-2007.
6. Market Capitalisation
st
The company had a market capitalization of over Rs. 760 billion for the year ending 31
st
March 2006 and was among the top 10 listed entities in India. For the year ending 31
March 2007, the Company had a market capitalisation of USD 38 bn and is among the
top 5 listed entities in India.
29
7. MV/BV Ratio
st st st
31 March 2007 31 March 2006 31 March 2005
Capital +Reserves 1,148,883,838,000 73,623,863,000 53,200,292,000

(in Rs) (A)
No. Of Equity 1,895,934,157 1, 893,879,304 1,853,366,767
Shares(B)
Book Value(BV) 60.59 38.87 28.70
= A/B
Market 730.60 412.85 206.85
Value(MV)
MV/BV 12.05 10.62 7.21
Thus we see that the MV/BV ratio has shown a positive increase over the period
considered.
6.3 FINANCIAL STATEMENTS
Consolidated Balance Sheet

All Figures in ‘000
2007 2006 2005
Capital 19,259,346 19,060,053 18,560,889

Reserves 95,173,342 54,395,531 34,639,403
LTL 55,474,673 49,853,367 50,951,920
CL 98,446,711 66,991,634 43,199,744
Total 268,354,072 190,300,585 147,351,956
Fixed Assets 216,814,497 153,481,269 107,594,459

Investments 7,058,179 7,196,981 9,318,953
CA 44,454,766 29,622,335 30,438,533
Total 268,327,442 190,300,585 147,351,945
30
Consolidated Income Statement

2007 2006 2005
Sales 177,944,343 112,905,793 79,441,940

COGS 220,849 674,043 721,037
Operating
Expenses 105,121,756 71,445,970 48,780,762
Depreciation 23,533,010 14,323,385 10,193,626
PBIT 43,455,272 25,113,966 18,101,946
Interest 2,558,440 2,256,011 2,459,184
PBT 46,013,712 22,857,955 15,642,762
Tax 6,055,561 2,737,160 3,536,023
PAT 40,332,265 20,120,794 12,106,739
Consolidated Cash Flow Statement

2007 2006 2005
Opening CIH 3,074,285 3,841,352 1,316,310
CFF 3,401,320 3,763,474 -4,230,893

CFI -79,750,547 -50,843,891 -23,303,010
CFO 81,079,547 46,313,349 30,058,945
Closing CIH 7,804,605 3,074,284 3,841,352
31
6.4 ACCOUNTING POLICIES
1. BASIS OF PREPARATION
These financial statements have been prepared under the historical cost convention on the
accrual basis of accounting, in accordance with the generally accepted accounting
principles in India and the provisions of the Companies Act, 1956 as adopted consistently
by the Company.
2. FIXED ASSETS
Fixed Assets are stated at cost of acquisition and subsequent improvements thereto,
including taxes, duties, freight and other incidental expenses related to acquisition and
installation. Capital work-in-progress is stated at cost. Site restoration cost obligations are
capitalized when it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate of the amount can be made. The fixed component of
license fee payable by the Company for cellular and basic circles, upon migration to the
National Telecom Policy (NTP 999), i.e. Entry Fee and the one time license fee paid by
the Company for acquiring new licenses (post NTP-99) has been capitalized as an asset.
3. DEPRECIATION / AMORTISATION
Depreciation is provided on straight-line method at the rates and in the manner prescribed
in Schedule XIV to the Companies Act, 1956 on all assets, except for the following on
which depreciation is provided on straight line method to write off the cost of the fixed
assets over their estimated useful lives as below:
Useful lives
Building 20 years
Building on Leased Land 20 years
32
Office Equipment 5 years/2 years

Computer / Software 3 years
Vehicles 5 years
Furniture and Fixtures 5 years
Plant & Machinery 3 years / 5 years/ 10 years / 15 years
Leasehold Land Period of lease
Leasehold Improvements Period of lease or 10 years whichever is less
Software up to Rs. 500,000 is written off in the year placed in service. Bandwidth
capacity is amortized over the period of the agreement subject to a maximum of 15 years.
Additional depreciation is provided as appropriate, towards diminution in value of assets.

The Entry Fee capitalised is being amortised equally over the period of the license and
the one time licence fee is being amortized equally over the balance period of licence
from the date of commencement of commercial operations.
The site restoration cost obligation capitalized is being depreciated over the period of the
useful life of the related asset.
4. REVENUE RECOGNITION AND RECEIVABLES
Mobile Services: Service revenue is recognised on completion of provision of services.

Service revenue includes income on roaming commission and access charges passed on
to other operators, and are net of discounts and waivers. Revenue, net of discount, from
sale of goods is recognised on transfer of all significant risks and rewards to the customer
and when no significant uncertainty exists regarding realisation of the consideration.
Processing fees on recharge coupon is being recognised over the estimated customer
relationship period or coupon validity period, as applicable.
Telephone and Broadband and Enterprise Services Carriers
33
Service revenue is recognised on completion of provision of services. Revenue on

account of bandwidth service is recognised on time proportion basis in accordance with
the related contracts. Service Revenue includes access charges passed on to other
operators, and is net of discounts and waivers. Revenue, net of discount, from sale of
goods is recognized on transfer of all significant risks and rewards to the customer and
when no significant uncertainty exists regarding realisation of consideration.
Enterprise Services Corporate

Revenue, net of discount, from sale of goods is recognised on transfer of all significant
risks and rewards to the customer and when no significant uncertainty exists regarding
realisation of consideration.105 Service Revenues includes revenues from registration,
installation and provision of Internet and Satellite services. Registration fees is
recognised at the time of dispatch and invoicing of Start up Kits. Installation charges are
recognised as revenue on satisfactory completion of installation of hardware and service
revenue is recognized from the date of satisfactory installation of equipment and software
at the customer site and provisioning of Internet and Satellite services. Revenue from
prepaid dialup packs is recognised on the actual usage basis and is net of sales return and
discount.
Activation Income
Activation revenue and related direct activation costs, not exceeding the activation
revenue, are deferred and amortized over the related estimated customers relationship
period, as derived from the estimated customer churn period.
Investing and other activities

Income on account of interest and other activities are recognised on an accrual basis.
Dividends are accounted for when the right to receive the payment is established.
Provision for doubtful debts

The Company provides for amounts outstanding for more than 90 days in case of active
subscribers and for all amounts outstanding from customers who have been deactivated
34
as reduced by security deposits or in specific cases where management is of the view that
the amounts are not recoverable. For receivables due from the other operators on account
of their NLD and ILD traffic, IUC and roaming charges, the Company provides for
amounts outstanding for more than 120 days from the date of billing net of any amounts
payable to the operators or in specific cases where management is of the view that the
amounts are not recoverable.
5. INVENTORIES
Inventories are valued at the lower of cost and net realisable value. Cost is determined on
First in First out basis.
6. INVESTMENT
Current Investments are valued at lower of cost and fair market value. Long term
Investments are valued at cost. Provision is made for diminution in value to recognise a
decline, if any, other than that of temporary nature.
7. LEASES
a) Operating Lease
Lease rentals in respect of assets taken on 'Operating Lease' are charged to the Profit and
Loss Account on a straight-line basis over the lease term.
b) Finance Lease
Assets acquired on 'Finance Lease' which transfer risk and rewards of ownership to the
Company are capitalized as assets by the Company at the present value of the related
lease payments Amortization of capitalized leased assets is computed on the Straight Line
method over the useful life of the assets. The finance charge is allocated over the lease
term so as to produce a constant periodic rate of interest on the remaining balance of
liability.
35
8. TAXATION
Tax expense for the period, comprising current tax, deferred tax and fringe benefit tax is
included in determining the net profit/ (loss) for the period. Deferred tax assets are
recognised for all deductible timing differences and carried forward to the extent there is
reasonable certainty that sufficient future taxable profit will be available against which
such deferred tax assets can be realised. Deferred tax is not recognized for such timing
differences which reverse during tax holiday period. Deferred tax assets to the extent they
pertain to brought forward losses and unabsorbed depreciation, are recognized only to the
extent that there is virtual certainty of realisation, based on expected profitability in the
future as estimated by the Company. Deferred tax assets and liabilities are measured at
the tax rates that have been enacted or substantively enacted by the balance sheet date.
9. BORROWING COST
Borrowing cost attributable to the acquisition or construction of a qualifying asset is

capitalised as part of the cost of that asset. Other borrowing costs are recognised as an
expense in the period in which they are incurred.
10. IMPAIRMENT OF ASSETS
Assets that are subject to amortization are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the assets' carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of the assets' fair
value less costs to sell and value in use. For the purpose of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units).
36
11. EARNING PER SHARE
The earnings considered in ascertaining the Company's Earnings per Share ('EPS')
comprise the net profit after tax. The number of shares used in computing basic EPS is
the weighted average number of shares outstanding during the year. The diluted EPS is
calculated on the same basis as basic EPS, after adjusting for the effects of potential
dilutive equity shares unless impact is anti dilutive.
12. PROVISIONS
Provisions are recognised when the Company has a present obligation as a result of past
events; it is more likely than not that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated.
37
7. Ratio Analysis
Various Financial Ratio Analysis are used to analyse the financial performance of Bharti
Airtel Ltd. Its performance is also compared against BSNL and VSNL for 3 years from
2005 to 2007. Since the financial figures of BSNL was not available for the year 2006-
2007, so we tracked back a year and showed its figures for the year 2003-2004.
7.1 LIQUIDITY RATIOS

Liquidity ratios help in determining the ability of a firm to meet its short term obligations.
7.1.1 Current Ratio

Current Ratio = Current Asset / Current Liability
It is a simple guide to the ability of a company to meet its short term obligations. The
current ratio is a good diagnostic tool as it measures whether or not your business has
enough resources to pay its bills over the next 12 months. Higher the ratio higher is the
liquidity.
Current Ratios
2.5
2
Current Ratio
1.5 Bharti Airtel Ltd

VSNL
1
BSNL
0.5
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Current Ratio 2003-2004 2004-2005 2005-2006 2006-2007

Bharti Airtel Ltd - 0.70 0.44 0.45
VSNL - 1.99 1.32 1.25
BSNL 1.36 1.79 2.02 NA
38
The current ratio of Bharti Airtel Ltd has consistently remained less than 1. So its current
liability is greater than the current assets which implies that its short term liquidity
requirements might be financed by long term sources. In comparison, the current ratios of
VSNL and BSNL are better.
7.1.2 Liquid Ratio

Liquid Ratio = (Current Asset – Inventory) / Current Liability
A better approach to measure the ability of a company to meet its short term liability is
by excluding the inventory from the current asset. This is done because it is unlikely to
turn inventory to cash immediately. It is thus a measure of how quickly a company’s
asset can be converted to cash. This ratio is also called the acid test and quick ratio.
Liquid Ratios
2.5
2
Liquid Ratio

VSNL
1
BSNL
0.5
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Liquid Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 1.98 1.31 1.25
BSNL 1.24 1.69 1.91 NA
Since the companies are all service oriented, they do not have inventories and hence the
liquid ratios are almost similar to the current ratios calculated above. The liquid ratio of
39
Bharti Airtel Ltd is well below 0.5 which indicates that it is able to meet only half of the
current obligations from its current assets. The liquid ratios of VSNL and BSNL are
much healthier than Bharti Airtel Ltd.
7.1.3 Absolute Cash Ratio

Absolute Cash Ratio = (Cash + Near Cash Items) / Current Ratio
This ratio is still better in calculating the liquidity as it does not take into the debts in the
current asset.
Absolute Cash Ratios
1.4
1.2
Absolute Cash Ratio
1
VSNL
0.6
BSNL
0.4
0.2
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Absolute Current Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 0.08 0.06 0.14
BSNL 0.58 1 1.22 NA
Absolute Current Ratio is very low for Bharti Airtel Ltd and VSNL. This shows that very
little cash reserve is being maintained to meet the short term obligations.
7.1.4 Debtor Days

Debtor Days = Debtors / Sales per day
This ratio measures the number of times that receivables turn over during the year. The
lower the turnover of receivables, the shorter the time between sale and cash collection. If
40
a company's debtor days is significantly higher than industry norms, the underlying
reason (poor collection methods, high risk customers, low sales) needs to be pinpointed.
Debtor Days measures the average time in days that receivables are outstanding. The
higher the number of days outstanding, the greater the collection risk. Debtor days may
suggest a concern over credit control and collections
Debtor Days
90
80
70
Debtor days
60
Bharti Airtel Ltd
50
40 VSNL
30 BSNL
20
10
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Debtor Days 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 57.30 67.14 81.96
BSNL 42.82 67.12 57.25 NA
The Debtor days for Bharti Airtel Ltd has decreased over the last year. In a year credit
sales takes place only for 29 days and it is much lower as compared to its competitors
thus indicating it has healthy debt collection practices.
7.1.5 Creditor Days

Creditor Days = Creditors / Purchase of goods per day
This ratio measures the number of times that Accounts Payable turns over during the year
relative to the Sales. Lower turnover rates suggest a shorter time period between purchase
41
and payment. Higher than industry rates may suggest cash shortages, or expansion of
trade credit. Creditor days tells the average length of time trade debt is outstanding.
Creditor Days 2003-2004 2004-2005 2005-2006 2006-2007

Creditor days for VSNL and BSNL could not be calculated because COGS is not
available for them. Bharti Airtel Ltd follows a trend of increasing Creditor days thus
indicating it takes longer to pay to its creditors. In a year it makes purchases on credit for
133 days.
7.1.6 Inventory Days

Inventory Days = Inventory / COGS per day
A financial measure of a company's performance that gives an idea of how long it takes a
company to turn its inventory into sales. Generally, the lower (shorter) the Inventory days
the better, but it is important to note that the average varies from one industry to another.
Inventory Days 2003-2004 2004-2005 2005-2006 2006-2007

Inventory days for VSNL and BSNL could not be calculated because COGS is not
available for them. Bharti Airtel Ltd being a telecom service based company has very
little inventory. In 2006-2007 the inventories were doubled but the COGS were halved.
7.2 SOLVENCY RATIOS

It’s the company’s ability to meet its long term obligations. Also called the capital
structure it is one of the major financing decisions for the company. A proper mix of debt
and equity is said to be always beneficial for the company rather than pure equity.
Existence of debt disciplines the management to some extent.
42
7.2.1 Debt Ratio

Debt Ratio = Debt / Total Assets
This ratio shows how much the business is in debt, making it a good way to check the
business’s long-term solvency. The lower the debt ratio, the less total debt the business
has in comparison to its asset base. On the other hand, businesses with high debt ratios
are in danger of becoming insolvent and/or going bankrupt.
Debt Ratios
0.4
0.35
0.3
Debt Ratio

0.2 VSNL
0.15 BSNL
0.1
0.05
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Debt Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 0.01 0.02 0.03
BSNL 0.14 0.11 0.08 NA
The Debt ratio of Bharti Airtel Ltd is higher as compared to VSNL and BSNL but it has a
decreasing trend over the past 3 years and is at a healthy level.
7.2.2 Equity Ratio

Equity Ratio = Equity / Total Assets
It helps in determining the extent of funding from equity channel.
43
Equity Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 0.75 0.75 0.75
BSNL 0.66 0.69 0.7 NA
Bharti Airtel Ltd uses a good mix of Reserves, Equities and Debts to fund its business.
7.2.3 Debt to Equity Ratio

Debt to Equity Ratio = Debt / Equity
The debt to equity ratio is a financial ratio indicating the relative proportion of equity and
debt used to finance a company's assets. It is considered to be a good practice to use both
Debt (financial leverage) and Equities to finance the assets.
44
Debt Equity Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 0.01 0.03 0.04
BSNL 0.21 0.16 0.11 NA
Bharti Airtel Ltd has reduced the Debt to Equity ratio consistently. This is because of the
company is reinvesting the Profits into the business. This shows the strong confidence on
the future outlook of the business.
7.2.4 Interest Coverage Ratio

Interest Coverage Ratio = PBIT / Interest Expense
A ratio used to determine how easily a company can pay interest on outstanding debt.
The lower the ratio, the more the company is burdened by debt expense. When a
company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may
be questionable. An interest coverage ratio below 1 indicates the company is not
generating sufficient revenues to satisfy interest expenses.
45
Interest Coverage Ratio 2003-2004 2004-2005 2005-2006 2006-2007

BSNL 10.29 271.4 8.75 NA
The Interest Coverage Ratio of VSNL is not shown because its interest expense is very
low as compared to its PBIT. Bharti Airtel Ltd has healthy Interest Coverage Ratio
because of increased profits.
7.2.5 Debt Service Coverage Ratio

DSCR = PBIT / Total Debt Service
It is the amount of cash flow available to meet annual interest and principal payments on
debt. Debt service coverage ratio is used by financial lenders as a rule of thumb to give a
preliminary assessment of whether a potential borrower is already in too much debt.
More specifically, this ratio shows the proportion of income that is already spent on loan
service payments.
DSCR 2004-2005 2005-2006 2006-2007

Bharti Airtel Ltd 1.16 0.68 0.91
VSNL 16.72 5.21 7.35
DSCR of BSNL could not be calculated since the loan repayments were not available.
DSCR of Bharti Airtel Ltd is low because of the high loan repayments. The Long term
loans are increasing every year and are being used for funding expansion plans. There is
consequently a higher repayment of loans every year.
46
7.3 PROFITABILITY RATIOS
Profitability ratios are used to analyse the profitability of the company. Different
stakeholders will have different perspective on the profitability ratios.
Shareholders: They may be concerned about the ability of the company to maintain and
improve the value of their investments. They look to the company to generate sufficient
profits for dividend payments and increase in market value of the shares they own.
Lenders: They will be interested to see whether the company has the ability to pay the
interests of the debts.
Management and employees: They will be interested in knowing the performance of the
company and its future outlook and profitability gives a good idea about the same.
7.3.1 Gross Profit (PBDITA) / Sales Ratio

Gross Profit / Sales = Profit before Depreciation Interest Tax and Amortisation / Sales
This ratio helps in determining extent to which the sales are greater than the operating
expenses.
47
Gross Profit/Sales Ratio 2003-2004 2004-2005 2005-2006 2006-2007

Bharti Airtel Ltd - 35.62% 34.93% 37.65%
VSNL - 33.46% 26.13% 26.11%
BSNL 55.89% 48.70% 47.08% NA
The gross profit for Bharti Airtel Ltd has improved as compared to the last year. The
profitability is extremely good as it is sustained with growing sales.
7.3.2 Operating Profit (PBIT) / Sales Ratio

Operating profit / Sales = Profit before Interest Tax / Sales
Operating profit is obtained by deducting the Depreciation and Amortisation from Gross
profit.
Operating Profit / Sales Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 27.17% 17.17% 16.91%
BSNL 26.78% 22.03% 23.74% NA
48
The Operating profit of Bharti Airtel has improved over last years. The depreciation has
more than doubled over last 2 years because of increase in Assets but the sales has
increase in sales has ensured a healthy profit.
7.3.3 Net Profit (PAT) / Sales Ratio

Net Profit / Sales = Profit After Tax / Ratio
Net profit is obtained by deducting the Tax from the operating profit. This is finally the
profit that the company gets to earn after incurring all kinds of expenses.
PAT/Sales Ratios
0.3
0.25
PAT/Sales Ratio

0.15 VSNL
0.1 BSNL
0.05
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Net Profit / Sales Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 19.50% 11.96% 11.01%
BSNL 17.62% 28.22% 22.25% NA
The PAT of Bharti Airtel Ltd has significantly improved in the last year. This is
significant especially when the call tariffs are reducing. Increase in sales is the main
contributing factor for increase in profits.
49
7.4 RETURN ON INVESTMENT

Return on Investment shows the profits earned from investments in different perspective
like Networth, Capital employed and Total assets.
7.4.1 RONW
RONW = PAT / (Capital + Reserve)
This is the best measure of profitability to evaluate overall return. This ratio measures
return relative to investment in the company. Return on Net Worth indicates how well a
company leverages the investment in it.
RONW 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 13.00% 8.00% 7.00%
BSNL 9.00% 14.00% 11.00% NA
RONW for Bharti Airtel Ltd. is much higher as compared to its competitors. This is
mainly because the company finances its future investments from its own profits and the
PAT has increased by 233% over last 2 years.
50
7.4.2 ROCE
ROCE = PBIT / (Capital + Reserve + Long Term Liability)
ROCE should always be higher than the rate at which the company borrows, otherwise
any increase in borrowing will reduce shareholders' earnings.
ROCE
0.3
0.25

ROCE
0.15 VSNL
0.1 BSNL
0.05
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
ROCE 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 18.00% 11.00% 11.00%
BSNL 12.00% 9.00% 11.00% NA
Bharti Airtel Ltd’s ROCE is much higher than the borrowing rate which is around 10%.
So the shareholders’ earnings are not reduced.
7.4.3 ROTA
ROTA = PBIT / Total Assets
A ratio that measures a company's profits before interest and taxes (PBIT) against its total
assets. The ratio is considered an indicator of how effectively a company is using its
assets to generate earnings before contractual obligations must be paid.
The greater a company's profits in proportion to its assets, the more effectively that
company is said to be using its assets.
51
ROTA
0.18
0.16
0.14
0.12
Bharti Airtel Ltd
ROTA
0.1
VSNL
0.06 BSNL
0.04
0.02
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
ROTA 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 0.14 0.09 0.08
BSNL 0.09 0.07 0.08 NA
Bharti Airtel has the highest ROTA as compared to its competitors which indicates that it
uses its assets most efficiently. Another positive is that it’s constantly in an increasing
trend.
7.4.4 EPS
EPS = PAT / No of shares
The portion of a company's profit allocated to each outstanding share of common stock.
EPS serves as an indicator of a company's profitability.
Earnings per share is generally considered to be the single most important variable in
determining a share's price.
An important aspect of EPS is that the capital that is required to generate the earnings
(net income) in the calculation is often ignored. Two companies could generate the same
EPS number, but one could do so with less equity (investment) - that company would be
52
more efficient at using its capital to generate income and, all other things being equal,
would be a "better" company. Investors also need to be aware of earnings manipulation
that will affect the quality of the earnings number. It is therefore important not to rely on
any one financial measure, but to use it in conjunction with statement analysis and other
measures.
Earnings per Share
30
Earnings per Share (Rs)
25
20 Bharti Airtel Ltd

15 VSNL
10 BSNL
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
EPS 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 26.54 16.83 16.44
BSNL 4.78 8.15 7.15 NA
The EPS for Bharti Airtel Ltd has significantly increased as compared to the last year.
This is because of the doubling of the profits in just 1 year. Since ROTA of Bharti Airtel
Ltd is also higher as compared to its competitors so it is most efficient and profitable of
the three companies.
7.5 EFFICIENCY RATIOS
7.5.1 Total Assets Turnover Ratio

Total Assets Turnover Ratio = Sales / Total Assets
53
This ratio tells us how efficiently the company uses its assets to generate sales.
Total Assets Turnover Ratios
0.7
Total Assets Turnover Ratio
0.6
0.5
VSNL
0.3
BSNL
0.2
0.1
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Total Assets Turnover Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 0.51 0.5 0.5
BSNL 0.35 0.34 0.35 NA
The above ratios indicate that Bharti Airtel Ltd is the most efficient in generating sales.
This ratio has consistently increased over the last 3 years.
7.5.2 Debt Turnover Ratio

Debt Turnover Ratio = Sales / Debt
This ratio would be of greater significance to the lenders as it indicates how sales of a
company against the debts.
54
Debt Turnover Ratios
45
40
Debt Turnover Ratio
35
30
Bharti Airtel Ltd
25
VSNL
15 BSNL
10
5
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Debt Turnover Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 38.92 23.13 15.8
BSNL 2.6 3.2 4.47 NA
Bharti Airtel Ltd has been able to increase its Debt Turnover ratio due to sharp increase
in its sales as compared to its borrowings.
7.5.3 Fixed Asset Turnover

Fixed Asset Turnover Ratio = Sales / Fixed Assets
This ratio gives an indication of how efficiently a company uses its fixed assets in doing
its business.
55
Fixed Assets Turnover Ratios
1.6
Fixed Assets Turnover Ratio
1.4
1.2
1 Bharti Airtel Ltd
0.8 VSNL
0.6 BSNL
0.4
0.2
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Fixed Assets Turnover Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 1.36 1.27 1.22
BSNL 0.49 0.54 0.63 NA
Bharti Airtel Ltd has improved its Fixed Turnover ratio primarily by increasing its sales
as compared to the increase in Fixed assets. It’s more efficient in utilizing its Fixed assets
than BSNL but less as compared to VSNL.
7.5.4 Current Asset Turnover

Current Asset Turnover = Sales / Current Assets
56
Current Assets Turnover Ratios
4.5
Current Assets Turnover
4
3.5
3
Bharti Airtel Ltd
2.5
Ratio
VSNL
1.5 BSNL
1
0.5
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Current Assets Turnover Ratio 2003-2004 2004-2005 2005-2006 2006-2007

Bharti Airtel Ltd - 2.61 3.81 4
VSNL - 1.09 1.66 1.84
BSNL 1.24 0.92 0.8 NA
7.5.5 Inventory Turnover

Inventory Turnover = Sales / Inventory
This financial ratio measures the number of times inventory is turned over during the
year. High inventory turnover suggests good levels of liquidity. Conversely it can
indicate a shortage of needed inventory for sales. Low inventory turnover can indicate
poor liquidity, overstocking, or, more optimistically, a planned inventory buildup.
57
Inventory Turnover Ratios
2500
Inventory Turnover Ratio
2000
1500 Bharti Airtel Ltd

VSNL
1000
BSNL
500
0
2003-2004 2004-2005 2005-2006 2006-2007
Period
Inventory Turnover Ratio 2003-2004 2004-2005 2005-2006 2006-2007

VSNL - 1974.03 1055.19 901.27
BSNL 14.47 16.07 14.4 NA
Since the three companies are in Telecom Service providers so they do not maintain a
high inventory. This is the reason why the inventory ratios are very high for Bharti Airtel
Ltd and VSNL.
58
8. DUPONT ANALYSIS
Financial statement analysis is employed for a variety of reasons. Outside investors are
seeking information as to the long run viability of a business and its prospects for
providing an adequate return in consideration of the risks being taken. Creditors desire to
know whether a potential borrower or customer can service loans being made. Internal
analysts and management utilize financial statement analysis as a means to monitor the
outcome of policy decisions, predict future performance targets, develop investment
strategies, and assess capital needs. As the role of the credit manager is expanded cross-
functionally, he or she may be required to answer the call to conduct financial statement
analysis under any of these circumstances. The DuPont ratio is a useful tool in providing
both an overview and a focus for such analysis
A comprehensive financial statement analysis will provide insights as to a firm's

performance and/or standing in the areas of liquidity, leverage, operating efficiency and
profitability. A complete analysis will involve both time series and cross-sectional
perspectives. Time series analysis will examine trends using the firm's own performance
as a benchmark. Cross sectional analysis will augment the process by using external
performance benchmarks for comparison purposes. Every meaningful analysis will begin
with a qualitative inquiry as to the strategy and policies of the subject company, creating
a context for the investigation. Next, goals and objectives of the analysis will be
established, providing a basis for interpreting the results. The DuPont ratio can be used as
a compass in this process by directing the analyst toward significant areas of strength and
weakness evident in the financial statements.
ROCE = (PBIT/Sales) X (Sales/Total Assets) X (Total Assets/Capital Employed)
The ratio provides measures in three of the four key areas of analysis, each representing a
compass bearing, pointing the way to the next stage of the investigation.
59
8.1 THE DUPONT RATIO DECOMPOSITION
The DuPont ratio is a good place to begin a financial statement analysis because it
measures the return on investment (ROI). A for-profit business exists to create wealth for
its owner(s). ROI is, therefore, arguably the most important of the key ratios, since it
indicates the rate at which owner wealth is increasing. While the DuPont analysis is not
an adequate replacement for detailed financial analysis, it provides an excellent snapshot
and starting point, as will be seen below.
The three components of the DuPont ratio, as represented in equation (1), cover the areas
of profitability, operating efficiency and leverage (liquidity analysis needs to be
conducted separately). Thus we will examine the meaning of each of these components
by calculating and comparing the DuPont ratio using the financial statements for Bharti
Airtel Ltd. We will be doing this by employing ROCE that is Return on Capital
Employed. Then carrying out decomposition we can study the finer implications.
8.1.1 Profitability: Net Profit Margin (NPM: PBIT/Sales)
Profitability ratios measure the rate at which either sales or capital is converted into
profits at different levels of the operation. The most common are gross, operating and net
profitability, which describe performance at different activity levels. Of the three, net
profitability is the most comprehensive since it uses the bottom line net income in its
measure.
8.1.2 Operating Efficiency or Asset Utilization: Total Asset Turnover

(Sales/Total Assets)
Turnover or efficiency ratios are important because they indicate how well the assets of a
firm are used to generate sales and/or cash. While profitability is important, it doesn't
always provide the complete picture of how well a company provides a product or
service. A company can be very profitable, but not too efficient. Profitability is based
60
upon accounting measures of sales revenue and costs. Such measures are generated using
the matching principle of accounting, which records revenue when earned and expenses
when incurred. Hence, the gross profit margin measures the difference between sales
revenue and the cost of goods actually sold during the accounting period. The goods sold
may be entirely different from the goods produced during that same period. Goods
produced but not sold will show up as inventory assets at the end of the year. A firm with
abnormally large inventory balances is not performing effectively, and the purpose of
efficiency ratios is to reveal that fact.
The total asset turnover ratio measures the degree to which a firm generates sales with its
total asset base. As in the case of net profitability, the most comprehensive measure of
performance in this particular area is being employed in the DuPont ratio (other measures
being fixed asset turnover, working capital turnover, and inventory and receivables
turnover). It is important to use average assets in the denominator to eliminate bias in the
ratio calculation.
8.1.3 Leverage: The Leverage Multiplier (Total Assets/Capital Employed)
Leverage ratios measure the extent to which a company relies on debt financing in its
capital structure. Debt is both beneficial and costly to a firm. The cost of debt is lower
than the cost of equity, an effect which is enhanced by the tax deductibility of interest
payments in contrast to taxable dividend payments and stock repurchases. If debt
proceeds are invested in projects which return more than the cost of debt, owners keep
the residual, and hence, the return on equity is "leveraged up." The debt sword, however,
cuts both ways. Adding debt creates a fixed payment required of the firm whether or not
it is earning an operating profit, and therefore, payments may cut into the equity base.
Further, the risk of the equity position is increased by the presence of debt holders having
a superior claim to the assets of the firm.
61
8.2 HIGHLIGHTS OF DUPONT ANALYSIS
Sound financial statement analysis is an integral part of the management process for any
organization. The DuPont ratio, while not the end in itself, is an excellent way to get a
quick snapshot view of the overall performance of a firm in three of the four critical areas
of ratio analysis, profitability, operating efficiency and leverage. By identifying strengths
and/or weaknesses in any of the three areas, the DuPont analysis enables the analyst to
quickly focus his or her detailed study on a particular spot, making the subsequent
inquiry both easier and more meaningful. Some caveats, however, are to be noted.
The DuPont ratio consists of very general measures, drawing from the broadest values on
the balance sheets and income statements (e.g., total assets are the broadest of asset
measures). A DuPont study is not a replacement for detailed, comprehensive analysis.
Further, there may be problems that the DuPont decomposition does not readily identify.
For example, an average outcome for net profitability may mask the existence of a low
gross margin combined with an abnormally high operating margin. Without looking at
the two detailed measures, understanding of the true performance of the firm would be
lost.
The ROCE first can be broken down into the three segments we already looked at. Then
each of these can be broken up further to study the finer details. Each component
comprises of several sub-components which give a complete holistic view of the
workings of a company comprising its investment, financing and operating decisions. A
proper decomposition is very important to actually pin-point the exact area which are out-
performing or underperforming, this analysis gives us a better idea as to where exactly is
the company lacking, is it something very superficial or fundamental. Thus all this can be
used to understand the future prospects as well its current efficiency.
Down below we have carried out the DuPont analysis for Bharti Airtel for three years.
The time-series analysis in terms of ratios has already been studied in the previous
segments, here we are focusing more on the finer implications of the ratios and seeing
how one derives from the other and finally where does it fit in the larger picture.
62
Return on Capital Employed

2007
ROCE
0.28
PBIT/Sales Sales/TA TA/CE

0.28 0.66 1.58
COGS/Sales Sales/FA Sales/CA TA/OF TA/LTL

0.0012 0.92 4 2.35 5.05
Oper Exp./Sales Sales/Stock TA/Capital

0.59 372.16 13.9
Salary/Sales Sales/Debtor TA/RS

0.07 12.54 2.82
Other exp/ Sales Sales/Cash

0.52 22.8
Dep/Sales
0.130
Amort/Sales
0.010
Implications:
As we can see from the above analysis, the company has decent profitability and
efficiency figures. Also one very interesting thing to note here is that the sales turnover
with relation to stock is pretty high, that tells us that the company does not maintain very
huge inventories. Also the sales as a proportion of debtors are also quite high, that could
also mean that the company is efficient enough in collecting its debt. And a large chunk
of its sales must comprise of cash sales.
Also if we see the break-up of the Sales/TA, we figure out that the Sales as a component
of CA is almost four times as compared to that of FA. This can mean that the proportion
of CA in comparison with FA is very less, which as we have seen earlier could be
attributed to low inventories and less credit sales.
63
Return on Capital Employed

2006
ROCE
0.19

0.22 0.37 2.46

0.006 0.74 3.81 4.13 6.08

0.63
636.29 15.9

0.071 10.49 5.57

0.56
36.73
Dep/Sales
0.127
Amort/Sales
0.011
Implications:
This year can be studied in relation to 2007. Doing that we note that in 2006 the sales as a
proportion of Stock was double of what it became in 2007. And the general trend of the
company, which was high reliance on current assets as compared to Fixed Assets, can be
very well traced from 2006 to 2007.
64
One thing to note here is the break-up of Total-assets as a function of Owner’s Fund. We
see that the TA/Capital ratio is almost triple of the TA/RS ratio. This means that the
owner’s fund comprises mainly of profits i.e. is reserves and surplus and that the capital
is almost thrice of the total reserves.
Return On Capital Employed

2005
ROCE
0.15

0.23 0.35 2.18

0.0091 0.74 2.61 4.26 4.45

0.61
251.53 12.2

0.065 11.1 6.55

0.55
20.68
Dep/Sales
0.128
Amort/Sales
0.015
65
Implications:
All the general trends which have been discussed in the DuPont Analysis of 2007 and
2006 were found to hold good for 2005 as well. Thus we can conclude that, all these have
been lasting trends and reflect the general working style of the company.
One thing we can highlight especially for this year is that, the COGS seems to form the
lowest composition of the total expenses as it has been observed that COGS as a
percentage of Sales is the least. This trend is also found in the subsequent years. We can
interpret it by having an integrated approach. If we study this ratio in relation with the
Sales/Stock ratio, we find that since the company maintains such a low inventory thus its
resulting COGS is also very small.
Also if we study the work-type of the company, it is basically a services based company,
thus it does not have a relevant COGS as part of its total expenses.
66
9. CASH FLOW ANALYSIS
Cash Flow Analysis
10,000.0
8,107.9
8,000.0
6,000.0 4,631.3
4,000.0 3,005.9
V a lu e (in c r o r
2,000.0 CFF
376.3 340.1
0.0 CFI
-2,000.0 -4232.1004-2005 2005-2006 2006-2007 CFO
-2,330.3
es)
-4,000.0
-6,000.0 -5,084.4
-8,000.0
-7,975.1
-10,000.0
Cash Flow in 2004-2005
The cash flow due to financing activities is negative. This is primarily due to interest paid
towards short-term borrowings. On the investment front, there is a net cash outflow. This
is primarily due to purchase of investments and certain fixed assets. A small proportion is
also due to license fee paid for new circles. A small percentage was also towards
acquisition of subsidiaries. The operating activities are generating good revenues. They
are able to meet the cash outflow required by investing & financing activities.
67
CFF
7%
CFF
CFI
CFO CFI CFO
53% 40%

The cash flow from financing activities becomes positive which was negative the
previous year. The biggest sucker of cash outflow was payments made towards long-term
borrowings. This was followed in close tandem by interest paid towards short-term
borrowings. There was substantial increase in investing activities. There was a quantum
jump in purchase of fixed assets. Since the company was going through a high-growth
phase huge investments were made by the company. However the company is able to
meet its financing activities with the cash generated from operating activities. This is a
good sign of the growth of the company.
68
CFF
4%
CFO
46% CFF
CFI
CFI CFO
50%

The cash flow from financing activities is positive again. But the overall percentage of
financing activities as a percentage of the overall cash has fallen down. The company is
surging ahead in purchase of fixed assets. There is lot of cash outflow towards purchase
of investments. High-growth periods demand high investments which mean high cash
outflows. For meeting its investing activities the company has good operating revenues.
This enables the company to utilize its current profits towards future growth.
CFF
2%
CFO
49% CFF
CFI
CFI CFO
49%
69
10. CALCULATION OF EVA
We have calculated the EVA of the company over the last 3 years. In 2006 due to the
huge surge in the stock markets the cost of equity became costly and this has led to the
negative EVA.
Rupees in '000 Rs.

2007 2006 2005
Interest rate(I) 0.0461 0.0453 0.0483

Tax ratio(t) 0.1316 0.1197 0.226
1-t 0.8684 0.8803 0.774
Cost of Debt,Kd=I*(1-t)
Risk free return(Rf) 0.04
7.46% 0.0399
7.46% 0.0374
7.46%
Beta(β) 1.09 1.09 1.09
Market opening in the new financial yr 11279.96 6492.82 5590.6
Market closing in the new financial yr 13072.1 11279.96 6492.82
Market Return(Rm) 0.1589 0.7373 0.1614
Cost Of Equity,Ke
=Rf+β(Rm-Rf) 0.1665 0.7969 0.1692
Debt 55474673 49853367 50951920
Equity 114432688 73455584 53200292
Capital Employed,CE 169907361 123308951 104152212
WaCC 0.1252 0.4908 0.1047
Capital Charge,CC=WaCC*CE 21272401.6 60520033.15 10904736.6
PAT 40,332,265 20120794 12,106,739

Interest 2558440 2,256,011 2,459,184
Tax Benefits 336690.704 270044.5167 555775.584
NOPAT 42,554,014 22,106,760 14,010,147
EVA=NOPAT-CC 21,281,613 -38,413,273 3,105,411
Note:
¾ Interest rate = Interest/Long-term liabilities
¾ Tax rate= Total tax/PBT
¾ Risk-free rate of return is the return offered for a 1 year government bond (T-Bill)
70
11. CONCLUSION
Based on the detailed analysis of Indian Telecom Industry, Bharti Airtel Limited and its
competitors we conclude the following regarding the financial health of Bharti Airtel
Limited:
Growth:
The company’s sales have grown over 70% CAGR in the last 2 years. It stands at Rs
17,794 Crores in 2007 up from Rs 7,944 Crores in 2005. Bharti Airtel Ltd is the market
leader in mobile phone services with over 22% market share in terms subscriber base.
With about 6 million mobile subscribers being added every month in India, the future
growth of Bharti Airtel Ltd looks very strong.
Profitability:
The PAT/Sales of the company stands at 22.67% in 2007 and has grown from 15.24% in
2005. In 2007, RONW stood at 35%, ROCE was 26% and ROTA was 16%. This
indicated the return on investment was extremely healthy. The EPS was Rs 21.27 in 2007
up from Rs 6.39 in 2005. All these parameters suggest that the company is achieving
increased levels of profitability in spite of massive growth.
Solvency:
The Debt Ratio has decreased from 0.35 in 2005 to 0.21 in 2007. The DER has also
decreased from 0.97 in 2005 to 0.49 in 2007. The Interest coverage ratio has improved
from 7.36 to 16.99 which is a positive sign. The Debt service coverage ratio however
stands at 0.91 in 2007 and needs improvement. The business expansion is being funded
more by the Profits rather than external borrowings.
Liquidity:
Liquidity is a cause of concern. Current Ratio and Liquid Ratio in 2007 stands at 0.45.
71
Absolute cash ratio is much less at 0.08. However the Debtor days are 29.10 which show
the debt collection practices of Bharti Airtel Ltd is much more effective as compared to
its competitors. The low liquidity could be attributed to the fact that the company invests
heavily in growth.
Efficiency:
Total Assets Turnover Ratio has increased from 0.54 in 2005 to 0.66 in 2007. Debt
Turnover Ratio, Fixed Assets Turnover Ratio and Current Assets Turnover Ratio have all
improved and are higher as compared to its competitors. This points that Bharti Airtel
Limited is more efficient in using its resources.
Overall the company has very strong fundamentals for future performance.
72
12. APPENDIX
Ratio Analysis
Bharti Airtel Ltd VSNL BSNL
2005 2006 2007 2005 2006 2007 2004 2005 2006
Current Ratio 0.7 0.44 0.45 1.99 1.32 1.25 1.36 1.79 2.02
Liquid Ratio 0.7 0.44 0.45 1.98 1.31 1.25 1.24 1.69 1.91
Absolute Current
Ratio 0.09 0.05 0.08 0.08 0.06 0.14 0.58 1 1.22
Inventory Days 159.88 96.09 790.24 NA NA NA NA NA NA
Debtor Days 32.89 34.79 29.1 57.3 67.14 81.96 42.82 67.12 57.25
Creditor Days 40.31 82.98 133.2 NA NA NA NA NA NA NA NA NA NA NA NA
WorkingCapital
Days 152.46 47.9 686.14
Debt Ratio 0.35 0.26 0.21 0.01 0.02 0.03 0.14 0.11 0.08
Equity Ratio 0.36 0.39 0.43 0.75 0.75 0.75 0.66 0.69 0.7
Debt Equity Ratio 0.97 0.67 0.49 0.01 0.03 0.04 0.21 0.16 0.11
Interest Coverage
Ratio 7.36 11.13 16.99 28798.33 382.51 104.13 10.29 271.4 8.75
Debt Service Ratio 1.16 0.68 0.91 16.72 5.21 7.35 NA NA NA
Operating
Profit/Sales (%) 35.62% 34.93% 37.65% 33.46% 26.13% 26.11% 55.89% 48.70% 47.08%
PBIT/Sales (%) 22.79% 22.24% 24.42% 27.17% 17.17% 16.91% 26.78% 22.03% 23.74%
PBDITA/Sales (%) 35.62% 34.93% 37.65% 33.46% 26.13% 26.11% 55.89% 48.70% 47.08%
PAT/Sales (%) 15.24% 17.82% 22.67% 19.50% 11.96% 11.01% 17.62% 28.22% 22.25%
Depreciation/Sales
(%) 12.83% 12.69% 13.22% 6.29% 8.96% 9.20% 29.11% 26.67% 23.34%
Interest/Sales (%) 3.10% 2.00% 1.44% 0.00% 0.04% 0.16% 2.60% 0.08% 2.71%
PBIT/TA 0.12 0.13 0.16 0.14 0.09 0.08 0.09 0.07 0.08
PBIT/CE 0.17 0.2 0.26 0.18 0.11 0.11 0.12 0.09 0.11
PAT/OF 0.23 0.27 0.35 0.13 0.08 0.07 0.09 0.14 0.11
PAT/no of shares 6.39 10.61 21.27 26.54 16.83 16.44 4.78 8.15 7.15
Price to Earning
Ratio 114.41 38.9 9.72 7.05 28.04 24.42 NA NA NA
Market Value/Book
ValueRatio 12.05 10.62 7.21 0.93 2.22 1.8 5.12 2.7 0.28
CFO/Total Cash
Generated during
the year 11.9 -60.38 17.14 1.69 45.34 -3.95 1.72 1.68 2.16
CFF/TCG -1.68 -4.91 0.72 -1.08 -4.35 0.37 -0.09 -0.06 -0.41
CFI/TCG -9.23 66.28 -16.86 0.4 -39.99 4.58 -0.63 -0.62 -0.75
CFO/PBIT 1.66 1.84 1.87 0.31 1.47 0.78 1.53 2.2 1.96
73
Ratio Analysis
Bharti Airtel Ltd VSNL BSNL
2005 2006 2007 2005 2006 2007 2004 2005 2006
FixedAsset/Total
Assets 0.73 0.81 0.81 0.38 0.39 0.41 0.71 0.63 0.56
Current
Assets/Total Assets 0.21 0.16 0.17 0.47 0.3 0.27 0.28 0.37 0.44
Investment/Total
Assets 0.06 0.04 0.03 0.16 0.31 0.32 0.002 0.002 0.002
Capital /Total
Assets 0.13 0.1 0.07 0.04 0.04 0.03 0.13 0.12 0.11
Reserves/Total
Assets 0.24 0.29 0.35 0.71 0.72 0.72 0.53 0.57 0.59
LTL/Total Assets 0.35 0.26 0.21 0.01 0.02 0.03 0.14 0.11 0.08
CL/Total Assets 0.29 0.35 0.37 0.24 0.23 0.22 0.21 0.21 0.22
ROCE (Dupont
Ratios) PBIT/CE
PBIT/Sales 0.17 0.2 0.26 0.18 0.11 0.11 0.12 0.09 0.11
Sales/TA 0.2 0.2 0.26 0.27 0.17 0.17 0.27 0.22 0.21
TA/CE 0.54 0.59 0.66 0.51 0.5 0.5 0.35 0.34 0.35
1.41 1.54 1.58 1.31 1.29 1.28 1.26 1.26 1.28
Debt Turnover
Ratio 1.56 2.26 3.21 38.92 23.13 15.8 2.6 3.2 4.47
FA Turnover Ratio 0.74 0.74 0.82 1.36 1.27 1.22 0.49 0.54 0.63
CA Turnover Ratio 2.61 3.81 4 1.09 1.66 1.84 1.24 0.92 0.8
Inventory Turnover
Ratio 251.53 636.29 372.16 1974.03 1055.19 901.27 14.47 16.07 14.4
Note : COGS for BSNL and VSNL is not available. So Inventory Days, Creditor Days and Working
Capital Days could not be calculated
74
13. REFERENCES
1. http://www.airtelworld.com
2. http://www.bsnl.co.in/index.html
3. http://www.vsnl.in/index.php
4. http://www.bseindia.com
5. http://www.rbi.org.in/home.aspx
6. http://www.myiris.com/newMyiris/
7. http://www.dot.gov.in/
8. http://www.aptsec.org/meetings/2002/forum/TPR16-IND.ppt
9. http://findarticles.com/p/articles/mi_qa3857/is_199804/ai_n8799612
10. http://www.investopedia.com/
11. http://www.domain-b.com/
12. http://ibef.org/download/Telecom_new.ppt
75

Financial Accounting: Bharti Airtel Limited

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Financial Accounting: Bharti Airtel Limited

Caricato da

Copyright:

Formati disponibili

Financial Accounting Bharti Airtel/u107092/u107093/u107094

Submitted by: Nidhi Agarwal (u107092) Niraj

7.5.1 Total Assets Turnover Ratio 53

4.1 GOVERNMENT POLICIES

4.2 NEW TELECOM POLICY, 1994

4.3 NEW TELECOM POLICY, 1999

4.4 BROADBAND POLICY, 2004

Recognising the potential of ubiquitous Broadband service in growth of GDP and

Pre-reform Partial Deregulation Further Deregulation Take-off

• MTNL - • 4 private fixed • Licenses converted to • Calling Party

National Telecom New Telecom Unified Licensing

Some of the other policy initiatives are:

Independent regulation has been a critical factor in the growth.

5. INDIAN ECONOMY AND THE TELECOM SECTOR

¾ Revenues ~ USD 19.5 bn (FY 2006)

o CAGR (FY 2002-06) - 21%

¾ Subscribers ~ 160 million (Aug 2006)

¾ Tele-Density - 14.8 (Aug 2006)

Te le com Subs cr ibe r s - Countr y w is e De ce m be r 2005

Japan Rus Ind

200 153 130 125

Mobile telephony continues to be the key growth driver.

Subscriber Growth - Mobile vs Fixed

o Lower cost of ownership due to Low cost / used handsets

Growing network coverage is triggering further market expansion

Segment Cellular reach (2003-04) Cellular reach (End 2006 - Est.)

Vibrant and competitive telecom market

Government owned. Has ramped up

Broadband and internet connectivity are on the verge of take-off.

Broadband subscriber growth

Several Indian firms are gaining a foothold in the global market.

Key Indian Companies

• MTNL - State owned operator covering the cities of Mumbai an

• Bharti Airtel - Integrated operator with presence in all

• Reliance Communications - Largest player in India in the

• Tata Teleservices - Integrated operator (with VSNL) with

5.1 GUIDELINES FOR FOREIGN DIRECT INVESTMENT IN

1. Singapore Telecom (SingTel) made an investment of US$1.07 B through a Mauritius

¾ Currently, the Indian Telecom market is valued at US$100 B. Two telecom

GSM and CDMA subscription numbers:

5.2 TRAI GUIDELINES AND OBJECTIVES

5.3 TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

The TDSAT is empowered to adjudicate any dispute between:

5.4 CELLULAR OPERATORS ASSOCIATION OF INDIA (COAI)

The Cellular Operators Association of India (COAI) was constituted in 1995 as a

6.1 ABOUT THE COMPANY

Vision & Promise

Awards and Recognition

Highlights for Full Year ended March 31, 2007

6.2 CAPITAL STRUCTURE OF BHARTI-AIRTEL

(In ‘000 Rs.) 2007 2006 2005

45.48% Promoter holding

2. Nominal Value of Capital

3. Issue Price of shares

For the year ending 2005-2006

For the year ending 2006-2007

No rights issue was brought out for the period 2005-2007.

Capital +Reserves 1,148,883,838,000 73,623,863,000 53,200,292,000

6.3 FINANCIAL STATEMENTS

Consolidated Balance Sheet

Capital 19,259,346 19,060,053 18,560,889

Total 268,354,072 190,300,585 147,351,956

Fixed Assets 216,814,497 153,481,269 107,594,459