FINANCIAL STATEMENT

ANALYSIS: AIRTEL

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SHAKIL HASSAIN
(MP15040)
SUMAN MANDAL
(MP15046)
SUDIPTA CHATTERJEE
(MP15045)
RANABIR MALLICK
(MP15034)

FINANCIAL STATEMENT ANALYSIS: AIRTEL

Table of Contents
1.

Introduction..................................................................................................................... 2

2.

Objectives of the Study.................................................................................................... 2

3.

Scope of the Study........................................................................................................... 2

3.1.

4.

Sources of Data......................................................................................................... 2

Financial Statement Analysis........................................................................................... 2

4.1.

Bharti Airtel Limited................................................................................................... 2

4.2.

Interpretation of Horizontal and Vertical Analysis:.....................................................7

4.3.

Interpretation on Ratios analysis.............................................................................14

Reference............................................................................................................................. 22

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

1. Introduction
Bharti Airtel Limited is a leading global telecommunications company with operations in 20 countries across Asia
and Africa. Headquartered in New Delhi, India, 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
including national & international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G
wireless services and mobile commerce. Bharti Airtel had over 307 million customers across its operations at the
end of November 2014.

2. Objectives of the Study

To examine the financial performance of Airtel

To interpret the financial statement and financial position of Airtel
To analyze profitability and performance of Airtel

3. Scope of the Study

This study confines itself to the issues relating to the Financial Performance of Airtel with regard to its growth,
profitability and liquidity and the impact on various factors such as capital, liquidity, asset quality, earnings quality
and liquidity passion of Iron and Steel Industry for the period of ten years.

3.1. Sources of Data

For the study secondary data is used. The data collected are audited balance sheets and profit and loss statements
published in trading websites, company websites, journals, Bulletins, library sources.

4. Financial Statement Analysis

4.1. Bharti Airtel Limited
The following are the analysis carried out in this report

Horizontal Analysis of Balance Sheet

Horizontal Analysis of P&L Statement
Vertical Analysis of Balance Sheet
Vertical Analysis of P&L Statement
Liquidity and Solvency Ratios
Profitability Ratios
Management Efficiency Ratios
Market Ratio (Performance ratio)

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Table-1: Balance Sheet of Bharti Airtel with Horizontal Analysis

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Table-2: Profit & Loss Account of Bharti Airtel (Standalone) with Horizontal Analysis

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Table-3: Vertical Analysis

Table-4: Vertical Analysis

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

4.2.

Interpretation of Horizontal and Vertical Analysis:

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Horizontal Analysis of Total Liabilities: Balance sheet

6000%
5000%

Total Liabilities
Total Debt

4000%

Unsecured Loans
Secured Loans

3000%

Networth
Reserves

2000%
1000%

Share Application Money

Equity Share Capital
Total Share Capital

0%

Horizontal Analysis of Total Assets: Balance sheet

12000%

Total Assets
Miscellaneous Expenses

10000%

Net Current Assets

Total CL & Provisions
Provisions

8000%

Current Liabilities
Total CA, Loans & Advances

6000%

Fixed Deposits
Loans and Advances
Total Current Assets

4000%

Cash and Bank Balance

Sundry Debtors

2000%

Inventories
Investments
Capital Work in Progress

0%

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Net Block

FINANCIAL STATEMENT ANALYSIS: AIRTEL

Vertical Analysis of Total Liabilities: Balance Sheet

100%
90%
80%

Total Debt

70%

Unsecured Loans

60%
50%
40%
30%

Secured Loans
Networth
Reserves
Share Application Money
Equity Share Capital
Total Share Capital

20%
10%
0%

Vertical Analysis of Total Assets: Balance Sheet

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

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Net Current Assets

Total CL & Provisions
Provisions
Current Liabilities
Total CA, Loans & Advances
Fixed Deposits
Loans and Advances
Total Current Assets
Cash and Bank Balance
Sundry Debtors
Inventories
Investments
Capital Work in Progress
Net Block

FINANCIAL STATEMENT ANALYSIS: AIRTEL

Horizontal Analysis of Income: P&L Account

25000%
20000%
15000%

Total Income
Stock Adjustments

10000%

Other Income
Net Sales

5000%

Sales Turnover

0%
-5000%
-10000%

Horizontal Analysis of Expenditure: P&L Account

8000%
7000%
6000%
Total Expenses
5000%
4000%
3000%

Miscellaneous Expenses
Selling and Admin Expenses
Other Manufacturing Expenses
Employee Cost
Raw Materials

2000%
1000%
0%

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Horizontal Analysis of Profit: P&L Account

7000%
6000%

Reported Net Profit

5000%

PBT (Post Extra-ord Items)

Tax
Extra-ordinary items

4000%

Profit Before Tax

Other Written Of

3000%

Depreciation
PBDT

2000%
1000%

Interest
PBDIT
Operating Profit

0%

Horizontal Analysis of Valuation: P&L Account

1800%
1600%
1400%
1200%

Book Value (Rs)

1000%

Earning Per Share (Rs)

800%

Shares in issue (lakhs)

600%
400%
200%
0%

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Total Value Addition

FINANCIAL STATEMENT ANALYSIS: AIRTEL

Vertical Analysis of Income: P&L Account

100%
90%
80%
70%

Total Income

60%

Stock Adjustments
Other Income

50%

Net Sales

40%

Sales Turnover

30%
20%
10%
0%

Vertical Analysis of Expenditure: P&L Account

100%
90%
80%
70%

Total Expenses

60%

Miscellaneous Expenses

50%

Selling and Admin Expenses

Other Manufacturing Expenses

40%

Employee Cost

30%

Raw Materials

20%
10%
0%

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Vertical Analysis of Profit: P&L Account

100%
90%
80%
70%
60%
50%
40%
30%
20%

Reported Net Profit

Tax
PBT (Post Extra-ord Items)
Extra-ordinary items
Profit Before Tax
Other Written Of
Depreciation
PBDT
Interest
PBDIT
Operating Profit

10%
0%

Vertical Analysis of Valuation: P&L Account

100%
90%
80%
70%
60%

Corporate Dividend Tax

50%

Equity Dividend

40%

Total Value Addition

30%
20%
10%
0%

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Table-4: Ratios Analysis

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4.3.

Interpretation on Ratios analysis

LIQUIDITY RATIO
Liquidity ratios are a class of financial metrics used to determine a company's ability to pay off its short-terms debts
obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to
cover short-term debts.

Current Ratio
The current ratio helps investors and creditors understand the liquidity of a company and how easily that company will
be able to pay off its current liabilities.
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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Current Ratio = Current Assets / Current Liabilities
In case of Airtel we can see that the Current Ratio in almost every year has been below 1, which suggests that Airtel had
less Current Asset to pay-off their Current Liabilities. Although in the year 2012 there has been a significant recovery as
their Current Ratio has jumped to 1.02 which is quite good. But in the year 2013 there has been a major drop from 1.02
to 0.65 which suggests that their Current liabilities have gone higher than their Current Asset.
This indicates that the financial condition of Airtel is not good, they are having higher portion of Current Liabilities
compared to Current Assets.
Quick Ratio
The Quick Ratio is an indicator of a companys short term liquidity. The Quick Ratio measures a companys ability to
meet its short term obligations with its most liquid asset. The quick ratio is more conservative than the current ratio
because it excludes inventories from current assets. Inventories generally take time to be converted into cash, and if they
have to be sold quickly, the company may have to accept a lower price than book value of these inventories.
Quick ratio = (current assets inventories) / current liabilities, or
= (cash and equivalents + marketable securities + accounts receivable) / current liabilities

1.5
1

Current Ratio
Quick Ratio

0.5
0
1

10

According to Airtels past 10 years financial statement, Airtel has quick ratio below 1, which is not a healthy sign
for the organization.
MANAGEMENT EFFICIENCY RATIO
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The efficiency ratio is a ratio that is typically used to analyze how well a company uses its assets and liabilities
internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of liabilities, the quantity and
usage of equity and the general use of inventory and machinery.

Inventory turnover ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed by comparing cost
of goods sold with average inventory for a period. This measurement also shows investors how liquid a company's
inventory is. If this inventory can't be sold, it is worthless to the company. This measurement shows how easily a
company can turn its inventory into cash.
Inventory Turnover = Sales / Inventory

Airtels past 10 years Financial statement shows that it had a raising trend till 2014 but in the year 2015 there
has been a huge dip.
Account Receivable Ratio
Accounts receivable turnover is an efficiency ratio that measures how many times a business can turn its accounts
receivable into cash during a period. In other words, the accounts receivable turnover ratio measures how many times a
business can collect its average accounts receivable during the year.

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FINANCIAL STATEMENT ANALYSIS: AIRTEL

Accounts Receivable Turnover

30.00
Accounts Receivable Turnover

20.00
10.00
0.00
1

10

Airtel has shown a stable Account Receivable Ratio over the period.
Asset Turnover Ratio
Asset turnover ratio is the ratio of the value of a companys sales or revenues generated relative to the value of its assets.
The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its
assets in generating revenue.

Asset Turnover Ratio

1.5
1
0.5
0
1

10

Asset
Turnover = Sales or Revenues / Total Assets

Airtels Asset Turnover ratio in the past 10 years suggests that it has not been able to utilize its asset efficiently to
generate enough revenue although it quite consistent over the period.
DEBT COVERAGE RATIO
The debt service coverage ratio is a financial ratio that measures a company's ability to service its current debts by
comparing its net operating income with its total debt service obligations. In other words, this ratio compares a
company's available cash with its current interest, principle, and sinking fund obligations.
The debt service coverage ratio is important to both creditors and investors, but creditors most often analyze it. Since
this ratio measures a firm's ability to make its current debt obligations, current and future creditors are particularly
interest in it.
Debt Ratio

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A financial ratio that measures the extent of a companys or consumers leverage. The debt ratio is defined as the ratio
of total long-term and short-term debt to total assets, expressed as a decimal or percentage. It can be interpreted as
the proportion of a companys assets that are financed by debt.

Debt Ratio
0.50
0.40
0.30
0.20
0.10
0.00

Debt Ratio

10

The Debt Ratio of Airtel has been fluctuating over the years. But compared to the past 10 years in 2015 the debt
ratio has significantly come down which is a healthy sign for the company.

Debt/Equity Ratio
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a companys
total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance
its assets relative to the amount of value represented in the shareholders equity.
Debt - Equity Ratio = Total Liabilities / Shareholders' Equity

Total Debt to Equity Ratio

15
10
Total Debt to Equity Ratio

5
0
1

10

Over the period the Debt to Equity ratio of Airtel has been on the lower side and has fallen over the period which
is a good sign for the company.

PROFITABILITY RATIO
Gross Profit Margin
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Gross profit margin is a financial metric used to assess a company's financial health and business model by revealing the
proportion of money left over from revenues after accounting for the cost of goods sold (COGS). Gross profit margin or
Margin on sales represents a key factor behind many of the most fundamental business considerations, including
budgets and forecasts. Without an adequate gross margin, a company is unable to pay for its operating expenses. In
general, a company's gross profit margin should be stable unless there have been changes to the company's business
model.
Gross Profit margin = Revenue COGS
Revenue

Gross Profit Margin(%)

Mar '15

Mar '14

Mar
'13

Mar
'12

Mar
'11

Mar
'10

Mar '9

Mar '8

Mar '7

Mar '6

21.39

18.16

14.65

18.57

22.95

30.7
1

25.0
3

28.2
3

27.3
6

22.4
1

Airtels gross profit margin is more or less stable showing that it is able to meet its operating expenses.

Operating Profit Margin

Operating margin is a measurement of what proportion of a company's revenue is left over after paying for
variable costs of production such as wages, raw materials, etc. It can be calculated by dividing a companys operating
income (also known as "operating profit") during a given period by its net sales during the same period. Operating
income here refers to the profit that a company retains after removing operating expenses (such as cost of goods
sold and wages) and depreciation. Net sales here refers to the total value of sales minus the value of returned goods,
allowances for damaged and missing goods, and discount sales.
Operating Margin = Operating Income
Net Sales

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It indicates a healthy state of the company in meeting its opearting expenses which is a main corcern for every
company

Net Profit Margin (%)

Net margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a
percentage that shows how much of each dollar earned by the company is translated in profits

Net margins will vary from company to company, and certain ranges can be expected from industry to industry, as
similar business constraints exist in each distinct industry.

Net profit margin decreased from 2011 to 2014 due to incerase in operating expense. Company did a remarkable
job in deacreasing the operating expense in the yaear 2015 to meet increase its profit.

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Return on Assets (book Value)
Return on assets (ROA) is a financial ratio that shows the percentage of profit a company earns in relation to its overall
resources. It is commonly defined as net income divided by total assets. Net income is derived from the income
statement of the company and is the profit after taxes. The assets are read from the balance sheet and include cash and
cash-equivalent items such as receivables, inventories, land, capital equipment as depreciated, and the value of
intellectual property such as patents. The higher the ROA, the better is the management. But this measure is best
applied in comparing companies with the same level of capitalization. The more capital-intensive a business is, the more
difficult it will be to achieve a high ROA. ROA measurements include all of a business's assetsthose which arise out
of liabilities to creditors as well capital paid in by investors.
Return on Assets = Net Income
Average Total Asset

Return on assets (ROA) for Airtel shows that, it is a profitable company in relative to its total assets. ROA data
clearly reveals that Airtels management had efficiently used its assets to generate earnings.

Return on Long Term Funds (%)

A unit investment trust's estimated return over the life of the portfolio, calculated according to formulae proposed by the
Securities and Exchange Commission (SEC). The return is calculated as the annual percentage return based on the
yields of all the underlying securities in the portfolio, but is weighted to account for each security's market value and
maturity. The return is presented net of estimated fees and the maximum offering price, but does not account for delays
in income distributions from the fund.

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Earnings Per Share (EPS)
Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serves as an indicator of a companys profitability

EPS =

Net Income Dividend on Preferred stock

Average Outstanding shares

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term,
because the number of shares outstanding can change over time. However, data sources sometimes simplify the
calculation by using the number of shares outstanding at the end of the period.

Dividends Per Share (DPS)

Dividend per share (DPS) is the sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is
the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided
by the number of outstanding ordinary shares issued.

D Sum of dividend over a period (Usually 1 year), SD- Special onetime dividend, S- Shares outstanding for the period
Dividends per share are usually easily found on quote pages as the dividend paid in the most recent quarter which is
then used to calculate the dividend yield. Dividends over the entire year (not including any special dividends) must be
added together for a proper calculation of DPS, including interim dividends. Special dividends are dividends which are
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only expected to be issued once so are not included. The total number of ordinary shares outstanding is sometimes
calculated using the weighted average over the reporting period.

Reference

http://www.airtel.in/about-bharti/about-bharti-airtel
Dion Global Solutions Limited
https://en.wikipedia.org/wiki/

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