A Project Report On Financial Analysis Of

IDEA CELLULAR LTD

In Partial Fulfillment of MBA Sem2 Batch: 2011-2013

Submitted to: Submitted by:

Prof.Dr.Narayan Baser P SJPI,Gandhinagar

Shah Ronil B-13

Shree Jairambhai Patel Institute of Business Management and Computer Application Gandhinagar

CERTIFICATE
This is to certify that the report based on 10 years published annual report of IDEA CELLULAR LTD is submitted by SHAH RONIL P to NICM affiliated to the Gujarat Technological University, in the partial fulfillment of the requirements for the completion of Practical Studies in the area of finance at the Second semester of the M.B.A. programme for the year 2011-2013.

---------------------------------------------------Director Prof. In-Charge

Date:

/2012

Preface
In the past decade this country has been in the rapid phenomenal growth in the professional management. Experts all over the world believe that management can be taught in a planned fashion and one of the basic ingredients of such training should be an understanding of the actual practical study like this of the project report. This provides us the basic education and particular knowledge of practical aspects. The activities of analyzing the financial reports give us some basic knowledge of how to prepare it nicely. Our institute offers us this kind of facilities, so that we are really thankful to our institute. During the course of MBA education this type of report help us to similar kind of situation in the future, serving in any corporate. The practical study of such kind support the theoratical concepts. With the great pleasure we undertake the writing of this report , because it is really a matter of pride to be a student of business management. The project is on the financial analysis of Idea Cellular Ltd in order to gain understanding about its financial position of the company in market.

ACKNOWLEDGEMENT
This project is dedicated to all the people whom I met ,took guidance,talked,interviewed and learned something from them.At this occasion I sincerely thank all of them while submitting these report. I would like to heartly thank to Professor Dr.Narayan Baser Sir who have provided necessary guidance and information for the success of the project. Lastly,I would like to extend my thanks to my classmates who have also provided me necessary information. I always have felt the invisible help from the Almighty,without the blessings of whom,I could not have succeded.

Ronil Shah(B-13)
4

MBA Sem 2(2011-2013) SJPI,Gandhinagar

INDEX
Sr. no. 1 1.1 1.2 1.3 1.4 1.5 2 2.1 2.2 3 3.1 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.3 3.3.1 3.3.2 3.3.3 3.4 3.4.1 3.4.2 3.5 3.5.1 4 5 TITLE COMPANY PROFILE Introduction History and Activities of Company Registered Address Present Management body Shareholding Pattern Financial Highlights Balance sheet Profit and Loss Statement RATIO ANALYSIS Meaning , importance and classification Profitability Ratio Gross profit ratio Net profit ratio Return on capital employed Return on equity share holders fund Activity/Turnover ratio Stock turnover ratio Fixed Assets turnover ratio Debtors turnover ratio Liquidity ratio Current ratio Liquid ratio Leverage ratio Debt equity ratio CONCLUSION Bibilography Page no. 6 6 8 9 10 11 13 15 19 20 21 22 23 24 25 27 28 29 31 32

COMPANY PROFILE 1.1 Introduction

Idea Cellular, usually referred to as Idea, is an Indian mobile network operators based in Mumbai, India. Idea is the 4th largest wireless carrier in Indian market with over 100 million customers and also provides broadband Internet to its customers.

1.2 History and Activities

Idea Cellular Limited was incorporated in 1995, and now ranks third in terms of all-India wireless revenue market share at 13.6 per cent. Idea ranks second with 23.6 per cent revenue market share in nine service areas where it holds 900 MHz spectrum and which derive about 41 per cent of the industrys all-India revenues (based on gross revenues for UAS and Mobile licenses only, for March 2011 quarter, as released by TRAI). The market positioning of Idea reflects the strength of its brand considering the fact that Idea added 11 out of its total 22 service areas in the past four years. Today, it is a pan-India player with commercial 2G operations in 22 service areas, and 3G in nine of these circles. Its subscriber base has grown multifold, from 7.37 million in March 2006 to 89.5 million in March 2011. Idea holds 16 per cent stake in Indus Towers, a joint venture with other telecom majors Bharti Airtel and Vodafone. Indus Towers is the world's largest tower company with over one lakh towers. In 2007, Idea was listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
6

Idea enjoys a market leadership position in many of its operational areas. It offers GPRS on all its operating networks for all categories of subscribers, and was the first company in India to commercially launch the next generation EDGE technology in Delhi in 2003. As a pioneer in technology deployment, it has been at the forefront through the adoption of bio fuels to power its base stations, and by employing satellite connectivity to reach inaccessible rural areas in Madhya Pradesh. Idea has been a leader in the introduction of value-added services, and there are many firsts to its credit, including a voice portal 'Say Idea', Idea TV, voice chat and instant messenger. Tariff plans have been customer-friendly, catering to the unique needs of different customer segments, for instance the 'Women's Card' caters to the special needs of women on the move, and 'Youth Card' covers the emerging youth segment. The company now has its own NLD and ILD operations, and ISP license. Idea has a network of over 70,000 cell sites covering the entire length and breadth of the country.The company has over 3,000 service centres servicing Idea subscribers across the country. Ideas service delivery platform is ISO 9001:2008 certified, making it the only operator in the country to have this standard certification for all 22 service areas and the corporate office. Idea has won numerous awards and is the only Indian GSM operator to win the prestigious GSM Association Award consecutively in the best mobile technology category for the Best Billing and Customer Care Solution both in 2006 and in 2007, even in the face of internationalcompetition. Idea was adjudged the Emerging Company of the Year by The Economic Times and the Most Customer Responsive Company in the Telecom sector, in the year 2010. Brand Idea has won many accolades for its innovative communication. The What an Idea, Sirji ads have won four Effies from 2008-2010, making it one of the Buzziest brands in the country.
7

In 2011 Brand Idea moved to the No. 4 position amongst all service brands in the 'Most Trusted Brands Survey' conducted by Brand Equity, an Economic Times publication. In 2000, Tata Cellular was a company providing mobile services in Andhra Pradesh. When Birla-AT&T brought Maharashtra and Gujarat to the table, the merger of these two entities was a reality. Thus BirlaTata-AT&T, popularly known as Batata, was born and was later rebranded as IDEA. Then Idea set sights on RPGs operations in Madhya Pradesh which was successfully acquired, helping Batata have a million subscribers, and the licence to be the fourth operator in Delhi was clinched. In 2004, Idea (the company had by then been rechristened) bought over the Escorts groups Escotel gaining Haryana, Uttar Pradesh (West) and Kerala and licences for three more UP (East), Rajasthan and Himachal Pradesh. By the end of that year, four million Indians were on the companys network. In 2005, AT&T sold its investment in Idea, and the year after Tatas also bid good bye to pursue an independent telecom business. And Idea was left only with one promoter, the AV Birla group. Rs 2,700 crore adding Punjab and Karnataka circles. Modis joint venture partner, Telekom Malaysia, invested Rs 7,000 crore for a 14.99% stake in Idea. Just around then, Ideas subsidiary, Aditya Birla Telecom sold a 20% stake to US-based Providence Equity Partners for over Rs 2,0000 crore.

1.3 Registered Address of the company

Idea Cellular Limited Suman Tower, Plot No. 18, Gandhinagar 382 011 Gujarat, India Tel: 91 79 6671 4000
8

Web Site: www.ideacellular.com

1.4 Name

Management Body Designation

Chairman Managing Director

Reported Designation
Chairman Managing Director Independent Director Independent Director Independent Director Independent Director Independent Director Independent Director Additional Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director

Annual Remuneration
0.01

Kumar Mangalam Birla HimanshuKapania P Murari

Independent Director R C Bhargava Independent Director TarjaniVakil Independent Director GianPrakash Gupta Independent Director Mohan Gyani Independent Director ArunThiagarajan Independent Director MadhabiPuriBuch Additional Director Rakesh Jain Rajashree Birla Biswajit A Subramanian Juan Villalonga Navarro Sanjeev Aga Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director

0.00 0.01 0.02 0.02 0.00 0.02

0.01 0.00 0.01 0.00

ShridhirSariputtaH ansaWijayasuriya PankajKapdeo

Alternate Director Company Secretary

Alternate Director to Mr. Juan Villalonga Navarro Company Secretary

0.01

1.5 Shareholding Pattern

Particular No. of Shareh olders No. of Shares % of Shares Demat Shares Pledged % of Shares Pledged Shares

Promoter and Promoter Group Indian Promoters Foreign Promoters Total of Promoter and Promoter groups Public Shareholding Institutions Non - Institutions Total Public Shareholding Total of Promoter and Public Shareholding Share held by custodians and against Depository Receipts have been issued ADRs GDRs Others Grand Total 5 0 5 456 335848 336304 336309 0 1520679047 0 1520679047 694221870 1092526923 1786748793 3307427840 0 45.98 0 45.98 20.99 33.03 54.02 100 0 1520679047 0 1520679047 694221870 1092513517 1786735387 3307414434 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 336309

0 0 0 3307427840

0 0 0 100

0 0 0 3307414434

0 0 0 0

0 0 0 0

10

2.Financial Highlights
2.1 Balance Sheet
DESCRIPTI ON SOURCES OF FUNDS: Share Capital Share Warrants &Outstand ings Total Reserves Sharehold er's Funds Secured Loans Unsecured Loans Total Debts Total Liabilities APPLICATI ON OF FUNDS : Gross Block Less: Accumulat ed Depreciati on Less: Impairmen t of Assets Net Block Mar11 Mar10 Mar09 Mar08 Mar07 Mar06 Mar05 Mar04 Mar03 Mar02

100. 00 1.45

100. 00 1.35

100. 00 0.59

100. 00 0.14

100. 00 0.00

100. 00 0.00

100. 00 0.00

100.0 0 0.00

100. 100.0 00 0 4.51 14.50

271. 84 373. 29 234. 92 84.6 9 319. 61 692. 89

245. 86 347. 21 181. 48 16.3 0 197. 78 544. 99

263. 74 364. 32 179. 51 64.9 8 244. 49 608. 81

34.4 1 134. 56 201. 70 45.5 1 247. 21 381. 76

15.9 6 84.0 4 136. 52 27.4 1 163. 93 247. 98

57.3 9 42.6 1 53.6 3 52.6 8 106. 31 148. 92

61.8 3 38.1 7 61.7 2 36.6 6 98.3 8 136. 55

62.71 37.29 54.93 27.61 82.53 119.8 2

61.2 4 43.2 7 24.5 6 46.4 9 71.0 6 114. 33

64.46 50.05 49.60 25.30 74.90 124.9 5

876. 06 296. 89

691. 99 239. 63

502. 01 152. 89

501. 04 160. 19

354. 92 139. 23

169. 59 66.8 5

152. 00 54.3 7

137.9 0 42.80

137. 77 35.5 0

134.7 9 32.17

579.

452.

349.

340.

215.

102.

97.6

95.10

102.

102.6 11

17 Lease Adjustmen t A/c Capital Work in Progress Preoperative Expenses pending Assets in transit Investmen ts Current Assets, Loans & Advances Inventorie s Sundry Debtors Cash and Bank Other Current Assets Loans and Advances Total Current Assets Less: Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellane ous Expenses not written off Deferred

36

11

86

69

73

28

108. 80

14.0 2

55.5 4

61.6 9

19.5 3

3.50

2.36

2.71

1.58

14.86

77.8 9

83.4 9

158. 99

21.6 3

0.53

11.2 0

11.2 0

3.36

1.40

1.48

1.58 13.9 7 13.6 7 3.14 68.4 3 100. 80

1.42 13.0 3 8.50 4.60 95.5 9 123. 14

1.38 10.6 3 75.6 2 4.95 61.0 8 153. 67

1.05 7.54 18.8 6 2.89 31.6 7 62.0 0

0.69 5.88 70.1 8 3.34 15.1 6 95.2 6

0.32 3.31 4.71 1.85 49.5 1 59.7 0

0.49 4.00 5.54 1.44 30.1 5 41.6 2

0.34 2.68 3.19 1.12 27.69 35.01

0.30 2.49 1.49 0.60 18.0 7 22.9 4

0.24 3.31 1.89 0.72 19.84 26.00

161. 16 3.91 165. 08 64.2 8

111. 51 9.67 121. 18 1.96

100. 72 3.18 103. 90 49.7 7

96.5 2 5.38 101. 90 39.9 0

80.9 2 2.08 83.0 0 12.2 6

27.7 9 0.42 28.2 1 31.4 9

15.9 6 0.30 16.2 6 25.3 7

16.20 0.16 16.36 18.65

13.7 6 0.10 13.8 7 9.08

19.91 0.09 20.00 5.99

-8.69

-6.84

-4.60

-2.51

-0.04 12

Tax Assets / Liabilities Total Assets Contingent Liabilities Book Value Adjusted Book Value

692. 89 92.9 4 1.13 1.13

544. 99 59.4 2 1.05 1.05

608. 81 45.8 5 1.17 1.17

381. 76 77.2 2 0.51 0.51

247. 98 46.9 4 0.32 0.32

148. 92 21.5 8 0.11 0.11

136. 55 15.9 3 0.09 0.09

119.8 2 12.30 0.09 0.09

114. 124.9 33 5 8.40 13.81 0.11 0.11 0.15 0.15

2.2 Profit and Loss Statement

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DESCRIPT ION Inc / Exp Performa nce Gross Sales Total Income Total Expenditur e PBIDT PBIT PBT PAT Cash Profit Sources of Funds Equity Paid Up Reserves and Surplus Net Worth Total Debt Capital Employed Applicatio n of Funds Gross Block Investment s Cash and Bank balance Net Current Assets Total Current Liabilities Total Assets Cash Flow Cash Flow from Operations Cash Flow from Investing activities

Mar-11

Mar10

Mar09

Mar08

Mar07

Mar06

Mar05

Mar04

Mar03

15332.8 0 15506.7 2 12253.7 8 3252.94 1279.93 906.32 844.60 2817.61

11850. 24 12437. 62 9153.9 8 3283.6 4 1732.4 4 1168.7 3 1053.6 6 2604.8 5 3299.8 4 8112.9 5 11412. 79 6526.4 1 17983. 65

9857.0 8 10334. 44 7144.5 6 3189.8 8 1947.0 3 1086.8 6 1001.2 1 2244.0 7 3100.1 0 8176.0 9 11276. 18 7579.3 7 18873. 78

6719.9 9 6919.0 3 4456.4 5 2462.5 8 1585.8 2 1116.8 6 1044.3 6 1921.1 2

4366.4 0 4412.5 3 2891.6 9 1520.8 4 849.03 509.05 502.06 1173.8 7

2007. 07 2020. 91 1285. 78 735.1 3 387.6 0 128.5 1 125.6 0 473.1 4 2259. 53 1574. 00 685.5 3 2915. 61 4084. 14

1625. 42 1635. 10 1031. 09 604.0 0 281.7 3 26.69 26.69 348.9 7 2259. 53 1695. 74 563.7 9 2698. 03 3744. 83

1165. 52 1180. 70 850.4 3 330.2 7 46.65 206.9 1 206.9 1 76.71

851.4 7 861.8 7 645.2 6 216.6 1 -41.71 240.0 4 240.0 4 18.28

3303.27 8979.62 12282.8 9 10557.4 6 22888.1 6

2635.3 2592.8 6 6 906.91 -413.71 3542.2 7 6514.7 6 10060. 79 2179.1 5 4250.5 0 6429.6 6

2259. 53 1719. 90 539.6 3 2263. 53 3286. 16

2139. 53 1547. 18 592.3 5 1795. 30 2888. 64

28938.7 5 2572.81 451.54 -2123.31 5452.89 22888.1 6 4500.70 -7644.44

22834. 40 2755.1 3 280.44 64.52 3998.8 8 17983. 65 1985.1 4 2095.9 4

15562. 75 4928.8 1 2344.4 3 1542.8 0 3221.0 4 18873. 78 1863.7 4 7655.3 6

13204. 30 569.93 497.06 1051.4 8 2685.4 8 10060. 79 2502.2 2 5956.1 8

9202.5 8 13.83 1819.7 3 317.94 2151.9 8 6429.6 6 1605.1 1 2275.0 9

4650. 92 307.0 3 129.0 9 863.7 2 773.6 3 4084. 14 822.1 5 286.9 4

4168. 64 307.0 3 151.8 9 695.6 8 445.8 7 3744. 83 511.4 8 627.9 3

3782. 02 92.03 87.48 511.6 1 448.6 4 3286. 16 95.73 387.3 8

3480. 91 35.41 37.61 229.3 7 350.3 1 2888. 64 288.7 1 14 720.7 0

3
3.1

RATIO ANALYSIS
Meaning , Importance and Classification:Meaning of Ratio:-

A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers. Ratio Analysis :- Ratio analysis is the process of determining and presenting the relationship of items and group of items in the statements. According to Batty J. Management Accounting Ratio can assist management in its basic functions of forecasting, planning coordination, control and communication. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgement, otherwise complex situations.
15

Ratio may be expressed in the following three ways :

1.

Pure Ratio or Simple Ratio

2. Rate or So Many Times 3. Percentage

Importance of Ratio Analysis:-

It helps in evaluating the firms performance

With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability ando p e r a t i o n a l efficiency of the undertaking. R a t i o p o i n t s o u t t h e operating efficiency of the firm i.e. w h e t h e r t h e m a n a g e m e n t h a s utilized the firms assets correctly, to increase the investors wealth. It ensures a fair return to its owners

Helps in inter-firm comparison:

Ratio analysis helps in inter-firm comparison by providing necessary data. Aninter firm comparison indicates relative position. It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be initiated immediately to bring them in line.

Simplifies financial statement:

The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner.

Determination of financial position

16

Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling .

Liquidity position:
With help of ratio analysis conclusions can be drawn regardingthe Liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm.

Long term solvency:

Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency s measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets.

Operating efficiency:
It throws light on the degree efficiency in the various activity ratios measures this kind of operational efficiency.

Classification Of Ratio:-

Ratio may be classified into the four categories as follows: A. Liquidity Ratio a. b. B. Current Ratio Quick Ratio or Acid Test Ratio Leverage or Capital Structure Ratio
17

a. b. c. d. e. f.

Debt Equity Ratio Debt to Total Fund Ratio Proprietary Ratio Fixed Assets to Proprietors Fund Ratio Capital Gearing Ratio Interest Coverage Ratio

C. a. b. c. d. e. f. g.

Activity Ratio or Turnover Ratio Stock Turnover Ratio Debtors or Receivables Turnover Ratio Average Collection Period Creditors or Payables Turnover Ratio Average Payment Period Fixed Assets Turnover Ratio Working Capital Turnover Ratio

D.

Profitability Ratio or Income Ratio (A) Profitability Ratio based on Sales : a. Gross Profit Ratio b. Net Profit Ratio c. Operating Ratio d. Expenses Ratio
18

(B) Profitability Ratio Based on Investment : I. Return on Capital Employed II. Return on Shareholders Funds : a. b. c. d. e. f. g. Return on Total Shareholders Funds Return on Equity Shareholders Funds Earning Per Share Dividend Per Share Dividend Payout Ratio Earning and Dividend Yield Price Earning Ratio

3.2

Profitability Ratio:-

Any ratio that measures a company's ability to generate cash flow relative to some metric, often the amount invested in the company. Profitability ratios are useful in fundamental analysis which investigates the financial health of companies.

3.2.1

Gross profit ratio:-

Gross profit is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. [Gross Profit Ratio = (Gross profit / Net sales) 100] To calculate gross profit subtract cost of sales (variable costs) from sales. (i.e. gross profit = sales - cost of sales) A low gross profit margin ratio (or gross margin ratio) indicates that low amount of earnings, required to pay fixed costs and profits, are generated from revenues.
19

A low gross profit margin ratio (or gross margin ratio) indicates that the business is unable to control its production costs. The gross profit margin ratio (or gross margin ratio) provides clues to the company's pricing, cost structure and production efficiency.

Interpretation: From the above graph it can be said that company did not perform well and suffered a loss in initial stage but after it gradually started making profit and in 2008 it gain the maximum profit. 3.2.2 Net profit ratio:-

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage

Net Profit Ratio = (Net profit / Net sales) 100

NP ratio is used to measure the overall profitability and hence it is very useful to to proprietors

20

This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability.

Interpretation: From the above data it can be inferred that the company overall profit started from 2005 uptill that it was incurring losses but after that it started gradually earning profit and it reached maximum in 2008 and afterwards it started declining.

3.2.3

Return On Capital Employed:-

Capital employed may be defined in two ways, gross capital employed" and "net capital employed". Gross capital employed usually means the total assets, fixed as well as current, used in business, while net capital employed refers to total assets minus liabilities. On the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and loss account balance), debentures and long term loans.
21

Gross capital employed = Fixed assets + Investments + Current

assets

Net capital employed = Fixed assets + Investments + Working capital Return on Capital Employed= (Adjusted net profits/Capital employed) 100

Interpretation:
It can be seen that due to losses the company was not able to get return on its capital but from 2004 it gradually started getting return on its invested capital

The company got the highest return in 2008 3.2.4 Return on Equity Capital:-

In real sense, ordinary shareholders are the real owners of the company. They assume the highest risk in the company. Thus ordinary shareholders are more interested in the profitability of a company and the performance of a company should be judged on the basis of return on equity capital of the company. Return on equity capital which is the relationship between profits of a company and its equity

22

Return on Equity Capital = [(Net profit after tax Preference dividend) / Equity share capital] 100 This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them.

Interpretation:
The negative sign indicates creation of bad impression of company in the minds of shareholders and other investors which started improving from 2005

3.3.1

Stock Turn Over Ratio:-

Stock turn over ratio and inventory turn over ratio are the same. This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory turnover/stock velocity indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. It implies over-investment in inventories, dull business, poor quality
23

of goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits as compared to total investment. It is also an index of profitability, where a high ratio signifies more profit, a low ratio signifies low profit.

Interpretation:
The company efficiently managed its inventory and was able to convert the stocked items into sales and over the period its efficiency improved and reached the maximum in 2007 and afterwards it started declining.

3.3.2

Fixed assets turnover ratio:-

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. The ratio is calculated by using following formula: Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets

24

Interpretation:
The company effectively utilized its fixed assets in its business and it increased over the years however in later years(2010 to 2011) its use got declined.

3.3.3

Debtors turnover ratio:-

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtor

Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors.

25

Interpretation:
It can be inferred that the average collection period of the company was getting lower and lower over the years or in other words the company was getting amount from its debtors in minimum time

3.4

Liquidity ratio:-

It refers to the ability of the firm to meet its current liabilities. The liquidity ratio, therefore, are also called Short-term Solvency Ratio. These ratio are used to assess the short-term financial position of the concern. They indicate the firms ability to meet its current obligation out of current resources. Liquidity ratio include two ratio :a. b. Current Ratio Quick Ratio or Acid Test Ratio

3.4.1

Current ratio:26

It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". Current Ratio = Current Assets / Current Liabilities This ratio is a general and quick measure of liquidity of a firm. It represents the margin of safety or cushion available to the creditors. It is an index of the firms financial stability. It is also an index of technical solvency and an index of the strength of working capital.

Interpretation: Initially the company was not able to properly utilize its assets properly but afterwards from 2004 its ratio got improved and its financial stability increased.

27

3.4.2

Quick Ratio:-

Liquid ratio is also termed as "Liquidity Ratio", "Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due. Liquid Ratio = Liquid Assets / Current Liabilities The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm. It measures the firm's capacity to pay off current obligations immediately and is more rigorous test of liquidity than the current ratio. . As a convention, generally, a quick ratio of "one to one" (1:1) is considered to be satisfactory.

Interpretation:
In initial years the company had not sufficient amount of liquidity to meet its obligations but gradually it earned profit and its liquid assets increased and in 2010 the ratio reached the idle value.
28

3.5 Leverage ratio:Leverage ratio is otherwise known as capital structure ratio. The term capital structure refers to the relationship between various long term forms of financing such as debentures (long term), preference share capital and equity share capital including reserves and surpluses. Financing the firms assets is a very crucial problem in every business and as a rule there should bea proper mix of debt and equity capital in financing the firms assets. Leverage or capital structure ratios are calculated to test the long term financial position of a firm. Generally capital gearing ratio is mainly calculated to analyse the leverage or capital structure of the firm.

3.5.1

Debt equity ratio:-

Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company. Following formula is used to calculate debt to equity ratio

[Debt Equity Ratio = External Equities / Internal Equities] Or [Outsiders funds / Shareholders funds]

29

Interpretation:
It can be inferred that in initial years the ratio was more as company was generating losses but afterwards it improved significantly and the ratio was arriving in proper alignment with equity of the company

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Conclusion
Idea Cellular has performed well on critical financial parameters in the last 10 years. Though, its profits have been hit recently by excessive competition, its other key financial parameters have grown robustly. The companys Net Sales has increased from Rs. 150 Cr. in FY2000 to Rs. 11850 Cr. in FY10 with 9 years CAGR of more than 43%, showing a consistent demand for its products. The company has clocked good y-o-y growth rates in its EPS, but, for the last 2 years, where it witnessed de-growth. EPS has fallen mainly due to increased operating cost as the company has ventured into new mobile circles. It has also maintained more than 18% Return on Invested Capital (ROIC) for 6 years on an average indicating optimum management of funds by the company. Idea Cellulars high Debt-to-Net Profit ratio (6.6) could be a cause of concern.

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Bibilography
www.ideacellular.com www.wikipedia.org .

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