ASSIGNMENT

ON
FUNDAMENTAL ANLAYSIS OF BHARTI AIRTEL

SUBJECT:- SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

SUBMITTED TO

SUBMITTED BY

MS. MANISHA GUPTA

KULBEER KAUR
ROLL NO:- 80804317030
SHAVIKA GAGNEJA
ROLL NO:- 80804317065
MBA 3rd

PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY

(MANDI GOBINDGARH)

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 national economy fundamental
analysis might focus on economic data to asses the present and future growth of the
economy.
Fundamental analysis is a method of evaluating a security by attempting to
measure its intrinsic value by examining related economy, financial and other qualitative
and quantitative factors. Fundamental analysis attempt to study every thing that can effect
the securities value including macro economic factors and individual specific factors.
Three phase of the fundamental analysis
A.

Understanding of the Macro Economic environment and developments

(Economy analysis)

B. Analyzing the prospectus of the industry to which the firm belongs(Industry

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
nationally.
The economy is like the tide and the various industry groups and individual
companies are like boats. When economy expands most industry groups and companies
benefits and grows. When the economy decline, most sectors and companies usually
suffer. The stock market does not operate in a vacuum it is an integral part 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 develop a
sound economic understanding and be able to interpret the impact of important economic
indicators on stock markets.
The following are some important factors which should be taken into account while
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
world economy, according to the World Bank.
India's diverse economy encompasses traditional village farming, modern
agriculture, handicrafts, a wide range of modern industries, and a multitude of
services. Services are the major source of economic growth, accounting for more
than half of India's output with less than one third of its labor force.
India GDP Growth Rate chart
Year

Mar

Jun

Sep

Dec

Average

2009 5.80

6.10

5.95

2008 8.60

7.80 7.70

5.80 7.48

2007 9.70

9.20 9.00

9.30 9.30

2006 10.40 9.80 10.60 9.30 10.03

.
INTERPETATION:AS WE SAW THAT GDP

GROWTH RATE OF INDIAS SHOWS DECLINING TREND. MAIN

REASON BEHIND 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 2009S 5.8. IT
SHOWS THAT INDIAS GDP RATE IS INCREASING. IT SHOWS GOOD PROSPECTUS FOR

INVESTORS IN FUTURE. AND INVESTOR CAN GET BENEFIT BY INVESTING IN

COMPANY

INDIAN

INDIAS INFLATION RATE

Inflation rate refers to a general rise in prices measured against a standard level of
purchasing power. The most well known measures of Inflation are the CPI which
measures consumer prices index, and the GDP deflator, which measures inflation in the
whole of the domestic economy. India's diverse economy encompasses traditional village
farming, modern agriculture, handicrafts, a wide range of modern industries, and a
multitude of services. Services are the major source of economic growth, accounting for
more than half of India's output with less than one third of its labor force. The economy
has posted an average growth rate of more than 7% in the decade since 1997, reducing
poverty by about 10 percentage points.

India Inflation Rate chart

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2009 10.45 9.63 8.03 8.70 8.63

9.29 11.89

11.72

2008 5.51

5.47 7.87 7.81 7.75

7.69 8.33

9.02

9.77 10.45 10.45 9.70

2007 6.72

7.56 6.72 6.67 6.61

5.69 6.45

7.26

6.40 5.51

5.51

5.51

2006 4.39

5.31 5.31 5.26 6.14

7.89 6.90

5.98

6.84 7.63

6.72

6.72

Interpretation:- As graph shows that inflation rate is rising year by year. Inflation in
economy is not good from investors point of view. When inflation rate rises it become
the reason of extra costs to business, thereby squeezing their profit margin and leading to
real decline in profitability and there by reducing the dividends on variable income
securities.

INDIA INTEREST RATE

India benchmark interest rate stands at 3.25 percent. In India, interest rate decisions 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

Jan

Feb

Mar

Apr

2009

4.00

4.00

3.50

3.25

2008

6.00

6.00

6.00

2007

6.00

6.00

2006

5.25

5.50

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

3.25

3.25

3.25

3.25

3.25

3.25

3.25

6.00

6.00

6.00

6.00

6.00

6.00

6.00

6.00

5.00

6.00

6.00

6.00

6.00

6.00

6.00

6.00

6.00

6.00

6.00

5.50

5.50

5.50

5.50

5.75

6.00

6.00

6.00

6.00

6.00

Interpretation :- Data in graph shows that in 2009 interest rate are less than
previous year. Means government is helping the businessmen so that the can
continue their business without any difficulty in economic crisis type of condition by
reducing the interest rate. Low interest rate is good from investors point of view.

INDIA CURRENT ACCOUNT

Current Account is the sum of the balance of trade (exports minus imports of goods and
services), net factor income (such as interest and dividends) and net transfer 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 economies. However, for the few countries with
substantial overseas assets or liabilities, net factor payments may be significant. Positive
net sales to abroad generally contributes to a current account surplus; negative net
sales to abroad generally contributes to a current account deficit. Because exports
generate positive net sales, and because the trade balance is typically the largest
component of the 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
current account, is usually presented under the headings income payments as outflows,
and income receipts as inflows. Income refers not only to the money received from
investments made abroad (note: investments are recorded in the capital account but
income from investments is recorded in the current account) but also to the money sent
by individuals working abroad, known as remittances, to their families back home. If the
income account is negative, the country is paying more than 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 income payments and receipts are roughly
equal of trade forms part of the current account, which also includes other transactions
such as income from the international investment position as well as international aid. If
the current account is in surplus, the country's net international asset position increases
correspondingly. Equally, a deficit decreases the net international asset position.
India Current Account chart, historical data, forecast and news. India is leading exporter
of gems and jewelry, textiles, engineering goods, chemicals, leather manufactures and
services. India is poor in oil resources and is currently heavily dependent on coal and
foreign oil imports for its energy needs. Other imported products are: machinery, gems,
fertilizers and chemicals. Main trading partners are European Union, United States, China
and UAE .
Year

Mar

Jun

Sep

Dec

Total

2009

4.7

-5.8

2008

-1.5

-9.0

-12.5

-13.0

-36.1

2007

4.3

-6.7

-4.3

-4.5

-11.3

2006

4.5

-4.1

-6.3

-3.7

-9.5

-1.1

Interpretation: - Indias current account shows negative current account. Means import
is greater than export. Investor doesnt take it positively. As compare to previous 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
Universal 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
around 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
at Rs 13,174.29 crore.
The industry is also elated about the CVD exemption on the manufacture of
cellphones 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 blow to the sector.
The broadcasting segment can cheer. There is a small decrease in duty for LCD
panels from 10% to 5%, which will bring down prices by a maximum of Rs 3,000
per LCD TV set. LCD TV shipments that stood at around 1.3 mn units in 2008 are
expected to grow in excess of 50% year-on-year as the preference for flat panel
televisions continues to soar amongst Indian viewers.
However, the industry in general seems happy on the increased spends on robust
infrastructure upgrades and on rural areas, which will possibly add another
chapter to the telecom story in India.

The purpose of industry analysis is to review prevailing conditions within specific

industry and its segments. The company's industry obviously influences the outlook for
the company. Even the best stocks can post mediocre returns if they are 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 overall
growth rate, market size, and its importance to economy. While the individual company is
still important, its industry group is likely to exert as much as, or more, influence on the
stock price. When stock move the usually move as groups; there are very few lone guns
out there. An understanding of the industry sector involved, including the maturity of the
sector and any cyclical effects that the overall economies have on it, is also necessary.
The followings are some important factors which should be considered in
Fundamental 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 industrys
fortune in 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
connections (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. Efforts have been
made from both governmental and non-governmental platforms to enhance the
infrastructure. The idea is to help modern telecommunication technologies to serve all
segments of Indias culturally diverse society, and to transform it into a country of
technologically aware people.
' Telecom Industry in India ' is regulated by 'Telecom Regulatory Authority of India'
(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-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL
Mobile, Spice Communications etc.

Telecom industry in India has a big market potentiality and is a fast growing sector.
Government of India is eager to reconstitute this telecom industry by enacting effective
policies for more investments from foreign companies, which results 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 enables
basic and cellular mobile service to use any modern technology. In 1997,
Telecom 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, which 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 like
GSM( Global System for Mobile Communications),
CDMA(Code Division Multiple Access),
PMRTS(Public Mobile Radio Trunking Services),

Fixed Line and WLL(Wireless Local Loop ).

Growth 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 wireless
network in the world.
At the current pace, the target of 500 million connections by 2010 is well within reach
.The Government of India has reiterated its commitment to reach out to the remote and
uncovered areas and to augment the broadband facilities in rural areas.

Economic Survey 2008-09

Growth
Growth of telephones over the years

(in million)

March
06

March
07

March
08

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

Feb.
09

Interpretation :- Graph shows that India telecom industry is growing in CDMA,

GSMA and wireless (CDMA & GSMA) sectors . It shows overall upward trend of
growth rate in these sectors. It will beneficial for investors to invest in telecom
industry. Because it is growing industry.
Future prospects are good in this industry.

The purpose of company analysis to analyze the financial and non-financial

aspects 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
analyzed to determine its financial health. This is usually done by studying the company's
financial statements. From these statements a number of useful ratios can be calculated.
The ratios fall under five main categories: profitability, price, liquidity, leverage, and
efficiency. When performing ratio analysis on a company, the ratios should be compared
to other companies within the same or similar industry to get a feel for what is considered
"normal." These are quantitative factors of company analysis; there are also some
qualitative factors which should 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 all 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
have to employ a large part of their profits and resources in marketing and finding
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 decide 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 sorts
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 items from the
income statement or the balance sheet. Ratio analysis helps you to evaluate the weak and
strong points in your financial and managerial performance. Financial ratio analysis is
calculation and comparison of ratio which are derived from the information in a
companys financial statements. The level and historical trends of these ratios can be
used to make inferences about a companys financial 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) is India's largest cellular service provider with more than 110 million
subscribers as of Sep 2009.
With this, Bharti is now the world's third-largest, single-country mobile operator
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
Bharti 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 communication
services.

The company has a submarine cable landing station at Chennai, which connects
the submarine cable connecting Chennai and Singapore.

The businesses at Bharti Airtel have always been structured into three individual
strategic business units (SBU's)

Mobile Services,

Airtel Telemedia Services

& Enterprise Services.

The mobile business provides mobile & fixed wireless services using GSM
technology 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
digital TV. The company provides end-to-end data and

Enterprise services to the corporate customers through its nationwide fiber optic
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 subscriber 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, followed 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

March 05

March 06

March 07

March 08

0.47
0.47

0.57
0.55

March 09

RATIOS
LIQUIDITY
RATIOS
Current Ratio
Quick Ratio

0.47
0.49

0.44
0.45

0.69
0.65

Interpretation :- Bharti airtels 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

March 05

March 06

March 07

March 08

March 09

RATIOS
Income
statement
Ratios
Gross profit
Ratio
Net profit Ratio

24.29

23.14

27.47

29.08

29.33

14.83

17.80

22.46

23.99

22.58

Interpretation :- High income ratio shows company is at good profitability condition.

As we see that net profit ratio in 2009 decline. But this is minor decline. This is due to
high inflation rate and global meltdown. But company did not effected very much.
3. MANAGEMENT/EFFICIENCY RATIOS
YEAR

March 05

March 06

March 07

March 08

March 09

RATIOS
Management
/efficiency
Ratios
Inventory Ratio
Account
receivable ratio

257.80

634.52

373.35

453.06

547.83

11.38

12.57

14.31

12.28

12.78

Interpretation :- High inventory turnover ratio and high debtor turnover ration shows
the managements efficiency in using inventory and collecting debts respectively. Bharti
airtels both ratios are high in 2009 as compare to previous years. Company is efficient in
using inventory properly and company able to collecting cash 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

March 05

March 06

March 07

March 08

March 09

RATIOS
Overall
profitability
analysis
Return on asset
Ratio
Return on
investment ratio

257.80

634.52

373.35

453.06

0.75

0.72

0.75

1.03

547.83
1.00

Interpretation :- High return on asset ratio shows that companys overall profitability is
goods. Bharti airtels this ratios is high in 2009 as compare to previous years. So its
overall profitability is good whether its return on inventment ratio has reduced by .03
point. It may be due to inflation and global meltdown reason.

5.MARKET TEST OR VALUATION RATIOS

YEAR

March 05

March 06

March 07

March 08

March 09

RATIOS
Market test or
valuation ratio
Earning per
share ratio

6.53

10.62

21.27

32.90

40.79

Interpretation :- High earning per share is considered good from investors point of
view. Bharti airtels this ratio is increasing year by year. It shows that investors has good
prospectus in bharti airtel if they will purchase is share.

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 SUGGESTED TO BUY BHARTI AIRTELS SHARE AT CURRENT
LEVEL ON 299.70

CONCLUSION
On the basis of this assignments data we can say that there will be benefit to investors to
invest their money in telecom industry because telecom industry is growing industry. And
Indian government is also providing various facilities in the development of telecom
industry. In india BHARTI AIRTEL is growing company. On the basis of its various
ratios like Current ratio, Quick ratio , Net profit margin ratio, Inventory turnover ratios,
Account receivable ratio, Return on assets ratio, Return on investment ratio
,
Earning per share we can say that company has good profitability condition, good
liquidity position, good market condition 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 AIRTELS SHARE.