ASSIGNMENT ON MICRO ENVIRONMENT ANLAYSIS OF BHARTI AIRTEL

SUBMITTED TO: Dr. SANDHYA A.S. SUBMITTED BY: LEENA BHATIA JL12RM27 ANSHITA SRIVASTAVA JL12RM09 MOHD. ALEEM JL12RM32 ABU UMAIR JL12RM01 PRATEEK MAHAUR JL12RM38 MOHD. RAHIL JL12RM31

Fundamental analysis is the examination of the underlying forces that affect the well being of the company, industry groups and companies. As with most analysis the goal is to develop a forecast of future price movement and profit from it. At the company level, fundamental analysis may involve examination of financial data, management , business concept and competition. At the industry level their might be an examination of supply and demand forces of the products. For the na tional economy fundamental analysis might focus on economic data to asses the pr esent and future growth of the economy. Fundamental analysis is a method of evaluating a security by attempting to measu re its intrinsic value by examining related economy, financial and other qualita tive and quantitative factors. Fundamental analysis attempt to study every thing that can effect the securities value including macro economic factors and indiv idual specific factors. Three phase of the fundamental analysis A. Understanding of the Macro Economic environment and developments (Econo my analysis)

B. Analyzing the prospectus of the industry to which the firm belongs(Indus try analysis) C. Assessing the projected performance of the company( Company analysis)

The purpose of analyze economic condition of the country in fundamental analysis to asses the general economic situation both within the country and inter natio nally. The economy is like the tide and the various industry groups and individ ual companies are like boats. When economy expands most industry groups and comp anies benefits and grows. When the economy decline, most sectors and companies u sually suffer. The stock market does not operate in a vacuum it is an integral p art of the whole economy of a country, more so in a free economy that of United States and to some extent in mixed economy like ours. To gain an insight into the complexities of stock market. One needs to d evelop a sound economic understanding and be able to interpret the impact of imp ortant economic indicators on stock markets. The following are some important factors which should be taken into account whil e doing fundamental analysis: Economic Growth Per capita income Industrial Production Inflation Interest Rates Foreign Exchange Reserves Budgetary Deficit Domestic Savings and Investment Tax Rates Infrastructure Political Situation INDIAN ECONOMY ANALYSIS INDIA GDP GROWTH RATE India Gross Domestic Product (GDP) expanded 6.10% over the last 4 quarters. The India Gross Domestic Product is worth 1217 billion dollars or 1.96% of the w orld economy, according to the World Bank. India's diverse economy encompasses traditional village farming, modern agricul ture, handicrafts, a wide range of modern industries, and a multitude of service s. Services are the major source of economic growth, accounting for more than ha lf of India's output with less than one third of its labor force. India GDP Growth Rate chart Year 2009 2008 2007 2006 Mar 5.80 8.60 9.70 10.40 Jun 6.10 7.80 9.20 9.80 Sep 7.70 9.00 10.60 Dec 5.80 9.30 9.30 Average 5.95 7.48 9.30 10.03

. INTERPETATION:AS WE SAW THAT GDP GROWTH RATE OF INDIA'S SHOWS DECLINING TREND. MAIN REASON BEHIN D THIS IS LESS RAIN AND GLOBAL ECONOMY MELTDOWN. BUT AS WE SEE IN JUNE 2009 GDP RATE INCREASES TO 6.10 AS COMPARE TO MARCH 2009'S 5.8. IT SHOWS THAT INDIA'S GDP RAT E IS INCREASING. IT SHOWS GOOD PROSPECTUS FOR INVESTORS IN FUTURE. AND INVESTOR CAN GET BENEFIT BY INVESTING IN INDIAN COMPANY

INDIA'S INFLATION RATE Inflation rate refers to a general rise in prices measured against a standard l evel of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices index, and the GDP deflator, which measures infla tion in the whole of the domestic economy. India's diverse economy encompasses t raditional village farming, modern agriculture, handicrafts, a wide range of mod ern industries, and a multitude of services. Services are the major source of ec onomic growth, accounting for more than half of India's output with less than on e third of its labor force. The economy has posted an average growth rate of mor e than 7% in the decade since 1997, reducing poverty by about 10 percentage poin ts.

India Inflation Rate chart Year Oct 2009 2008 10.45 2007 5.51 2006 7.63 Jan Nov 10.45 5.51 10.45 6.72 5.51 4.39 6.72 Feb Dec 9.63 5.47 9.70 7.56 5.51 5.31 6.72 Mar 8.03 7.87 6.72 5.31 Apr 8.70 7.81 6.67 5.26 May 8.63 7.75 6.61 6.14 Jun 9.29 7.69 5.69 7.89 Jul 11.89 8.33 6.45 6.90 Aug 11.72 9.02 7.26 5.98 9.77 6.40 6.84 Sep

Interpretation:- As graph shows that inflation rate is rising year by year. Infl ation in economy is not good from investor's point of view. When inflation rate ri ses it become the reason of extra costs to business, thereby squeezing their pro fit margin and leading to real decline in profitability and there by reducing th e dividends on variable income securities.

INDIA INTEREST RATE India benchmark interest rate stands at 3.25 percent. In India, interest rate de cisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate. India Interest Rate chart, Year Oct 2009 3.25 2008 6.00 2007 6.00 2006 6.00 Jan Nov 4.00 3.25 6.00 6.00 6.00 6.00 5.25 6.00 Feb Dec 4.00 6.00 5.00 6.00 6.00 5.50 6.00 Mar 3.50 6.00 6.00 5.50 Apr 3.25 6.00 6.00 5.50 May 3.25 6.00 6.00 5.50 Jun 3.25 6.00 6.00 5.50 Jul 3.25 6.00 6.00 5.75 Aug 3.25 6.00 6.00 6.00 Sep 3.25 6.00 6.00 6.00

Interpretation :- Data in graph shows that in 2009 interest rate are less than p revious year. Means government is helping the businessmen so that the can conti nue their business without any difficulty in economic crisis type of condition b y reducing the interest rate. Low interest rate is good from investor's point of v iew. INDIA CURRENT ACCOUNT Current Account is the sum of the balance of trade (exports minus imports of goo ds and services), net factor income (such as interest and dividends) and net tra

nsfer payments (such as foreign aid). The balance of trade is typically the most important part of the current account. This means that changes in the patterns of trade are key drivers in the current accounts of most of the world's economie s. However, for the few countries with substantial overseas assets or liabilitie s, net factor payments may be significant. Positive net sales to abroad generall y contributes to a current account surplus; negative net sales to abroad general ly contributes to a current account deficit. Because exports generate positive n et sales, and because the trade balance is typically the largest component of th e current account, a current account surplus is usually associated with positive net exports. The net factor income or income account, a sub-account of the curr ent account, is usually presented under the headings income payments as outflows , and income receipts as inflows. Income refers not only to the money received f rom investments made abroad (note: investments are recorded in the capital accou nt but income from investments is recorded in the current account) but also to t he money sent by individuals working abroad, known as remittances, to their fami lies back home. If the income account is negative, the country is paying more th an it is taking in interest, dividends, etc. For example, the United States' net income has been declining exponentially since it has allowed the dollar's price relative to other currencies to be determined by the market to a point where in come payments and receipts are roughly equal of trade forms part of the current account, which also includes other transactions such as income from the internat ional investment position as well as international aid. If the current account i s in surplus, the country's net international asset position increases correspon dingly. Equally, a deficit decreases the net international asset position. India Current Account chart, historical data, forecast and news. India is leadin g exporter of gems and jewelry, textiles, engineering goods, chemicals, leather manufactures and services. India is poor in oil resources and is currently heavi ly dependent on coal and foreign oil imports for its energy needs. Other importe d products are: machinery, gems, fertilizers and chemicals. Main trading partner s are European Union, United States, China and UAE . Year 2009 2008 2007 2006 Mar 4.7 -1.5 4.3 4.5 Jun -5.8 -9.0 -6.7 -4.1 Sep -12.5 -4.3 -6.3 Dec -13.0 -4.5 -3.7 Total -1.1 -36.1 -11.3 -9.5

Interpretation: - India's current account shows negative current account. Means im port is greater than export. Investor doesn't take it positively. As compare to pr evious year negative balance payment has increased.

IMPACT OF BUDGET ON TELECOME INDUSTRY The Finance Minister has announced the allocation of Rs 2,400 crore from the Uni versal Service Obligation Fund (USOF) to subsidize mobile, Internet and landline operations in rural India. With the government planning to subsidize construction of 11,000 telecom towers across 2.4 lakh villages, the road ahead for the rural sector seems smooth. These steps definitely promise greater spending on telecom infrastructure in aro und 3 lakh villages which are yet to see the telecom revolution. According to budget estimates, for 2009-10, the government expects to collect Rs 48,335.33 crore from the telecom sector, with 3G spectrum sales contributing 75 % to the total. In FY 2008-09, the government's receipts from the sector stood a t Rs 13,174.29 crore. The industry is also elated about the CVD exemption on the manufacture of cellph ones and accessories. The industry's happiness did not last long with Pranab Mukherjee announcing the increase in Minimum Alternate Tax (MAT) from 10% to 15%, which came as a huge bl ow to the sector. The broadcasting segment can cheer. There is a small decrease in duty for LCD pa nels from 10% to 5%, which will bring down prices by a maximum of Rs 3,000 per L CD TV set. LCD TV shipments that stood at around 1.3 mn units in 2008 are expect ed to grow in excess of 50% year-on-year as the preference for flat panel televi sions continues to soar amongst Indian viewers. However, the industry in general seems happy on the increased spends on robust i nfrastructure upgrades and on rural areas, which will possibly add another chapt er to the telecom story in India.

The purpose of industry analysis is to review prevailing conditions within speci fic industry and its segments. The company's industry obviously influences the o

utlook for the company. Even the best stocks can post mediocre returns if they a re in an industry that is struggling. It is often said that a weak stock in a strong industry is preferable to a strong stock in a weak industry. To assess the industry group potential, an investor would want to consider the o verall growth rate, market size, and its importance to economy. While the indivi dual company is still important, its industry group is likely to exert as much a s, or more, influence on the stock price. When stock move the usually move as gr oups; there are very few lone guns out there. An understanding of the industry s ector involved, including the maturity of the sector and any cyclical effects th at the overall economies have on it, is also necessary. The followings are some important factors which should be considered in Fundamen tal Analysis Growth: A growing industry gives room for profitability. Profitability: Average profitability of the industry should be attractive. Demand-Supply: the wider demand supply gap, the better is the industry's fortune i n the future Entry barrier Competition and Market share: Technology trends Government Policy Capacity Utilization Bargaining power of buyers Indian Telecommunication industry Indian Telecommunication industry, with about 464.82 million mobile phone connec tions (June 2009) , is the third largest telecommunication network in the world and the second largest in terms of number of wireless connections. For the past decade or so, telecommunication activities have gained momentum in India. Effort s have been made from both governmental and non-governmental platforms to enhanc e the infrastructure. The idea is to help modern telecommunication technologies to serve all segments of India's culturally diverse society, and to transform it i nto a country of technologically aware people. ' Telecom Industry in India ' is regulated by 'Telecom Regulatory Authority of I ndia' (TRAI). It has earned good reputation for transparency and competence. Two types of players exists in ' Telecom Industry India ' community State owned companies like - BSNL and MTNL. Private companies like - Reliance Infocomm and Tata Teleservices, Hutchison-Essa r, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communication s etc. Telecom industry in India has a big market potentiality and is a fast growing se ctor. Government of India is eager to reconstitute this telecom industry by enac ting effective policies for more investments from foreign companies, which resul ts in a very competitive and deregulated market in the world. Policies of telecom industry in India Government of India implemented the unified access licensing regime, which enabl es basic and cellular mobile service to use any modern technology. In 1997, Tele com Regulatory Authority of India (TRAI) was formed to facilitate the growth of the telecom sector in India. Major services and market potentiality of Telecom industry in India Telecommunication sector in India is primarily subdivided into two segments, whi ch are Fixed Service Provider (FSPs) and Cellular Services. Telecom industry in India constitutes some essential telecom services like telephone, radio, television and Internet. Telecom industry in India is specifically emphasizing on latest technologies li

ke Growth

GSM( Global System for Mobile Communications), CDMA(Code Division Multiple Access), PMRTS(Public Mobile Radio Trunking Services), Fixed Line and WLL(Wireless Local Loop ). of telecom industry in India

Indian telecom industry continued to register significant growth in 2008-09. Indian telecom network, with about 414 million connections in February 2009, is the third largest in the world, while it is credited with the second largest wir eless network in the world. At the current pace, the target of 500 million connections by 2010 is well withi n reach .The Government of India has reiterated its commitment to reach out to t he remote and uncovered areas and to augment the broadband facilities in rural a reas. Economic Survey 2008-09 Growth Growth of telephones over the years (in million) 06 07 08 09 March March March Feb.

Fixed lines 40.23 40.77 39.41 37.73 CDMA 32.67 44.62 68.38 92.14 GSM 69.19 120.47 192.70 283.98 Wireless (CDMA & GSM) 101.86 165.09 261.08 376.12 Gross Total 142.09

205.86 300.49 413.85 Source : Department of Telecommunications point to point

Interpretation :- Graph shows that India telecom industry is growing in CDMA, GS MA and wireless (CDMA & GSMA) sectors . It shows overall upward trend of growt h rate in these sectors. It will beneficial for investors to invest in telecom i ndustry. Because it is growing industry. Future prospects are good in this industry.

The purpose of company analysis to analyze the financial and non-financial aspec ts of a company to determine whether to buy, sells, or holds onto the shares of a particular company After determining the economic and industry conditions, the company itself is an alyzed to determine its financial health. This is usually done by studying the c ompany's financial statements. From these statements a number of useful ratios c an be calculated. The ratios fall under five main categories: profitability, pri ce, liquidity, leverage, and efficiency. When performing ratio analysis on a com pany, the ratios should be compared to other companies within the same or simila r industry to get a feel for what is considered "normal." These are quantitative factors of company analysis; there are also some qualitative factors which shou ld be considered also. Find out as much as possible about the company and their products. Do they have any core competency or fundamental strength that puts them ahead of the other competing firms? What advantage do they have over their competing firms? Do they have a strong market presence and market share? Or do they constantly ha ve to employ a large part of their profits and resources in marketing and findin g new customers and fighting for market share? Following are some more important aspects about company Shareholding pattern Growth Technology Expansion Plan Profitability Capital History Marketing Capabilities Most important its financial statement After you understand the company & what they do, how they relate to the market and their customers, you will be in a much better position to dec ide whether the price of the companies stock is going to go up or down. So fundamental analysts use different tools and ratios to compare all sor ts of companies no matter what business they are in or what they do! Financial ratios A financial ratio is an expression of the relationship between two selected item s from the income statement or the balance sheet. Ratio analysis helps you to ev aluate the weak and strong points in your financial and managerial performance. Financial ratio analysis is calculation and comparison of ratio which are deriv ed from the information in a company's financial statements. The level and histor ical trends of these ratios can be used to make inferences about a company's finan cial condition its operations and attractiveness as an investment. 1. Balance sheet ratio analysis Current ratio Quick ratio 2. Income statement ratio anlysis

Gross margin ratio Net profit margin ratio 3. Management/efficiency ratios Inventory turnover ratios Account receivable ratio 4. Overall profitability analysis Return on assets ratio Return on investment ratio 5. Market test or valuation ratios Earning per share

COMPANY ANALYSIS OF BHARTI AIRTEL Bharti Airtel Bharti Airtel (BSE: 532454), formerly known as Bharti Tele-Ventures LTD (BTVL) i s India's largest cellular service provider with more than 110 million subscribe rs as of Sep 2009. With this, Bharti is now the world's third-largest, single-country mobile opera tor and sixth-largest integrated telecom operator. It also offers fixed line services and broadband services. It offers its TELECOM services under the Airtel brand and is headed by Sunil Bha rti Mittal. The company also provides telephone services and Internet access over DSL in 14 circles. It also acts as a carrier for national and international long distance communica tion services. The company has a submarine cable landing station at Chennai, which connects th e submarine cable connecting Chennai and Singapore. The businesses at Bharti Airtel have always been structured into three individua l strategic business units (SBU's) Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technolo gy across 23 telecom circles while The Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched a Direct-to-Home (DTH) service, Airtel digit al TV. The company provides end-to-end data and Enterprise services to the corporate customers through its nationwide fiber opti c backbone, last mile connectivity in fixed-line and mobile circles, VSATs, ISP and international bandwidth access through the gateways and landing station.[2] Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscri ber base, behind China Mobile and China Unicom.

MARKET SHARE OF DIFFERENT TELECOM INDUSTRIES IN INDIA In India, the company has a 24.6% share of the wireless services market, followe d by 17.7% for Reliance Communications and 17.4% for Vodafone Essar

COMPANY ANALYSIS OF BHARTI AAIRTEL BY USING DIFFERENT RATIOS

1. Balance sheet ratio analysis YEAR RATIOS March 05 09 LIQUIDITY RATIOS Current Ratio 0.47 Quick Ratio 0.49 March 06 0.44 0.45 0.47 0.47 0.57 0.55 March 07 0.69 0.65 March 08 March

Interpretation :- Bharti airtel's both current and quick ratios are moving upward means shows increasing trends. These shows company has good liquidity position . Company is able to pay day to obligations of company.

2. INCOME STATEMENT RATIO ANALYSIS

YEAR RATIOS March 05 March 06 Income statement Ratios Gross profit Ratio 24.29 23.14 Net profit Ratio 14.83 17.80 March 07 27.47 22.46 29.08 23.99 March 08 29.33 22.58 March 09

Interpretation :- High income ratio shows company is at good profitability cond ition. As we see that net profit ratio in 2009 decline. But this is minor declin e. This is due to high inflation rate and global meltdown. But company did not e

ffected very much. 3. MANAGEMENT/EFFICIENCY RATIOS YEAR RATIOS March 05 March 06 March 07 March 08 Management /efficiency Ratios Inventory Ratio 257.80 634.52 373.35 453.06 547.83 Account receivable ratio 11.38 12.57 14.31 12.28 12.78 March 09

Interpretation :- High inventory turnover ratio and high debtor turnover ration shows the management's efficiency in using inventory and collecting debts respecti vely. Bharti airtel's both ratios are high in 2009 as compare to previous years. C ompany is efficient in using inventory properly and company able to collecting c ash from debtors on time. In this way it shows good prospectus for investors to invest in this company in future.

4. OVERALL PROFITABILITY NALYSIS YEAR RATIOS March 05 March 06 March 07 March 08 Overall profitability analysis Return on asset Ratio 257.80 634.52 373.35 453.06 547.83 Return on investment ratio 0.75 0.72 0.75 1.03 1.00 March 09

Interpretation :- High return on asset ratio shows that company's overall profita bility is goods. Bharti airtel's this ratios is high in 2009 as compare to previou s years. So its overall profitability is good whether its return on inventment r atio has reduced by .03 point. It may be due to inflation and global meltdown re ason.

5.MARKET TEST OR VALUATION RATIOS

YEAR RATIOS March 05 March 06 Market test or valuation ratio Earning per share ratio 6.53 10.62 March 07 21.27 32.90 March 08 40.79 March 09

Interpretation :- High earning per share is considered good from investor's point of view. Bharti airtel's this ratio is increasing year by year. It shows that inv estors has good prospectus in bharti airtel if they will purchase is share. Strengths Huge wireless subscriber potential Fastest growing mobile market in the world Consumers are ready to pay for cutting edge services Government proposes to hike FDI limit in Telecom to 74% Unified license regime

Weakness Lowest call tariffs in the world

Market strongly regulated by Government body Governing both ISP and Telecom sectors Too many authorities ruling the sector Huge potential for low end and cheap handsets Wide scale Consumer churn in Telecom and ISP

Wide spread VAS deployment is restricted due to language and literacy problems Primarily a voice based market

Opportunity To offer value added services on GSM, CDMA and IP Language independent services Mobile Marketing concepts

 Threats

Content influenced buy local culture and Global success stories M-Commerce Unified messaging platforms Foreign investment in form of equity or technology

Low cost service providers no possibility of breaking even in short term Weak IPR protection Software and digital content Piracy Political instability Regulatory interference

Calculation of Intrinsic value for March FY2010 EXPECTED EPS = 26.52 EXPECTED PE RATIO= 14.28 INTRINSIC VALUE FOR MARCH 2010= 26.52*14.28=378.70 Market Price 299.70 INTRINSIC VALUE IS GREATER THAN MARKET PRICE THEREFOR INVESTOR ARE SUGG

ESTED TO BUY BHARTI AIRTEL'S SHARE AT CURRENT LEVEL ON 299.70

CONCLUSION On the basis of this assignment's data we can say that there will be benefit to in vestors to invest their money in telecom industry because telecom industry is gr owing industry. And Indian government is also providing various facilities in th e development of telecom industry. In india BHARTI AIRTEL is growing company. O n the basis of its various ratios like Current ratio, Quick ratio , Net profit m argin ratio, Inventory turnover ratios, Account receivable ratio, Return on asse ts ratio, Return on investment ratio , Earning per share we can say that com pany has good profitability condition, good liquidity position, good market cond ition because earning per share is increasing every year. AND ON THE BASIS OF INTRINSIC VALUE WE CAN SAY THAT INVESTOR CAN TAKE BENEFIT IN FUTURE BY PURCHASING BHARTI AIRTEL'S SHARE.