INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT (GREATER NOIDA)

GROUP PROJECT REPORT- EQUITY RESEARCH

Economic, Industry, Company Analysis TELECOM INDUSTRY

SUBMITTED TO: Name: Prof. Anubha Gupta IILM GSM, Greater Noida.

SUBMITTED BY: Group No. 1 Aditi Mongia Ayushi Garg Chandra Shekhar Gourav Dang Md. Aamir Naveen Kumar Rahul Sharma Shankar Pradhan Tarun Agarwal

INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT, GREATER NOIDA

FUNDAMENTAL ANALYSIS
Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. It is the study of economic, industry and company conditions in an effort to determine the value of a companys stock. Fundamental analysis typically focuses on key statistics in companys financial statements to determine if the stock price is correctly valued. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements.

Fundamental analysis is the cornerstone of investing. The basic philosophy underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a company, how much expected returns from this investment he has.

The fundamental analysis is to appraise the intrinsic value of a security. It insists that no one should purchase or sell a share on the basis of tips and rumors. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company, about the industry, and the economy. It is also known as top-down approach. This approach attempts to study the economic scenario, industry position and the company expectations and is also known as economic-industry-company approach (EIC approach).

Thus the EIC approach involves three steps: 1. 2. 3. Economic analysis Industry analysis Company analysis

COMPANY ANALYSIS INDUSTRY ANALYSIS ECONOMIC ANALYSIS

1. ECONOMIC ANALYSIS
The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be expected to show rapid growth and vice versa. When the level of economic activity is low, stock prices are low, and when the level of economic activity is high, stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macro-economic environment is essential to understand the behavior of the stock prices.

The commonly analyzed macro economic factors are as follows:

Gross Domestic Product (GDP): GDP indicates the rate of growth of the
economy. It represents the aggregate value of the goods and services produced in the economy. It consists of personal consumption expenditure, gross private domestic investment and government expenditure on goods and services and net exports of goods and services. The growth rate of economy points out the prospects for the industrial sector and the return investors can expect from investment in shares. The higher growth rate is more favorable to the stock market.

Savings and investment: It is obvious that growth requires investment which in

turn requires substantial amount of domestic savings. Stock market is a channel through which the savings are made available to the corporate bodies. Savings are distributed over various assets like equity shares, deposits, mutual funds, real estate and bullion. The savings and investment patterns of the public affect the stock to a great extent.

Inflation: Along with the growth of GDP, if the inflation rate also increases, then
the real growth would be very little. The effects of inflation on capital markets are numerous. An increase in the expected rate of inflation is expected to cause a nominal rise in interest rates. Also, it increases uncertainty of future business and investment decisions. As inflation increases, it results in extra costs to businesses, thereby squeezing their profit margins and leading to real declines in profitability.

Interest rates: The interest rate affects the cost of financing to the firms. A
decrease in interest rate implies lower cost of finance for firms and more profitability. More money is available at a lower interest rate for the brokers who are doing business with borrowed money. Availability of cheap funds encourages speculation and rise in the price of shares.

Consumer Price Index (CPI): The CPI is a measure of the change in the prices
of consumer goods across over 200 different categories. This report, when compared to a nation's exports, can be used to see if a country is making or losing money on its products and services. Be careful, however, to monitor the exports - it is a focus that is popular with many traders because the prices of exports often change relative to a currency's strength or weakness. Some of the other major indicators include the purchasing managers index (PMI), producer price index (PPI), durable goods report, employment cost index (ECI), and housing starts. And don't forget the many privately issued reports, the most famous of which is the Michigan Consumer Confidence Survey. All of these provide a valuable resource to traders, if used properly.

Retail Sales: The retail-sales report measures the total receipts of all retail stores in
a given country. This measurement is derived from a diverse sample of retail stores throughout a nation. The report is particularly useful because it is a timely indicator of broad consumer spending patterns that is adjusted for seasonal variables. It can be used to predict the performance of more important lagging indicators, and to assess the immediate direction of an economy. Revisions to advanced reports of retail sales can cause significant volatility. The retail sales report can be compared to the sales activity of a publicly traded company.

Industrial Production: This report shows the change in the production of

factories, mines and utilities within a nation. It also reports their 'capacity utilizations', the degree to which the capacity of each of these factories is being used. It is ideal for a nation to see an increase of production while being at its maximum or near maximum capacity utilization. Traders using this indicator are usually concerned with utility production, which can be extremely volatile since the utilities industry, and in turn the trading of and demand for energy, is heavily affected by changes in weather.

Significant revisions between reports can be caused by weather changes, which in turn, can cause volatility in the nation's currency.

Tax structure: Every year in March, the business community eagerly awaits the
Governments announcement regarding the tax policy. Concessions and incentives given to a certain industry encourage investment in that particular industry. Tax reliefs given to savings encourage savings. The type of tax exemption has impact on the profitability of the industries.

Infrastructure facilities: Infrastructure facilities are essential for the growth of

industrial and agricultural sector. A wide network of communication system is a must for the growth of the economy. Regular supply of power without any power cut would boost the production. Banking and financial sectors also should be sound enough to provide adequate support to the industry. Good infrastructure facilities affect the stock market favorably.

Foreign Markets: Economic trends in foreign markets can have an effect on the
stock market in the United States, according to the article titled Riding the Economic Roller Coaster. When the economies in foreign countries are down, American companies cannot sell as many goods overseas as they used to. This causes a drop in revenue, and that can show up as a drop in the stock market. Foreign stock exchanges also have an effect on the American stock market. If foreign exchanges start to fail or experience sharp drops, then that kind of activity can cause American investors to anticipate a ripple effect, resulting in a drop in the United States stock exchange

2. INDUSTRY ANALYSIS
An industry is a group of firms that have similar technological structure of production and produce similar products and Industry analysis is a type of business research that focuses on the status of an industry or an industrial sector (a broad industry classification, like "manufacturing"). Irrespective of specific economic situations, some industries might be expected to perform better, and share prices in these industries may not decline as much as in other industries. This identification of economic and industry specific factors influencing share prices will help investors to identify the shares that fit individual expectations.

Industry Life Cycle:

The industry life cycle theory is generally attributed to Julius Grodensky. The life cycle of the industry is separated into four well defined stages.

Pioneering stage: The prospective demand for the product is promising in this stage and the technology of the product is low. The demand for the product attracts many producers to produce the particular product. There would be severe competition and only fittest companies survive this stage. The producers try to develop brand name, differentiate the product and create a product image. In this situation, it is difficult to select companies for investment because the survival rate is unknown.

Rapid growth stage: This stage starts with the appearance of surviving firms from the pioneering stage. The companies that have withstood the competition grow strongly in market share and financial performance. The technology of the production would have improved resulting in low cost of production and good quality products. The companies have stable growth rate in this stage and they declare dividend to the shareholders. It is advisable to invest in the shares of these companies.

Maturity and stabilization stage: The growth rate tends to moderate and the rate of growth would be more or less equal to the industrial growth rate or the gross domestic product growth rate. Symptoms of obsolescence may appear in the technology. To keep going, technological innovations in the production process and products should be introduced. The investors have to closely monitor the events that take place in the maturity stage of the industry.

Decline stage: demand for the particular product and the earnings of the companies in the industry decline. It is better to avoid investing in the shares of the low growth industry even in the boom period. Investment in the shares of these types of companies leads to erosion of capital.

Growth of the industry:

The historical performance of the industry in terms of growth and profitability should be analyzed. The past variability in return and growth in reaction to macro economic factors provide an insight into the future.

Nature of competition:
Nature of competition is an essential factor that determines the demand for the particular product, its profitability and the price of the concerned company scrips. The companies' ability to withstand the local as well as the multinational competition counts much. If too many firms are present in the organized sector, the competition would be severe. The competition would lead to a decline in the price of the product. The investor before investing in the scrip of a company should analyze the market share of the particular company's product and should compare it with the top five companies.

SWOT analysis:
SWOT analysis represents the strength, weakness, opportunity and threat for an industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for instance, increase in demand for the industrys product becomes its strength, presence of numerous players in the market, i.e. competition becomes the threat to a particular company. The progress in R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. In this way the factors are to be arranged and analyzed.

Introduction to telecom industry:

The telecom industry has been divided into two major segments, that is, fixed and wireless cellular services. In todays information age, the telecommunication industry has a vital role to play. Considered as the backbone of industrial and economic development, the industry has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionizing human communication. Although the Indian telecom industry is one of the fastest-growing industries in the world, the current tele-density or telecom penetration is extremely low when compared with global standards. Indias tele-density of 36.98% in FY09 is amongst the lowest in the world. Further, the urban tele-density is over 80%, while rural tele-density is less than 20%, and this gap is increasing. As majority of the population resides in rural areas, it is important that the government takes steps to improve rural tele-density. No doubt the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony. These measures are expected to improve the rural teledensity and bridge the rural-urban gap in tele-density. India-World's 2nd largest mobile users with over 903 million subscriber (January 2012). World's 3rd largest Internet subscriber with over 121 million(December 2011). India is slated as world's most competitive and one of the fastest growing telecom markets. Indian telecom industry is contributing nearly 1.5% to Indias GDP. Emergence of Mobile proved to be a boon to expanding Indian Telecom Sector.

Role in Indias Development:

Contribution to GDP: According to the UNCTAD, there is a direct correlation between the growth in mobile tele-density and the growth in GDP per capita in developing countries, which tend to have a high percentage of rural population. The share of the telecom services industry in the total GDP has been rising over the past few years (the telecom sector contribution in GDP went up from 1.52% in FY05 to 2.83% in FY12).

Growth and Opportunities

And would generate employment opportunities for about 10 million people during the same period. Expected Growth: 344,921 crore (US$ 68. 81 billion) by 2012 with growth rate of 26 per cent. Revenue of the sector grew by 7% to 283,207cr (US$ 56. 5 billion) for 2010-11 financial year. Revenues from telecom equipment segment stood at 117,039 crore (US$ 23. 35 billion). Sector would create direct employment of 2. 8 mn people and for 7 mn indirectly.

Growth:
Today the world of telecom has changed. Earlier there was just Reliance Communications providing mobile phones at cheap rates but, now we have many mobile phone operators providing mobile phone services at cheap prices. All this has indeed helped consumers. The entry of AIRCEL was not expected to be good due to the existing tough completion but now it has become one of the most successful operators in the country. Competition is on the rise and even foreign companies like UNINOR are trying their luck in India. The growth in the telecom sector has led to the coming of 3G communication technology. What is 3G? Lets see where it takes us. The 3G service is a generation of mobile phones akin to the generation X for human race. Its like a generation of the mobile phones if mobile phones were species. The 3G technology came into being in the year 2001. NTT Docomo launched 3G for the first time in Japan followed by South Korea in the year 2002. In India it was launched by BSNL in 2008 in Patna and today it has spread to 380 cities with 3G licenses. This was followed by MTNL. The consumers got to know about it through the advertisement which aired on television by BSNL. Its been ten years since 3G came into being. There were mixed responses from both the sides- the consumers and providers. From the consumers point of view it was beneficial but the providers were having some issues. The 3G transmission requires a specific frequency as it cannot be superimposed on the existing 2G frequency. This

requires new operating towers and building new towers needs capital. USA was the first country that successfully adjusted both 2G and 3G on the same frequency. Due to the high cost of building new networks in European countries the introduction of 3G technology got delayed. The overall impact of 3G is going to be a boon to the human race.

Telecommunication Sector Opportunities in India:

The telecom sector is one of the leading contributors to India's flourishing economy. The telecom opportunities in India have been growing by 20 to 40 percent every year since past three years. The telecom services in India have been recognized as a world-class tool for the socio-economic development in India. The tele-density has grown leaps and bounds in the past few years from 2.3 percent in 1999 to 4.8 percent in 2002. The world average percentage for the telecom industry as against the Indian average is 7.5 times while the Asian average against the same was 4.5 times. The current market range of the telecommunication industry in India has been estimated to USD 8 billion and this is expected to undergo an accretion by the end of 2012. Telecommunication Sector Opportunities in India assures a transparent, safe, and secured ambiance for the telecom market. Around 300 million population of highly consumable middle-class status that is advantageous for the industry surrounds the telecom sector in India. Therefore, it adds up to the growth in mobile sector in Indian telecom industry.

Few more Telecommunication Sector Opportunities in India include introduction of Internet telephony services, privatization of VSNL, and introduction of a number of international long distance services sector. The opportunities in the Indian telecom sector is increasing at a massive pace with the introduction of newer and innovative schemes in various sectors and at present the telecom sector in India is claimed to be one of the major contributors in India's flourishing economy.

Timeline of Telecom:
28/1/1882: License to the Oriental Telephone Company Limited of England. 1948: 80,000 total numbers of telephones in India. Slow growth till 1991: Total telephones 5.07 mn. Post 1975 saw resurgence in the India by virtue of various Govt. decisions. Separation DOT from Post and Telegraph (P&T) in 1975. The formation of MTNL out of DOT to provide telecom services exclusively to Delhi and Mumbai. 1995: Wireless Telecom by Modi Group in Kolkata.

Present Scenario:
In the 1990s, sector was opened for private investment as a part of L-P-G Policy. 1/10/2000: the GOI started its operation-BSNL. The GOI policies encouraged the growth, competition and high levels of FDI. (up to 74% foreign investment is now allowed). From telegraphic and telephonic systems, now expanded to technologies like GSM, CDMA, and WLL to the great 3G. 4G in Kolkata by Airtel.

At 861.48 million connections in April 2011' Indian Telecom Industry' is the third largest and fastest growing in the world. According to Cellular Operators' Association of India (COAI), the GSM cellular subscriber base has reached to 590.19 million in May 2011 from 580.66 million at the end of April 2011. There were 826.93 million total wireless subscribers (including GSM and CDMA) in the country at the end of April 2011.. The wireless technologies currently in use in ' Indian Telecom Industry ' are Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). There are primarily 11 GSM and 5 CDMA operators providing mobile services in 22 telecommunication circles, covering more than 2000 towns and cities across the country. Among leading mobile operators in India include Bharti Telecom with 19.88% market share, followed by Reliance with 16.80%, Vodafone with 16.59%, Idea Cellular with 11.16%, state owned BSNL with

11.05%, TATA with 10.8%, Aircel with 6.79%, and all others accounting for just about 6.93% of market share. State owned companies like - BSNL and MTNL.

Private Indian owned companies like Reliance Infocomm and Tata Teleservices.

Foreign

invested

companies

like

Hutchison-Essay, Bharti

Tele-Ventures,

Escotel, Idea Cellular, BPL Mobile, Spice Communications etc.

The Indian Telecom Industrys services are not confined to basic telephone but it also extends to internet, broadband (both wireless and fixed), cable TV, SMS, IPTV, soft switches etc. The bottlenecks for ' Indian Telecom Industry ' are:

Slow reform process. Low penetration. Service providers bears huge initial cost to make inroads and achieving break-even is difficult.

Huge initial investments. Limited spectrum availability and interconnection charges between the private and state operators.

FDI and other M&A activities increasing in number:

The Indian telecom industry has a 74 percent FDI limit in the telecom services segment. The GOI has permitted 100 percent FDI in manufacturing of telecom equipment in India.

Telekom Malaysia acquired a 49 percent stake in Spice Communications for USD 179 million.

Maxis Communications acquired a 74 percent stake in Aircel for USD 1.08 billion.

Ericsson to design, plan, deploy and manage Bharti Airtel network and facilitate their expansion in the rural areas, under a USD 2 billion contract.

Vodafone purchased stake in Hutch from Hong Kong's Hutchison Telecom International for USD 11.08 billion.

Reliance Communications Limited has sold a five percent equity share capital of its subsidiary Reliance Telecom Infrastructure Limited to international investors across the US, Europe and Asia. The deal was worth USD 337.5 million.

Emerging technologies 3G and WiMax to assist in penetration of telecom services in India:

The Indian government plans to auction the spectrum for 3G services by inviting bids from domestic as well as foreign players. The immense potential for 3G is reflected by the 3040 percent annual growth in Value-Added Services. Cell phone manufacturers are striving to develop USD 100 priced 3G handsets for the Indian market. India expects to replicate its 2G growth in 3G services.

WiMAX has been one of the most significant developments in wireless communication. It provides network access in inaccessible locations at a speed of more than 4 Mbps. WiMAX is expected to accelerate economic growth and assist in providing better education, healthcare and entertainment services. It is estimated that India will have 13 million WiMAX subscribers by 2012. Aircel is the pioneer in WiMAX technology in India. BSNL, aims to connect 74,000 villages through WiMAX. Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz range to utilise the opportunities offered by this domain.

Regulation of Telecom
TRAI was established in 1997 to regulate telecom Sector. The functions of TRAI included:

a) To recommend the need and timing for introduction of new service provider. b) To protect the interest of customers of telecom. c) To settle disputes between service providers. d) To recommend the terms and conditions of license to a service provider.

e) To render advice to GOI on matters relating to the development of telecommunication technology. The National Telecom Policy-1994 & the New Telecom Policy-1999has been the driving force of the development and liberalization in this sector. The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing: Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.

New Telecom Policy

GOI has unveiled the new telecom policy as the sector has almost reached saturation. Drastic changes to improve the services and retain growth. It aims to provide new benefits to the mobile consumers and the telecom companies. The main highlights are: No Roaming charges. One license for the whole nation. 100% Tele density will be achieved by 2020. Broadband services be made affordable & reliable by 15. Spectrum availability to be increased to boost growth. Spectrum will be made available at market valuations to reduce possibility of any controversies or scams. Trading, sharing and pooling of spectrum will be allowed among the telecom companies. Delink licenses issuances & spectrum allocations to improve the policies and services.

The New Telecom Policy (NTP) 2012 details of which were released late on Monday, 11 days after the Cabinet approved the policy reveals major compromises in the government's proclaimed thrust on domestic manufacturing of telecommunications equipment. The considerably diminished thrust on telecom manufacturing by domestic players is significant considering that the draft policy projects domestic demand to be in the region of Rs. 2,50,000 crore by the end of the 12th Five Year Plan.

Current News
TRAI recommended easier M&A norms for Indian telecom sector: Indias Telecom Commission has accepted norms of up to 35% market share for merger and acquisitions in the Indian telecom sector, which will make it easier for the Telecom companies to merge with other small players and acquire other companies satisfying the criteria. Indias telecom sector has now been completely saturated with nearly 12/13 players. As per the Telecom Secretary Mr. R. Chandrasekhar, TRAI recommendation will help the telecom operators to go for merger and acquisition easily if the market share of the combined entity falls below 35% of the total market share. This will definitely be a good news for Indian telecom sector as it will provide some lifeline to the highly saturated sector. TRAIs Recommendations to Promote Structured Growth in Telecom Sector: The Telecom Regulatory Authority of India (TRAI) issued important

recommendations related to manufacturing, infrastructure and green telecom to promote structured growth of the sector on 13 April 2011. TRAI proposed investments of over Rs.1-lakh crore for technical up gradation and improvement of manufacturing capabilities of the sector.

TRAI recommended preferential market access to domestic manufacturers and tax

concessions in equipment manufacturing policy. TRAI is in favor of treating telecom infrastructure as an essential infrastructure.

TRAI suggested setting up of Telecom Standards Organization (TSO) for carrying out all works related to telecom standards. TSO would also be responsible for driving international standards and drawing up specifications of the equipment to be used in the Indian telecom networks, including security standards. Pointing out that Indian market for semiconductor chips is around $8 billion, it recommended setting up of two fabrication units with government assistance.

2G Scam and effects: The latest revelations on the 2G scam suggest a careful confluence between the Telecom Ministry, when it was headed by A Raja, and a series of big business houses.

"85 of the 122 licenses were issued to companies which suppressed facts, disclosed incomplete information and submitted fictitious documents to DoT and thus used fraudulent means of getting licenses and thereby access to spectrum" -this is one of the more biting conclusions of the report prepared by the government's auditor, the Comptroller and Auditor General (CAG) the report - which was leaked to the media last week and forced Raja's resignation - was tabled in Parliament today. It is unflinching in its indictment of Raja, blaming him for violating guidelines, indulging in favoritism and costing the government Rs. 1.76 lakh crores by giving away 2G spectrum in 2008 at bargain basement prices to inexperienced new players.

Companies that benefited from Raja's twisted rules include Reliance Telecom (owned by Anil Ambani), which was allocated spectrum ahead of the others. The Department of Telecom, the report says, "did not follow its own practise of first-come first-served in letter and spirit."

The report also states that Swan Telecom was given undue advantage, and that it served effectively as a front for Reliance. The charges in the CAG report are that

Swan should not have been considered for a license because Reliance Communications held 10.71% stake in Swan - and according to the rules, a telecom operator cannot own more than 10% stake in another telecom company operating in the same service area. Reliance Telecom issued a statement this evening that declares it did not have any shareholding in Swan when the license was granted (the CAG report's allegation is that Reliance owned stake when Swan applied for the license).

CAG indicts Unitech Wireless Another big beneficiary of the 2G spectrum allocation was Unitech Wireless, which had no experience in the telecommunication sector. After Unitech got the license for a throwaway price of Rs. 1,661 crore, it sold 60 per cent stake to Telenor Asia for a whopping Rs. 6,200 crore. In its report, CAG indicts Unitech saying the high value paid by Telenor was for the 2G spectrum, and not for other inputs as claimed by Unitech. It also says that such huge equity infusion, which should have accrued to the public exchequer, went as a favors to the new licensees for enriching their business. Speaking to NDTV, the telecom giant Telenor said that its investment in Unitech Wireless conformed to all regulations. Stocks of Unitech traded with over 5.5 per cent losses. All 22 licenses of Uninor, the company in which Unitech and Telenor are partners, have been scrapped. Unitech stocks had plunged over 8 per cent after the verdict. Reliance Communications (down 3.5 per cent) continued to be under pressure though the company issued a clarification after the verdict. RCom's licenses were all issued in 2001 or prior. Bharti Airtel (3.5%) was the top gainer on the Nifty index. Bharti is the only listed telecom firm not to get a license post 2008. Idea Cellular (1%) also traded with gains despite cancellation of nine licenses. Close to 6 per cent of Idea's subscribers would be affected by cancellation but the company will benefit as most of the cancelled licenses are in loss making circles.

Unitech (down 2%) and DB Realty (down 1%) traded lower while Videocon traded flat. All these firms have been hit by the Judgment. Reliance Communications (down 2.5%) was the top loser on the Nifty index though none of the company's license has been cancelled.

SWOT Analysis:
Strengths

Brand name Strong Management Financial leverage Asset leverage Innovative culture Technology

Opportunities
Financial leverage

New services Innovation

Weakness
Cost structure

Work ineffectiveness Customer services

Threat
Mature market

Change in taste Intense competition Government regulation

3. COMPANY ANALYSIS
In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. The present and future values are affected by a number of factors.

Competitive edge of the company:

Major industries in India are composed of hundreds of individual companies. Though the number of companies is large, only few companies control the major market share. The competitiveness of the company can be studied with the help of the following: Market share: The market share of the annual sales helps to determine a companys relative competitive position within the industry. If the market share is high, the company would be able to meet the competition successfully. The companies in the market should be compared with like product groups otherwise, the results will be misleading. Growth of sales: The rapid growth in sales would keep the shareholder in a better position than one with stagnant growth rate. Investors generally prefer size and growth in sales because the larger size companies may be able to withstand the business cycle rather than the company of smaller size. Stability of sales: If a firm has stable sales revenue, it will have more stable earnings. The fall in the market share indicates the declining trend of company, even if the sales are stable. Hence the stability of sales should be compared with its market share and the competitors market share. Earnings of the company: Sales alone do not increase the earnings but the costs and expenses of the company also influence the earnings. Further, earnings do not always increase with increase in sales. The companys sales might have increased but its earnings per share may decline due to rise in costs. Hence, the investor should not only depend on the sales, but should analyze the earnings of the company.

Financial analysis: The best source of financial information about a company is its own financial statements. This is a primary source of information for evaluating the investment prospects in the particular companys stock. Financial statement analysis is the study of a companys financial statement from various viewpoints. The statement gives the historical and current information about the companys operations. Historical financial statement helps to predict the future and the current information aids to analyze the present status of the company. The two main statements used in the analysis are Balance sheet and Profit and Loss Account.

The balance sheet is one of the financial statements that companies prepare every year for their shareholders. It is like a financial snapshot, the company's financial situation at a moment in time. It is prepared at the year end, listing the company's current assets and liabilities. It helps to study the capital structure of the company. It is better for the investor to avoid a company with excessive debt component in its capital structure. From the balance sheet, liquidity position of the company can also be assessed with the information on current assets and current liabilities.

Company Profile: IDEA Cellular Ltd.

History:
In 1995, IDEA Cellular limited, a GSM mobile services provider was established as Birla communications. It entered into a joint venture with AT&T Corporation and Grasim Industries, forming Birla AT&T Communications Limited in 1996. The brand IDEA was created in 2002, after a second merger with Tata Cellular Limited. In 2006 Aditya Birla Group (ABG) acquired all the shares from TATA group to become the largest shareholder and went public in March 2007. It became a pan-India operator in 2009 and reached the milestone of 100 million subscribers on September 2011.

Mission
IDEAs Mission is: We will delight our customers while meeting their individual communication needs anytime anywhere. It shows the commitment of the company in serving an individuals needs without compromising on the quality of service.

SWOT Analysis
Strengths With a 13.9% of market share in Q1-FY-2012, IDEA is the 3rd largest mobile services operator in India. IDEA is the only operator in the country to have ISO 9001:2008 certifications across all 22 centers, showing the uniformity and quality in service across length and breadth of the country. Strong distribution channels and the high quality network structure strengthen its brand equity. IDEA, a subsidiary of ABG the US $35billion Corporation, operating in over 33 countries, has strong support to implement its initiatives.

Weaknesses IDEA has a Debt-Equity10 ratio higher than the Industry and peers, which reduces the fund raising capacity of the firm inhibiting expansion and quality enhancement. It makes the company accountable to creditors before taking strategic decisions. IDEA incurred losses till 2010 despite the industry making profits (Exhibit-11). This loss prevented IDEA from issuing dividends to the shareholders making it an unattractive investment. Complete dependence on mobile services makes it vulnerable to risks.

Opportunities IDEA with 66.67% of its subscribers from rural areas (IDEA-Cellular, 2012) is the market leader in the semi-urban and rural market. With a suitable strategy, IDEA can pose a threat to its competitors in urban market and increase the subscriber base.

The increase in affordability of telephone services and mobiles along with the increase in disposable income and low tele-density also supports future growth. The Indian IT industry is poised to be a US $225billion industry by 2020, with a threefold increase in internet users.

Telecom Regulatory Authority of India (TRAI) expects the broadband subscribers to reach 100-million by 2014, provides an immense opportunity to operators like IDEA to fill the gap.

The launch of Mobile Number Portability (MNP) has been an added advantage as IDEA has been the biggest gainer with a net increase of 2.2 million subscribers (TRAI-Subscription Data, 2012). The volatility in the industry is reducing with the improvised regulatory environment making it easy for operators to raise funds and improve network quality.

Threats The intense competition in the telecom industry has led to price wars and reduction in tariffs and impacting the Average revenue per user (ARPU). IDEA faces significant competition from companies like Bharti Airtel, Tata Teleservices, and BSNL. With industries like hospitality, IT, Business process outsourcing (BPO) replacing broadband with Wi-Fi technology the demand for Wi-Fi is peaking. India is expected to have 350-million Wi-Fi users by 2013. Hence this alternative technology along with Wi-Max poses a severe threat.

Company Profile: Bharti Airtel Ltd. History:

Bharti Airtel, the largest telecom operator in India, is a fully integrated player offering end to end telecom solutions. Started as Bharti Tele-Ventures in 1995 in Delhi, Bharti Airtel today operates in all the 22 circles in India and has the largest customer base with 19.58% market share (TRAI-Subscription Data, 2012). The growth of Airtel is primarily characterized by acquisitions JT Holdings, Skycell, Spice Cell - and expansions into new geographical markets Africa, Sri-Lanka, Bangladesh.

Mission & Vision:

Bharti Airtels mission is stated as to meet their customers needs based on their deep understanding of customers ambitions, wherever they are. It aims at addressing the latent needs of existing mobile users and use innovative means to satisfy them. The company envisions being the most loved brand, enriching the lives of millions by 2015. To consolidate and increase its existing market share, Airtel, being the industry leader, intends to diversify into integrated services.

SWOT Analysis
Strengths Largest telecom operator in India High new additions 3G service launch: Bagged 3G spectrum in 13 out of 22 reaching 65-70% of its customer base. Large passive infrastructure Rise in total MoU Highest active customer base: Airtel has ~92% active customers, one of the highest in the industry. Has one-fourth of the rural market and is focused on increasing it further.

Weaknesses Decline in customer market share: Fell to 20.0% in March 2011 from 21.8% in March 2010 due to the new Greenfield operators offering rock bottom prices Decline in ARPU's: ARPU's have declined from Rs 220 in Q4FY10 to Rs 194 in Q4FY11. Focus on rural markets is one of the reasons.

Opportunities New customer additions through MNP Future potential of telemedia services: The government proposal in NTP 2011 for broadband on demand services offers a huge potential. Opportunities in Africa: large untapped market still exists in Africa Possibility of acquisitions: Less performing Greenfield operators are potential targets.

Threats MNP can be a double edged sword: Rock-Bottom prices by new competitors can affect Airtel. Temporary setback to telecom tower growth due to the uncertainty over license conditions TRAI recommendation to charge Rs. 4000 Cr. extra from telecom companies that hold more 2G spectrum than 6.2 Mhz

Comparison: Lag Indicators Financial Parameters:

Current Ratio: The ratio measures the liquidity position of a firm i.e. the ability to pay off current obligations.

The trends show a fluctuating ratio for IDEA whereas Airtel has a relatively stable ratio at 0.7. This indicates the vulnerability of IDEA to external market factors including the economic crisis of 2007-08.

Debt/Equity Ratio: This is a measure of financial leverage of a firm. A Lower D/E ratio represents low risk to the equity holders. Given that the market is highly competitive, in order to reduce their cost of debt both the companies steadily reduced their debts and raised capital through equity. IDEA issued IPO in 2007 and stabilized its D/E ratio. However, Airtel continues to maintain a lower ratio.

Return on Capital Employment (ROCE) Ratio: This ratio indicates the efficiency and profitability of a company's capital investments. Airtel has a considerably higher ROCE ratio when compared to IDEA Efficient handling of operations and economies of scale due to huge size are the key differentiating factors for Airtel.

Earnings per Share (EPS): EPS is a measure of profitability and is used to compare performance of similar companies. Though IDEAs EPS is relatively stable at around 2.7, it is significantly lower than that of Airtel. Lower expenditures and efficient management of resources led to higher profits for Airtel which is reflected in its high EPS ratio.

PBITM/Income Ratio: The ratio signifies the profitability of a company. The efficiency of operations plays a key role in cutting down costs and thus withstanding the tariff war. Hence effective resource management combined with superior capital structure is the key driver behind Airtel higher profitability.

Telecom-Sector Performance Indicators:

Average Revenue per User for both Airtel and IDEA is decreasing over the years following the industry trend as shown. The intense competition among players leads to a price war and eventually huge tariff reduction.

Average Minutes of Usage per subscriber (AMoU): As shown, the industry AMoU has been constantly decreasing owing to the availability of other modes of communication like Short Message Service (SMS), chatting over internet, usage of Wi-Fi etc. However, for market-leaders, AMoU has stabilized over time, due to the quality of service and promotional schemes.

Customer Base: There has been a robust growth in the customer base post-2002 when the prices became affordable. Airtel and IDEA initially grew at the rate of 91.74% and 129.55% respectively till 2008 owing to the initial lower customer base. From 2009, the growth stagnated at 12.87% and 27.35% for Airtel and IDEA respectively because of saturated urban market and intense competition. Churn Rate: IDEAs churn rate is on the higher side because of proliferation of new service providers. Due to difficulty in gaining the loyalty of customers, IDEA stepped up with free VAS and full talk time packages.

Active Mobile Users: Airtel and IDEA had the highest Active Mobile Users, greater than industry average of 70%. Eventually IDEAs active mobile users surpassed that of Airtel which can be proliferation of multiple SIM usage in urban areas and greater penetration in rural areas where people do not switch operators easily. Customer Satisfaction: Despite being the highest gainer from MNP, IDEAs customer satisfaction level measured based on the parameters like billing accuracy, customer service, supplementary services is among the least in some parts of the country. Airtel has the highest satisfaction level rightly making it a market leader.

Comparison: Lead Indicators: Growth Drivers

While the telecom sector has been growing over the last 5 years, the rate of growth has been slowing down over the last couple of years. While Airtel has looked the Global way for

growth through mergers and acquisitions, and has expanded to Africa, Bangladesh and Sr Lanka; IDEA has focused on the rural areas for growth.

Airtel has also focused on shifting from a pure mobile services operator to an integrated telecom service provider across Telecom, Television and Computers. IDEA, on the other hand has expanded its array of Value-added Services with greater focus on rural applications with strategic tie-ups. On the whole, the main growth drivers for the industry are expected to be from 3G and Data services driven through Broadband.

Strategic Tie Ups

Airtel was the pioneer in entering into strategic tie-ups, with its outsourcing of IT to IBM. Till today, Airtel has pioneered similar tie-ups with companies for its forays. IDEA Cellular as also struck similar deals for hastening growth.

Bharti Airtel Strategic Tie-ups: Rural Focus: IFFCO Software: Microsoft, Google IT: Aegis, Firstsource, Hinduja TMT, IBM, Mphasis & Teleperformance Handsets: iPhone Mobile Banking: State Bank of India

For Rural Areas, while Airtel has a tie-up with IFFCO; IDEA has similar tie-ups with Reuters Market Light which provides information to farmers about weather and other such information. With the saturating market, rural circles have become the areas of focus for operators and such tie-ups help in penetration by providing relevant information for the target audience. With the proliferation of mobile phones, mobile banking has become an important application.

Both IDEA and Airtel have tie ups with banks for the same. Another innovative strategic tieup is the formation of Indus Towers by Airtel, Vodafone and IDEA for tower infrastructure by pooling in their entire prior infrastructure, for the benefit of each other. Through this, all

three operators have been able to reduce fixed costs that are incurred in the construction of infrastructure and have achieved better network coverage simultaneously.

Such tie-ups are the way for the future as it helps reduce costs and increase efficiency by focusing only on the areas of expertise while outsourcing the other aspects of the business to the area specialists.

IDEA Cellular Strategic Tie-ups Rural Focus: Reuters Market Light, Indian Railways Software IndiaTimes, Opera, handygo IT: SPANCO BPO, Aditya Birla Minacs Handsets: Huawei Mobile Banking: Axis Bank

Marketing and Promotion

With increased competition, and about 12-13 active players in the industry, it has become a challenge for the service providers to grab eyeballs and garner customer attention. It has become an industry trend to be associated with high TRP properties to ensure visibility. Added to this, most telecom players have resorted to celebrity endorsement for the same.

While Airtel has focussed on conveying its brand image and improving brand equity through its advertising, IDEA focuses mainly on its targets its ads towards the various plans that it offers with its What an IDEA campaigns.

IDEA has focused on increasing awareness among the Indian consumers. It has associated itself with popular Indian TV properties like KBC and Filmfare Awards. It has also sponsored three IPL teams Mumbai Indians, Deccan Chargers and Delhi Daredevils. With the resounding success of the IPL, this has given IDEA, pan-India recognition.

On the other hand, Airtel has concentrated on establishing itself in the global arena. It was the title sponsor for the T20 Champions League and the Indian Formula-1 Grand Prix. Added to

this is its partnership with Manchester United FC, the worlds most popular Football Club to give it global visibility. These strategies are coherent with Airtels motive to have a global presence.

IDEA vs AIRTEL vs INDUSTRY Financial Indicators [2011 Data]

PERFORMANCE INDICATOR Current Ratio Debt-to-Equity Ratio

IDEA 0.7 0.72

AIRTEL 0.7 0.27

INDUSTRY 0.88 0.35

ROCE

6.2

15.97

10

EPS

3.9

20

N.A

PBITM/Income

8.35

24.12

19.13

Telecom sector -Performance Indicators [2011 Data]

PERFROMANCE INDICATORS Average Revenue per User Average Minutes of Usage per user IDEA 168 401 AIRTEL 194 468 INDUSTRY 84 368

Customer Base Churn Rate

105 8.2

152.3 5.8

NA NA

Active Mobile Users Customer Satisfaction Levels

93.18 % 92 %

91.17 % 97.00 %

70 % 95 %

Recommendations Immediate:
In the immediate future, IDEA Cellular should ensure that it recaptures the 9 circles that were lost due to the Supreme Court Decision through the re-auction as Pan-India presence is critical for all future growth prospects.

Short Term:
IDEA Cellular should work on improving Brand Equity and recall through brand building measures. It can possibly associate with global entities for tie-ups like Chelsea FC as brand ambassador Abhishek Bachchan is already associated with the same, Indian Hockey Team and other CSR Initiatives. For tapping the rural segments and non-Hindi speaking states, IDEA can focus on having regional film stars as brand ambassadors and tie-up with their movies for in-film placement. To increase the consistently decreasing ARPU and MoU, IDEA should improve network coverage and variety of plans offered for long distance calling. To improve ARPU, it may focus on targeted VAS for rural and semi-urban areas. For increasing customer base in urban markets, IDEA could possibly develop focused plans like Closed User Groups (CUG) for corporates, college students and improve 3G connectivity.

Medium Term:
IDEA should focus on Customer Relationship Management and take steps to improve customer satisfaction as it is of paramount importance. Given the low customer satisfaction levels and resultant high churn rates, it may look at the possibility of outsourcing customer care and IT management to specialized firms with skilled labor force and expertise, even at the cost of short term profits. It should increase the focus on 3G and data services, and develop supporting infrastructure for the same, as they are likely to be the future growth drivers. IDEA must focus on tapping the low-cost Smartphone market targeted at youth and the middle class, through the IDEA Smartphones, in turn boosting 3G proliferation.

Long Term:
In the long term, IDEA can consider expanding into untapped geographical markets like African countries, Middle East through acquisitions. It could possibly target FDI to increase

working capital for rural and data services expansion. Overall, it should look to maintain the current focus on reducing the debt-equity ratio, thus increasing investor confidence in the company.

TATA COMMUNICATIONS About Tata Communications

Tata Communications is a leading global provider of a new world of communications. With a leadership position in emerging markets, Tata Communications leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers. The Tata Global Network includes one of the most advanced and largest submarine cable networks, a Tier-1 IP network, with connectivity to more than 200 countries across 400 PoPs, and nearly 1 million square feet of data center and colocation space worldwide. Tata Communications' depth and breadth of reach in emerging markets includes leadership in Indian enterprise data services, leadership in global international voice, and strategic investments in South Africa (Neotel), Sri Lanka (Tata Communications Lanka Limited), and Nepal (United Telecom Limited). Tata Communications Limited is listed on the Bombay Stock Exchange and the National Stock Exchange of India and its ADRs are listed on the New York Stock Exchange. (NYSE: TCL)

Tata Companies Profile

The Tata group comprises over 100 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries. The total revenue of Tata companies, taken together, was $83.3 billion (around Rs. 376975 crore) in 2010-11, with 58 per cent of this coming from business outside India. Tata

companies employ over 425,000 people worldwide. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. Every Tata company or enterprise operates independently. Each of these companies has its own board of directors and shareholders, to whom it is answerable. There are 31 publicly listed Tata enterprises and they have a combined market capitalisation of about $79.36 billion (as on August 19, 2011), and a shareholder base of 4.3 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Indian Hotels and Tata Communications. Tata Steel is among the top ten steelmakers, and Tata Motors is among the top five commercial vehicle manufacturers, in the world. TCS is a leading global software company, with delivery centres in the US, UK, Hungary, Brazil, Uruguay and China, besides India. Tata Global Beverages is the second-largest player in tea in the world. Tata Chemicals is the world's second-largest manufacturer of soda ash and Tata Communications is one of the world's largest wholesale voice carriers. In tandem with the increasing international footprint of Tata companies, the Tata brand is also gaining international recognition. Brand Finance, a UK-based consultancy firm, valued the Tata brand at $15.75 billion in 2011 and ranked it 41st among the world's 100 most valuable brands. Business Week magazine ranked Tata 17th among the '50 Most Innovative Companies' list and the Reputation Institute, USA, in 2009 rated it 11th on its list of the world's most reputable companies. Founded by Jamsetji Tata in 1868, Tata's early years were inspired by the spirit of nationalism. It pioneered several industries of national importance in India: steel, power, hospitality and airlines. In more recent times, its pioneering spirit has been showcased by companies such as TCS, India's first software company, and Tata Motors, which made India's first indigenously developed car, the Indica, in 1998 and recently unveiled the world's lowestcost car, the Tata Nano. Tata companies have always believed in returning wealth to the society they serve. Twothirds of the equity of Tata Sons, the Tata promoter holding company, is held by philanthropic trusts that have created national institutions for science and technology, medical research, social studies and the performing arts. The trusts also provide aid and assistance to non-government organisations working in the areas of education, healthcare and livelihoods. Tata companies also extend social welfare activities to communities around their industrial units. The combined development-related expenditure of the trusts and the companies amounts to around 3 per cent of the group's net profits in 2011.

Going forward, Tata is focusing on new technologies and innovation to drive its business in India and internationally. The Nano car is one example, as is the Eka supercomputer (developed by another Tata company), which in 2008 was ranked the world's fourth fastest. Anchored in India and wedded to traditional values and strong ethics, Tata companies are building multinational businesses that will achieve growth through excellence and innovation, while balancing the interests of shareholders, employees and civil society.

Tata Companies Commitment

From customer to community, the Tata Companies invest in resources for the various markets and communities it serves. The Tata Companies' philanthropic trusts and global community initiatives develop and sustain services that promote health and education, leadership and technical training, and arts and sports programs

Vision
Deliver a new world of communications to advance the reach and leadership of our customers.

Commitment
Invest in building long-lasting relationships with customers and partners and lead the industry in responsiveness and flexibility.

Strategy
Build leading-edge IP-leveraged solutions advanced by our unmatched global infrastructure and leadership in emerging markets

Shares
The equity capital of Tata Communications is represented by 285 million shares. The equity shares of Tata Communications are currently listed on the National Stock Exchange of India Limited (NSE) and The Stock Exchange, Mumbai (BSE) which are the premier stock exchanges of India.

Tata Communications is also listed on the NYSE in the form of ADR's (American Depository Receipts)

Ratio Analysis
Mar 12 PROFITABILITY RATIOS
Gross Profit Margin (%) Net Profit Margin (%) Return On Capital Employed (%) 6.86 4.08 4.79

Liquidity And Solvency Ratios

Current Ratio Quick Ratio Debt Equity Ratio 1.34 1.32 0.13

Management Efficiency Ratios

Inventory Turnover Ratio Debtors Turnover Ratio Asset Turnover Ratio 9092.82 5.54 0.48

Gross profit
The gross profit ratio is the gross profit expressed as a percentage of total sales. The gross profit margin ratio measures how efficiently a company uses its resources, materials and labor in the production process by showing the percentage of net sales remaining after subtracting the cost of making and selling a product or service

Interpretation- this ratio has been increased from last year which means that the company is managing their resources very well.

Net profit
The ratio of an organization's net profit to its total net sales. Comparing the net profit ratios of companies in the same sector shows which is the most efficient.

Interpretation: this ratio has come down from last year as this shows that profitability has been decreased.

Return on capital employed

A ratio that indicates the efficiency and profitability of company's capital investment ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings.

Interpretation- this has been increased from last year and shows that company is increasing capital.

Current ratio
The current ratio measures the short-term solvency of the firm. It establishes the relationship between current assets and current liabilities. . dividing current assets by current liabilities. It is calculated by

Interpretation- this has been decreased since last year and shows the ability to pay debts.

Quick ratio
It has been an important indicator of the firms liquidity position and is used as a complementary ratio to the current ratio. It establishes the relationship between quick

assets and current liabilities. It is calculated by dividing quick assets by the current liabilities.

Interpretation- this ratio has been decreased from last year and shows that company is not able to convert its liquidity.

Debt equity ratio

Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest) against the assets of the firm. Thus this ratio indicates the relative proportions of debt and equity in financing the firms assets. It can be calculated by dividing outsider funds (Debt) by shareholder funds (Equity).

Interpretation- this ratio has been reduced than last year and shows that the company is not aggressive in financing its growth with debt.

Inventory turnover ratio

This ratio indicates the number of times the inventory has been converted into sales during the period. Thus it evaluates the efficiency of the firm in managing its inventory. It is calculated by dividing the cost of goods sold by average inventory.

Interpretation- it shows how quickly goods enter and exits from the company.

Debtors turnover ratio

This indicates the number of times average debtors have been converted into cash during a year. It is determined by dividing the net credit sales by average debtors.

Interpretation- this has been increased and a very good sign as it shows that how quickly company has been able to collect its money from debtors.

Asset turnover ratio

The relationship between assets and sales is known as assets turnover ratio. Several assets turnover ratios can be calculated depending upon the groups of assets, which are related to sales.

Interpretation- This ratio has been increased from last year and shows that sales has affected a little.

comparison at a glance
Gross Profit Margin(%) current ratio debtors turnover 6.86 5.54 4.79 4.08 5.47 4.38 3.21 1.34 1.32 0.13 1 0.48 2 1.92 2.01 0.32 0.45 5.16 Net profit quick ratio asset turnover return on capital employed debt equity

Overview of Reliance communication Introduction

Reliance Communications Limited (Reliance Communications or the Company) is Indias largest integrated communications service provider in the private sector with over 32 million individual, enterprise, and carrier customers. We operate pan-India across the full spectrum of wireless, wire line, and long distance, voice, data, video and internet communication services. We also have an extensive international presence through the provision of long distance voice, data and internet services and submarine cable network infrastructure globally. As presently constituted, Reliance Communications was formed by the demerger and vesting of the telecommunications undertakings of Reliance Industries Limited (RIL). The demerger and vesting became effective on December 21, 2005. Our shares were listed in India on the Bombay Stock Exchange and National Stock Exchange on March 6, 2006 and our Global Depositary Receipts were listed on the Luxembourg Stock Exchange on August 3, 2006.

Strategic Business Units

The business of Reliance Communications is organized into three strategic customer facing business units: Wireless, Global, and Broadband. In addition, one of the wholly owned subsidiaries of Reliance Communications is engaged in the marketing and distribution of wireless handsets. Our strategic business units are supported by our fully integrated, state-of-the-art network and operations platform and by the largest retail distribution and customer service facilities of any communications service provider in India.

Analysis
Liquidity and solvency ratio

Current Ratio
Year Ratio 2012 .77 2011 .96

The standard ratio is 2:1 but in the case of Reliance Communication the case in not such. In it the CL of the company is more than the CA. So it means the company is over trading. It needs to maintain a sufficient current asset to overcome this.

Quick Asset
Year Ratio 2012 1.19 2011 1.81

The standard ratio is 1:1 but in the case of Rel-Com the company ability to convert asset into cash is more. So this is healthy for the company and for the bank, money lenders and the creditors to work with the company.

Debt-Equity Ratio
Year Ratio 2012 .62 2011 .65

It shows the relation between debt and equity in the business. Commonly 1:2 is considered the standard ratio. As the company equity is more than debt this shows that the investors in the company are safe.

Profitability indicators for shareholders Earnings per share

year ratio 2012 .76 2011 -3.67

EPS for the current year is .76 which means the PAT of the company is positive and each share holder is earning .76 per share.

Operating Ratio
Year In % 2012 28.29 2011 12.85

It shows the portion of net sales to cover the cost of good sold and operating expenses. In this case the ratio is lower which indicate greater managerial efficiency and control as well as higher profitability.

Gross profit ratio

Year In % 2012 13.95 2011 .87

It helps to get the gross profit after deducting the cost of goods sold and other direct expenses. The company gross profit margin is 13.31.

Net profit ratio

Year In % 2012 1.21 2011 -5.4

It helps to ascertain profitability. It is compared with G. P ratio. There is a considerable difference which indicates that there are considerable expenses and losses charged against profit.

 Return on capital employed

year In % 2012 3.34 2011 1.03

An efficient business must have reasonable turnover on sales and also a reasonable margin of sales. This is the combination of both. It shows operational efficiency.

Dividend payout ratio

year Dividend per share 2012 .25 2011 .5

It shows the dividend which is paid to each equity shareholder after the company keeps the fund in reserve and allocating it in various place. In this case each equity shareholder is paid a dividend of .25.

Management Efficiency Ratio

Inventory Turnover ratio

year ratio 2012 36.88 2011

It shows number of time average stock is rotated during a period. In this the velocity of stock movement is high which indicates quick movement of stock, lower storage cost and efficiency of management in inventory cost.

Debtors Turnover Ratio

year ratio 2012 6.22 2011 7.22

It shows the period of credit allowed to the debtors. In this case is around 6.22 which is quite high, that shows trend of collection which may invite bad debt and other risk. In any case credit should always be collected faster than paid off.

Fixed Asset Turnover Ratio

year ratio 2012 .46 2011

Fixed asset turnover ratio in this case is .46. This low ratio indicates the under utilisation of fixed asset and the management is not showing efficiency to utilise it. But it can also be that it is capital intensive industry so the ratio tends to be low.

Investment Turnover Ratio

year ratio 2012 36.88 2011 39.63

The investment turnover ratio is 36.88 which indicate higher performance .This means the sales of the company is increasing investment remaining the same.

References

Ideacellular.com Tatacommunications.com Rcom.co.in Airtel.in Wikipedia.org Introecon.com Journal of economic analysis & policy bx.businessweek.com