Ratio Analysis And Industry Analysis Of Telecom Industry Finance Essay

The Indian Telecommunications web has 203 million connexions which is the 3rd largest in the universe and the 2nd largest among the emerging economic systems of Asia. Today, it is the fastest turning market in the universe. Telecom industry in India has a major function in Indian economy.A

Bharti AIRTEL normally referred merely as AIRTEL is the taking planetary telecommunications company which performs its nomadic operations across Asia and Africa. It operates GSM web in all states which provides 2G and 3G services depending upon the state. It is the largest cellular service supplier in India.

Swot Analysis of AIRTEL:

Strengths

AIRTEL is the largest operator.

More inventions.

Strategic confederation with IT companies.

It has Global presence.

Failing

Less figure of towers.

No program like free calls as the rivals as its fring value among young person.

Opportunities

Global Expansion

Partnered with IT companies to utilize the latest engineering.

Menaces

Competition is more from the domestic participants

Aditya Birla Group owns IDEA cellular. It provides services in around 25 states with over 1.3 hundred thousands of employees. IDEA cellular provides GSM services in India with over 72 million clients. It is most client friendly cellular service which has besides introduces its first postpaid offerings in India.

Swot Analysis of IDEA:

Strengths

Market incursion by cutting the monetary values of duty rates.

Strategic Alliance.

Net income growing rate is besides increasing.

Failing

No wide set and DTH service.

Less market portion in urban market.

Opportunities

Launch 3G services.

Started cyberspace services.

Strategic confederation with NOKIA.

Menaces

Increase in competition in domestic market

Reducing of duty rates resulted in lowering of service revenue enhancement.

Fiscal Performance of the above companies for FYE 2009 and FYE 2010:

Fiscal Ratios:

Liquidity Ratios/Solvency Ratios:

Current Ratio:

The current ratio metric is produced by spliting current liabilities into current assets. It is calculated as follows

Current ratio = Current assets ? Current liabilities

Current ratios of AIRTEL for the twelvemonth 2009 and 2010 are 0.69 and 0.68 severally. This shows that the house has high assets in 2009 when compared to 2010, which means AIRTEL is more capable of uncluttering its liabilities and is able to give assurance for the short term investors in twelvemonth 2009 and it ‘s somewhat decreased in 2010.

Current ratios of IDEA for the twelvemonth 2009 and 2010 are 0.98 and 0.96 severally. . This shows that the house has high assets in 2009 when compared to 2010, which means IDEA is more capable of uncluttering its liabilities and is able to give assurance for the short term investors in twelvemonth 2009 and it ‘s somewhat decreased in 2010.

Quick ratio/Acid Test ratio:

Quick Ratio is besides known as Acid trial or Liquid ratio. The Acid trial ratio is the ratio between speedy assets and current liabilities.

Acid-test ratio = Quick assets ?Current liabilities.

The acerb trial ratio of AIRTEL for twelvemonth 2009 and 2010 are 0.65 and 0.72 severally. This shows that AIRTEL has really strong acid ratio means it is non dependent on its stock lists to unclutter off its liabilities and it is nice mark to put in AIRTEL.

The acerb trial ratios of IDEA for twelvemonth 2009 and 2010 are 1.31 and 0.86 severally. This means that big portion of the current assets of IDEA is tied up in slow moving and unsaleable stock lists and decelerate paying debts.

Inventory turnover ratio:

Inventory Turnover ratio defined as

Inventory turnover ratio = Cost of goods sold ?Average stock list.

The stock list turnover ratio of AIRTEL for old ages 2009 and 2010 are 547.83 and 1307.05 severally. The inventory-holding period of AIRTEL for twelvemonth 2009 and 2010 are merely few hours. AIRTEL has really less stock list keeping period.

The stock list turnover ratio of IDEA for old ages 2009 and 2010 are 230.69 and 253.76 severally.

Debtors turnover ratio:

This ratio establishes a relationship between newt recognition gross revenues and mean debitors.

Debtors turnover ratio = net recognition gross revenues ?average debitors

The debitors turnover ratios of AIRTEL are 12.78 and 15.30 for the old ages 2009 and 2010 severally. The debitors aggregation period is 0.9 months and 0.78 months for the old ages 2009 and 2010. These figures show that company is roll uping its debits really keenly.

The debitors turnover ratio of IDEA are 37.32 and 31.20 for the twelvemonth 2009 and 2010. The debitors aggregation periods are 0.32 months and 0.38 months for the old ages 2010 and 2009 severally.

Solvency Ratios

Debt equity ratios:

Debt-equity ratio is calculated as

Debt-equity ratio = Outsiders financess ? Shareholder ‘s financess

The debt equity ratios of AIRTEL are 0.28 and 0.14 for the old ages 2009 and 2010 severally. This ratio shows that the foreigners financess is really less when compared to the stockholder ‘s financess.

The debt equity ratios of ITC are 0.67 and 0.57 for the old ages 2009 and 2010 severally. This indicates that the foreigners financess is really less when compared to the stockholders financess.

Profitability ratios:

Gross Profit Ratio:

Gross net income ratio is expressed as

Gross Profit Ratio = Gross net income ?sales * 100

Gross net income borders of AIRTEL are 29.33 % and 28.15 % for the old ages 2009 and 2010 severally.

Gross net income borders of IDEA for the old ages 2009 and 2010 are 20.51 % and 15.83 % severally. IDEA enjoys a just sum of gross net income border.

Net net income ratio:

This ratio is defined

Net net income ratio = net net income ? net gross revenues * 100

The net net income ratios of AIRTEL for the old ages 2009 and 2010 are 22.58 and 26.36 severally. As the net net income border is high is good to the house as it can defy in the market during the bad stage besides.

The net net income ratios of IDEA for the old ages 2009 and 2010 are 9.91 and 8.71 severally. When compared to IDEA, AIRTEL enjoys a low net net income border.

Operating net income ratio:

Operating net income ratio is expressed as

Operating net income ratio = operating net income ? net gross revenues * 100

The operating net income ratio of AIRTEL for the twelvemonth 2009 and 2010 are 38.74 and 39.08 severally. The operating net income ratio of IDEA for the twelvemonth 2009 and 2010 are 31.63 and 27.37 severally.

Tax return on capital employed ( ROCE ) :

ROCE = EBIT / mean entire capital employed * 100

The ROCE ratios for AIRTEL in the twelvemonth 2009 and 2010 are 28.40 and 23.86 severally.

The ROCE ratios for IDEA in the twelvemonth 2009 and 2010 are 11.20 and 10.73 severally.

FINANCIAL STATEMENTS ( Horizontal ) :

Net income and Loss history of AIRTEL

Debit

2009

2010

Recognition

2009

2010

Outgo

Natural stuffs

Depreciation

Interest

Equity Dividend

Preference Dividend

Power and fuel

Corporate Dividend Tax

Reported Net Net incomes

Transportation to capital history

To Net net income

286.94

3,206.28

434.16

379.65

0.00

0.00

64.52

7,743.84

20,676.47

32791.86

278.72

37.54

8.21

59.73

0.00

0.00

64.55

9,426.15

22,370.45

36,693.09

Income:

Gross saless turnover

Excise responsibility

Net gross revenues

Other income

Stock accommodation

34,048.32

0.00

34,048.32

-1,261.75

5.29

32,791.86

35,609.54

0.00

35,609.54

1,118.46

-34.91

36,693.09

Balance sheet of AIRTEL

Liabilitiess

2009

2010

Assetss

2009

2010

Beginnings of financess:

Entire portion capital

Share application money

Preference portion capital

Militias

Reappraisal militias

Secured Loans

Unbarred loans

Current Liabilitiess:

Commissariats

Entire

1898.24

116.22

0

25,627.38

2.13

51.73

7661.92

13,832.49

634.40

49824.51

1898.77

186.09

0

34,650.19

2.13

39.43

4999.49

12,183.25

658.75

54618.1

Gross Block

Less: Collector Depreciation

Investings

Current Assetss:

Inventories

Assorted Debtors

Cash & A ; Bank balance

Loans & A ; progresss

Fixed sedimentations

Assorted disbursals

Capital working advancement

37,266.70

12,253.34

11,777.76

62.15

2550.05

153.44

5602.83

2098.16

0.09

2566.67

49824.51

44,212.53

16,187.56

15,773.32

27.24

2104.98

54.89

6276.12

761.86

0.00

1594.74

54618.1

Cash Flows of AIRTEL

Beginnings

2009

2010

Applications

2009

2010

Cash Opening Balance

Cash from Operationss

Net Cash from Investment activities

Net Cash from Financing activities

Entire

503.31

11,853.15

-10,894.38

-672.00

790.08

789.88

12,692.63

-10,601.66

-2539.32

341.53

Closing Cash Equivalent

790.08

790.08

341.53

341.53

Net income and loss history of IDEA

Debit

2009

2010

Recognition

2009

2010

Outgo

Natural stuffs

Depreciation

Interest

Equity Dividend

Preference Dividend

Power and fuel

Corporate Dividend Tax

Reported Net Net incomes

Transportation to capital history

To Net Net income

18.92

1096.72

1206.35

0.00

0.00

533.54

0.00

1001.21

6402.99

10,258.83

0.02

1366.61

982.44

0.00

0.00

942.27

0.00

1053.66

7889.07

12,234.07

Income:

Gross saless turnover

Excise responsibility

Net gross revenues

Other income

Stock accommodation

9857.08

0.00

9857.08

401.80

-0.05

10,258.83

11,850.24

0.00

11,850.24

383.83

0.00

12,234.07

Balance sheet of IDEA

Liabilitiess

2009

2010

Assetss

2009

2010

Beginnings of financess:

Entire portion capital

Share application money

Preference portion capital

Militias

Reappraisal militias

Secured Loans

Unbarred loans

Current Liabilitiess:

Commissariats

Entire

3100.10

18.23

0.00

8176.09

0.00

5564.93

2014.43

3496.04

98.65

22,468.47

3299.84

44.45

0.00

8112.95

0.00

5988.61

537.81

4313.76

137.76

22,435.18

Gross Block

Less: Collector Depreciation

Investings

Current Assetss:

Inventories

Assorted Debtors

Cash & A ; Bank balance

Loans & A ; progresss

Fixed sedimentations

Assorted disbursals

Capital working advancement

15,562.75

4739.86

4928.81

42.73

329.59

140.86

2278.21

2203.57

0.00

1721.82

22,468.47

22,834.40

7907.34

2755.13

46.70

430.12

129.13

3533.15

151.31

0.00

462.58

22,435.18

Cash flows of IDEA

Beginnings

2009

2010

Applications

2009

2010

Cash Opening Balance

Cash from Operationss

Net Cash from Investment activities

Net Cash from Financing activities

Entire

497.06

1863.74

-7655.35

7639.00

2344.43

2921.82

1985.14

-2095.94

-2530.57

280.44

Closing Cash Equivalent

2344.43

2344.43

280.44

280.44

FINANCIAL STATEMENTS ( Vertical ) :

CASH FLOWS SHEET ( IDEA )

FY2009 FY2010

Net Net income Before Tax

1001.21

1053.66

Net Cash From Operating Activities

1863.74

1985.14

Net Cash ( used in ) /from

Investing Activities

-7655.36

-2095.94

Net Cash ( used in ) /from Financing Activities

7639.00

-2530.57

Internet ( lessening ) /increase In Cash and Cash Equivalents

1847.37

-2641.38

OpeningA Cash & A ; Cash Equivalents

497.06

2921.82

Closing Cash & A ; Cash Equivalents

2344.43

280.44

BALANCE SHEET OF IDEA

Beginnings Of Fundss

FY2009

FY2010

TotalA Share Capital

3,100.10

3,299.84

EquityA Share Capital

3,100.10

3,299.84

Share Application Money

18.23

44.45

PreferenceA Share Capital

0.00

0.00

Militias

8,176.09

8,112.95

Reappraisal Militias

0.00

0.00

Networth

11,294.42

11,457.24

Secured Loans

5,564.93

5,988.61

Unbarred Loans

2,014.43

537.81

TotalA Debt

7,579.36

6,526.42

TotalA Liabilitiess

18,873.78

17,983.66

Application Of Fundss

Gross Block

15,562.75

22,834.40

Less: Accum. Depreciation

4,739.86

7,907.34

Net Block

10,822.89

14,927.06

Capital Work in Advancement

1,721.82

462.58

Investings

4,928.81

2,755.13

Inventories

42.73

46.70

Assorted Debtors

329.59

430.12

Cash and Bank Balance

140.86

129.13

TotalA Current Assetss

513.18

605.95

Loans and Progresss

2,278.21

3,533.15

Fixed Deposits

2,203.57

151.31

TotalA CA, Loans & A ; Progresss

4,994.96

4,290.41

Deffered Recognition

0.00

0.00

Current Liabilitiess

3,496.04

4,313.76

Commissariats

98.65

137.76

TotalA CL & A ; Commissariats

3,594.69

4,451.52

Net Current Assetss

1,400.27

-161.11

Assorted Expenses

0.00

0.00

TotalA Assetss

18,873.79

17,983.66

Contingent Liabilitiess

2,279.41

1,960.75

Book Value ( Rs )

36.37

34.59

Net income and Loss history of IDEA

Income

FY2009

FY2010

Gross saless Employee turnover

9,857.08

11,850.24

Excise Duty

0.00

0.00

Net Gross saless

9,857.08

11,850.24

Other Income

401.80

383.83

Stock Adjustments

-0.05

0.00

Entire Income

10,258.83

12,234.07

Outgo

Natural Materials

18.92

0.02

Power & A ; Fuel Cost

533.54

942.27

Employee Cost

458.46

561.17

Other Fabrication Expenses

4,022.86

5,187.63

Selling and Admin Expenses

1,621.90

1,823.48

Assorted Expenses

82.76

91.58

Preoperative Exp Capitalised

0.00

0.00

Entire Expenses

6,738.44

8,606.15

Operating Net income

3,118.59

3,244.09

PBDIT

3,520.39

3,627.92

Interest

1,206.35

982.44

PBDT

2,314.04

2,645.48

Depreciation

1,096.72

1,366.61

Other Written Off

146.13

184.59

Net income Before Tax

1,071.19

1,094.28

Extra-ordinary points

15.68

91.61

PBT ( Post Extra-ord Items )

1,086.87

1,185.89

Tax

85.65

115.08

Reported Net Net income

1,001.21

1,053.66

Entire Value Addition

6,719.52

8,606.12

Preference Dividend

0.00

0.00

Equity Dividend

0.00

0.00

Corporate Dividend Tax

0.00

0.00

Per portion informations ( annualised )

Shares in issue ( hundred thousand )

31,000.95

32,998.38

Gaining Per Share ( Rs )

3.23

3.19

Equity Dividend ( % )

0.00

0.00

Book ValueA ( Rs )

36.37

34.59

CASH FLOWS SHEET of AIRTEL

FY2009 FY2010

Net Net income Before Tax

8161.54

10699.25

NetA CashA From Operating Activities

11853.15

12692.63

NetA CashA ( used in ) /from

Investing Activities

-10894.38

-10601.66

NetA CashA ( used in ) /from Financing Activities

-672.00

-2539.32

Internet ( lessening ) /increase InA CashA andA Cash Equivalents

286.77

-448.35

OpeningA CashA & A ; A CashA Equivalents

503.31

789.88

ClosingA CashA & A ; A CashA Equivalents

790.08

341.53

BALANCE SHEET OF AIRTEL

Beginnings Of Fundss

FY2009

FY2010

Entire Share Capital

1,898.24

1,898.77

Equity Share Capital

1,898.24

1,898.77

ShareA ApplicationA Money

116.22

186.09

Preference Share Capital

0.00

0.00

Militias

25,627.38

34,650.19

Reappraisal Militias

2.13

2.13

Networth

27,643.97

36,737.18

Secured Loans

51.73

39.43

Unbarred Loans

7,661.92

4,999.49

Entire Debt

7,713.65

5,038.92

Entire Liabilitiess

35,357.62

41,776.10

ApplicationA Of Fundss

Gross Block

37,266.70

44,212.53

Less: Accum. Depreciation

12,253.34

16,187.56

Net Block

25,013.36

28,024.97

Capital Work in Advancement

2,566.67

1,594.74

Investings

11,777.76

15,773.32

Inventories

62.15

27.24

Assorted Debtors

2,550.05

2,104.98

Cash and Bank Balance

153.44

54.89

Entire Current Assets

2,765.64

2,187.11

Loans and Progresss

5,602.83

6,276.12

Fixed Deposits

2,098.16

761.86

Entire CA, Loans & A ; Progresss

10,466.63

9,225.09

Deffered Recognition

0.00

0.00

Current Liabilitiess

13,832.49

12,183.25

Commissariats

634.40

658.75

Entire CL & A ; Commissariats

14,466.89

12,842.00

Net Current Assetss

-4,000.26

-3,616.91

Assorted Expenses

0.09

0.00

Entire Assetss

35,357.62

41,776.12

Contingent Liabilitiess

4,104.25

3,921.50

Book ValueA ( Rs )

145.01

96.24

Net income and Loss history of AIRTEL

Income

FY2009

FY2010

SalesA Turnover

34,048.32

35,609.54

Excise Duty

0.00

0.00

Net Gross saless

34,048.32

35,609.54

Other Income

-1,261.75

1,118.46

Stock Adjustments

5.29

-34.91

Entire Income

32,791.86

36,693.09

Outgo

Natural Materials

286.94

278.72

Power & A ; Fuel Cost

0.00

0.00

Employee Cost

1,397.54

1,401.66

Other Fabrication Expenses

8,627.13

11,882.41

Selling and Admin Expenses

9,385.68

6,856.42

Assorted Expenses

1,409.89

1,482.39

Preoperative Exp Capitalised

-269.25

-293.31

Entire Expenses

20,837.93

21,608.29

Operating Net income

13,215.68

13,966.34

PBDIT

11,953.93

15,084.80

Interest

434.16

283.35

PBDT

11,519.77

14,801.45

Depreciation

3,206.28

3,890.08

Other Written Off

178.82

207.84

Net income Before Tax

8,134.67

10,703.53

Extra-ordinary points

-46.15

-50.78

PBT ( Post Extra-ord Items )

8,088.52

10,652.75

Tax

321.78

1,177.87

Reported Net Net income

7,743.84

9,426.15

Entire Value Addition

20,551.00

21,329.56

Preference Dividend

0.00

0.00

EquityA Dividend

379.65

379.79

Corporate Dividend Tax

64.52

64.55

Per portion informations ( annualised )

Shares in issue ( hundred thousand )

18,982.40

37,975.30

Gaining Per Share ( Rs )

40.79

24.82

EquityA Dividend ( % )

20.00

20.00

Book Value ( Rs )

145.01

96.24

Decision

For any investor who wants to buy the portions in the company will look into the overall company ‘s public presentation and place as it gives the clear thought about the company growing. From the above current ratios houses are more capable of uncluttering its liabilities and is able to give assurance for the short term investors in twelvemonth 2009 and it ‘s somewhat decreased in 2010.Quick ratios of the houses are below the acceptable degree for AIRTEL when compared to IDEA which might raise some concerns over the stock list and liquidness of concern. Cash flow of the IDEA is decreased for 2010 when compared to 2009 where as AIRTEL has merely little alteration in hard currency flow that is refund of debt is more for AIRTEL. When compared to IDEA, AIRTEL enjoys a low net net income border. Gross net income of companies earns a just sum of money to run into its operational disbursals and ensures good sum of returns for the stockholders.

It is recommended that the investor can purchases the s hares of AIRTEL which has gross revenues in concern and good hard currency flows from the operating activities and strong in industry in all demand and supply.