Company Overview:

Bharti Airtel Limited is a leading global telecommunications company with operations in 20

countries across Asia and Africa. The company ranks amongst the top 4 mobile service
providers globally in terms of subscribers. In India, the company's product offerings include 2G,
3G and 4G wireless services, mobile commerce, fixed line services, high speed DSL broadband,
IPTV, DTH, enterprise services. Bharti Airtel had nearly 287 million customers across its
operations at the end of Dec 2013. Bharti Airtel Ltd was incorporated in the year 1995 with the
name Bharti Tele-Ventures Ltd. By 2003-04, the company acquired licenses in all the circles in
India. During the year 2010-11, Airtel won the 'Most Preferred Cellular Service Provider Brand'
award in the CNBC Awaaz Consumer Awards 2010 for the 6th year in a row. During the year,
the company launched 3G Services in 9 of 13 circles with 3G spectrum.

Industry Overview:

India's telecommunication network is the second largest in the world based on the total
number of telephone users. India's telephone subscriber base expanded at a CAGR of 19.22 per
cent to 1,002 million over FY0715. India has the world's third-largest Internet user-base. The
ongoing expansion of the mobile ecosystem, coupled with demand for high-bandwidth
applications and services such as video and gaming, is keeping pressure on the industry to
increase the availability and quality of broadband connectivity. At the same time, long-term
spectrum availability, spectrum efficiency, and backhaul improvements are likely to be a key
focus to assure continued mobile broadband momentum.

FINANCIAL STATEMENT ANALYSIS :

1.Balance Sheet:
Compared to 2010 huge increase in Intangible assets was seen because of increase in
purchase of licenses for 3G spectrum
The common stock remains almost constant throughout 2010-14, with a major
contribution to Shareholders equity coming from earnings.
There was a huge difference between the Total Liabilities and Total Stockholder's equity
throughout, with Stockholders equity contributing majorly to the overall increase in the
right side of balance sheet.
The company has significantly invested in intangible assets for the years 2011-13,
whereas tangible assets have nearly remained the same.
Airtel has hugely invested in Bharti Airtel International in countries like Singapore,
Netherlands, Mauritius which resulted in 144% increase in noncurrent investments in
the year 2013. Increasing trend throughout the whole period shows company has plans
for international investments
Long term loans and advances went up by 62% because of advance payment for
Spectrum in 2014. Long-term borrowings have increased from 2010 to 2013 by 86% but
decreased again in 2014 showing that the company had paid off its debts in 2014
2. Income Statement:
Gross Profit has increased consistently from 2010 to 2014, but there was a consistent
decrease in Net Income partially due to increasing in Operating expenses. Also,
Operating Expenses are more than 60% of Gross Profits
Cost of Goods Sold went down from by more than 80% from 2010 to 2014 as the
company is majorly a service provider
Income from Other sources has increased by more than 50% in 2013 because of
increase in Dividend Income from the subsidiaries and Net foreign exchange gain
3. Cash Flow Statement:
Airtel has been carrying negative cash flows on its balance sheet in 2010 and 2011 due
to its high investment and financial activities.
Such investments paid off in 2012, which resulted in high cash inflows from operating
activities and thereby positive overall cash flows.
In 2013, the net change in cash flows again slipped to negative, due to increasing in
Long-term borrowings. However, good performance in 2014 led to an increase of over
500%.
Airtel on an average is carrying ending cash balance of 3197.2 million over the last five
years forming only 0.41% of the total assets.
This low cash balance could be problematic in the future as it could cause liquidity
problems.
The overall cash flow of the company is very marginal as most of the cash generated
from operating activities are being used for investing activities.

RATIO ANALYSIS:
Liquidity Ratios: The current ratio and quick ratio of this company are around 0.3 for the
period considered but in the year 2012, they spiked up to 0.73. This is because in that
particular year company issued a huge amount of short-term loans & advances which led to a

significant increase in its current assets. This lower current and quick ratio indicate its low
liquidity and its reduced short-term ability to pay its maturing obligations and meet any
unexpected needs of cash.
Turnover/Efficiency Ratios: Being a telecommunication company, it does not have a
significant amount of inventory but an increase in its inventory turnover ratio shows that the
company is improving on managing its inventory well.It also has good receivables turnover that
shows its ability to collect cash faster from its customers. These both led to decrease in
operating cycle which shows its growing efficiency.
Solvency: The company has maintained a lower debt to equity ratio throughout the period
considered which shows that the company is not much dependent on long-term borrowings.
But there is a significant decrease in interest coverage ratio that shows that there is a
significant increase in the interest expenses against any proportionate increase in EBIT. This
comes as a matter of concern for the company as the expenses may further get increased and
lower its profitability.
Profitability: The company has a constant gross margin. However, the operating profit margin
and net profit margin has decreased over the period. This is because though there is an
increase in gross sales; operating expenses and interest expenses have increased over the
time. This shows that the company has not been able to match up its revenues as compared to
its expenses and hence should be more cautious about its total expenses in the future. The
ROA figures of the company has declined over the years which shows that though the total
assets of the company has increased over the years ;the net income has not proportionately
increased to that indicating that the company has not been able to utilize its assets fully for
generating net income leading to low profitability of the assets. The ROE figures of the
company have decreased over the period considered which shows that although the company's
total equity has increased; it has not been able to generate significant returns on the same.
The company has witnessed a decline in its profit for four consecutive years, but it started to
rise again in 2014.

COMPETITOR ANALYSIS :
Liquidity Ratios:
To ascertain the liquidity of the three companies, we will consider two ratios current ratio and
the quick ratio. We observe that all the companies had high current ratios in 2010, but it
eventually got decreased from 1 to less than 1 to because of spectrum auctions. Airtel has
lower current ratios and quick ratios over the years whereas Tata Communications maintained
a better ratio among all the competitors ranging around 0.9 which implies that if the firm
liquidated all of its current assets at the recorded value, it would only be able to cover 91% of
its current liabilities. The ratio for Airtel is far less ranging around 0.35, and This may come
across as a cause of concern when it comes to meet unexpected outcomes and may result in
emergency loans.

Efficiency Ratios:

As we can see Airtel has higher Inventory Turnover ratio which shows that it is better capable of
converting its inventory soon to revenue. In the Receivables Turnover ratio, Idea has the
highest values which indicates its ability to collect it's receivables soon. If Airtel has to be more
efficient, it should try to collect it's receivables soon which in turn will lead to reduction in
operating cycle.

Solvency Ratios:
Debt to equity ratio: Airtels debt to equity ratio was consistently around 0.1 whereas for
Idea and Tata the corresponding value is around 0.5. A major change in the Debt to equity
ratio was seen for Tata in 2014 where the value is as low as 0.02. This is because Tata has paid
off a significant amount of its Long-term liabilities in 2014. Lower debt to equity shows that
these companies assets have been funded by equity more than debts implying a lower degree
of financial risk and low-interest expenses.
Interest Coverage Ratio: The ratio for Airtel has decreased from 17.8 to 7.2 during 2010-14,
Tata has managed to bring up this value to 14.5 in the year 2014 compared to 6.5 in 2013. For
Idea, the value has fluctuated between 6.6 to 5.1 from 2010-14. Higher Interest Coverage ratio
means that the companies were able to meet their Interest expenses through their operating
incomes.

Profitability Ratios:
For profitability about sales we looked at the three types of margins gross profit margin,
operating profit margin and profit margin for all three companies. In terms of gross profit
margin, All the companies fare well because COGS for telecom companies is very low, so gross
profit margins remain nearly equal to net sales.
Operating Profit Margin and Net profit Margin: Airtel mostly outperforms its competitors
when it comes to Operating Profit Margin and Net Profit margin. This is primarily due to the
high operating costs that the competitors have in comparison with Airtel. It again reiterates
the fact that Airtel is efficient in minimizing its Operating expenses and efficiently using its

resources. Although margin is decreasing for all the companies till 2013, Airtel fared well
among the competitors.
Return on Assets and return on Equity: ROA figures for Airtel is higher as compared to its
competitors Idea and Tata Communications which shows that Airtel is better off in converting
its assets into net income and thus has better asset profitability. Also the ROE figures for Airtel
is comparatively higher to its competitors which indicates that it has higher return on
stockholders equity and generated significant net income in return of that.

Comments on Financial Health:

From our analysis, we believe that Airtel is in a good financial condition as compared to its
competitors and has fared well in almost most of the financial parameters with an above
industry average. Looking over the trends it is evident that Airtel has an increasing profit
margin, ROA & ROE along with decreasing debt to equity ratio which is responsible for its
steady performance till 2013. However we see that though it had fared relatively well in the
industry among its competitors, its own performance has declined in absolute terms over the
years which shows that its operating efficiency has gone down. Given positive scope for
economic growth in India in the coming years, Airtel can step ahead to take advantage of the
same and improve its declining profits as it already has an upper hand in the market segment.