Group :

Finatics

Nishant Kumar (MP13037)

Rahul Naredi (MP13039)
Samardarshi Sarkar (MP13046)
Shadab Akhter (MP13050)
Gaurav Gulati (MP13024)
Amit Chakraborty(MP13006)
Chawar Singh (MP13073)

Vision
By 2015 airtel will be the most loved
brand, enriching the lives of millions.

Performance Highlights

Financial Year Ended March 31

2010
2011
2012
Particulars
Units
Total Customer Base
000s
137,013
220,878
251,646
Mobile Services
000s
131,349
211,919
241,148
Broadband & Telephone Services
000s
3,067
3,296
3,270
Digital TV Services
000s
2,597
5,663
7,228
Based on Consolidated Income Statement
Revenue
` Mn
418,948
595,383
683,267
EBITDA (before exceptional items)
` Mn
168,149
200,718
222,025
Cash Profit from Operations before Derivative and Exchange
` Mn
162,817
180,581
193,899
Fluctuation
(before
exceptional
items)
Earnings Before Tax
` Mn
105,091
76,782
63,792
Net Profit
` Mn
89,768
60,467
42,594
Based on Consolidated Statement of Financial Position
Shareholders Equity
` Mn
421,940
487,668
506,113
Net Debt
` Mn
23,920
599,512
618,442
Capital Employed
` Mn
445,860
1,087,180
1,124,555
Key Ratios
Capex Productivity
%
61.59
66.93
69.17
Opex Productivity
%
39.25
45.13
43.84
EBITDA Margin
%
40.14
33.71
32.49
EBIT Margin
%
25.14
16.57
13.90
Return on Shareholders Equity
%
24.52
13.30
8.57
Return on Capital Employed
%
20.65
10.79
7.06
Net Debt to EBITDA
Times
0.15
2.95
2.60
Interest Coverage Ratio
Times
30.65
11.20
9.09
Book Value Per Equity Share
`
111.13
128.41
133.27
Net Debt to Shareholders Equity
Times
0.06
1.23
1.22
Earnings Per Share (Basic)
`
23.67
15.93
11.22
Contribution to Exchequer (India)
Taxes, Duties, Fees and other Levies
` Mn
95,720
307,999
119,082
Financial information for years ended till March 31, 2011 is based on proportionate consolidation for Joint Ventures and for years ended March 31, 2012, 2013 &

2013
271,227
259,844
3,283
8,100

2014
295,948
283,580
3,356
9,012

769,045
232,579
195,643

857,461
277,770
241,813

47,853
22,757

78,643
27,727

503,217
583,567
1,086,784

597,560
605,416
1,202,976

69.12
45.43
30.24
10.98
4.51
5.68
2.51
6.77
132.51
1.16
6.00

72.91
45.20
32.39
14.14
5.04
6.65
2.20
7.56
149.49
1.01
7.02

141,513

213,324

2014 is based on equity accounting for Joint Ventures.

Bharti Airtel Limited Abridged Annual Report 2013-14

Performance Highlights

CUSTOMER BASE
251,646

271,22
7

2011-12

2012-13

(NOS. 000)
295,948

683,267

2013-14

(` MILLIONS)

EBITDA
222,025

232,579

2011-12

2012-13

193,899

195,643

2011-12

2012-13

2011-12

769,045

857,461

2012-13

2013-14

EBITDA MARGIN

277,770

32.49

2013-14

2011-12

(` MILLIONS)

CASH PROFIT

(` MILLIONS)

REVENUE

(%)

30.24

32.39

2012-13

2013-14

CAPITAL EMPLOYED

241,813

1,124,55
5

1,086,784

2013-14

2011-12

2012-13

(` MILLIONS)

1,202,976

2013-14

The Board of Directors

Who is on the board of directors of the Company?

Mr. Sunil Bharti Mittal, Chairman-Promoter
Ms. Chua Sock Koong-Non-Executive Director
Sheikh Faisal Thani Al-Thani-Non-Executive Director
Mr. Ajay Lal-Independent Director
Mr. Ben Verwaayen-Independent Director
Mr. Craig Ehrlich-Independent Director
Mr. D. K. Mittal- Independent Director
Mr. Manish Kejriwal-Independent Director
Ms. Obiageli Ezekwesili-Independent Director
Mr. Rajan Bharti Mittal-Non-Executive Director-Promoter
Ms. Tan Yong Choo-Non-Executive Director
Mr. Tsun-yan Hsieh-Independent Director
Mr. V. K. Viswanathan- Independent Director
Mr. Manoj Kohli, Executive Director
Mr. Gopal Vittal-Executive Director

Board of
Directors

Sunil Bharti Mittal

Chua Sock Koong

Sheikh Faisal Thani

Al-Thani

Ajay Lal

Ben Verwaayen

Craig Ehrlich

D. K. Mittal

Manish Kejriwal

Obiageli Ezekwesili

Rajan Bharti Mittal

Tan Yong
Choo

Tsun-yan Hsieh

V. K. Viswanathan

Manoj
Kohli

Gopal Vittal

Stockholder Analysis
a) Who is the average investor in this stock?( Individual or PPF,Small, large, Domestic Firm)

There are basically two types of investors they are active and passive investors . Average investors are the one who do not fully
depends on the market for their bread and butter rather they seek advice through broking agency or individuals to enter the market
and invest part of their income
No such record found from analyzing the detail of the company

b) Who is the marginal investor in the stock

To qualify as the marginal investor who decides the trading price , he needs to satisfy two criteria
1. He should own significant portion of the equity
2. He should trade on that equity.

Marginal Investor is a representative investor whose actions reflect the beliefs of those people who are currently trading a stock.

It is the marginal investor who determines a stock's price here they are the Institutional Investors

Stockholder Analysis
Name of the Shareholder

Number

As a % of grand
total

Bharti Telecom Limited

1,747,545,460

43.72

Pastel Limited
Indian
Continent
Limited

591,319,300

14.79

265,860,986

6.65

Viridan Limited

8,493,000

0.21

Total

2,613,218,746

65.37

How many stockholders does the company have?

Company has in
Moneycontrol.com)

total

260508

Share

holders.

What percent of the stock is held by Institutional investors?

Investment

24.9%

Does the company have listing in the foreign markets

No

(www.

Share Holding Pattern as

on :
30/06/2014
Face Value
5

No. Of Shares

% Holding

PROMOTER'S HOLDING

Foreign Promoters

865673286.00 21.66

Indian Promoters

1747545460

43.72

Person Acting in Concert

0.00

Sub Total
NON
HOLDING

2613218746

65.37

PROMOTER'S

Institutional Investors

Mutual Funds and UTI

72721488
Banks
Fin.
Inst.
and
Insurance
213743985
FII's
709035440
995500913
Sub Total
Other Investors

1.82

Private Corporate Bodies

NRI's/OCB's/Foreign
Others
GDR/ADR
Directors/Employees
Government
Others
Sub Total

129957146

3.25

207361126
0
0
0
8814232
346132504

5.19
0.00
0.00
0.00
0.22
8.66

General Public

42547939
3997400102

1.06

GRAND TOTAL

5.35
17.74
24.90

100

10

Insider Holdings
a) Who are the insiders in the company? Besides the mangers and directors, anyone with more than 5%is treated as
an insider)
There are no insiders in the company
b) What role the insiders play in the company
Insider trading based on inside information is illegal. This is because it is seen as unfair to other investors
who do not have access to the information. In India it is Ban through SEBI Act of 1992.
They play a vital role as their illegal information can drive the price up ward or downward of a company

c) What percent is held by the employee overall( Including employees pension plan)
Total shares hold under ESOP scheme 2980128 which is 0.075% of total shares
d) Have insiders been buying or selling stock in this company in the most recent year?
No such bulk buying / selling deals data found (Information from SEBI)
11

12

Dividend Policy

Airtel inline with the companies act of 1956

do abide to the approved dividend policy as
per the article 1.7. Historically they have
stand by it as well.
It started in 2009, At the Annual General
Meeting (AGM) of the Company to be held on
August 21, 2009. Bharti Airtel Ltd has
informed BSE that the 14th Annual General
Meeting (AGM) of the members of the
Company will be held on August 21, 2009,
inter alia, to transact the following business:
1. To declare dividend on equity shares
2. Equity dividend @ Rs. 2/- per equity share
of Rs. 10/-each.
BUYBACK : Bharti Airtel has never done any
buy back of the shares.

13

For Year
2014
Dividend / share
Dividend payout
%age
Dividend Yield
%age

Bharti
Idea
Reliance TATA
Airtel Cellular Comm
Comm
1.8

0.4

4.5

26%

6.70%

126.5

Dividend as a % of Profit
2014
2013
(Airtel)
Net Profit in Rs Cr
Equity Dividends in Rs Cr
Dividend/Profit(%)

0.60%

0.30%

6,600.20 5,096.30

2012

2011

2010

9,426.1
5
379.8 379.79

5,730.00 7,716.90

719.5

379.8

379.8

11%

7%

7%

5%

4%

Comparing the dividend policies it is clear

that Bharti Airtel has been disbursing token
dividends

Airtel has huge Earnings

It can disburse more dividends to Shareholders

The Marginal Investor are the Institutional Investors

These are growth investors. There would be negative

sentiments among them if high dividends are paid. This would
show that there are no Growth Projects for Airtel and hence
Marginal Investors would start selling the Stock.

Airtel should use the Profits for growth projects and

acquisitions.

14

Risk & Return

The Figure on the right Shows

performance of Bharti Airtel v/s
BSE Sensex over period of 5 years

15

Risk & Return

From the Previous slide we see that the Point to Point return doesn't have any trends for Airtel as compared to BSE.

The investors would have gained by investing in Airtel by around 30% in the last year based on our calculations. Whereas BSE
index would have given a Return of 48%.

Total Risk for a year is 1.84% out of which 1.02% is Systematic Risk driven by Market Factors and the rest 0.83% is Business
Risk. Hence 45% of Total Risk is Business Driven.

The Companys equity has fluctuated in all the years under consideration. This is quite evident from the Total Risk as Airtel's
Stock is generally twice as risky compared to Index

Cost of Equity---18.58%

Cost Of Debt Long term is 7.06% and Short Term is 5.56%

Companies Current Cost of Capital Long term WACC 18.49%. Short Term
WACC 18.27%

16

Risk & Return

Intercept 0.00052 based on daily annual data for the period under consideration. This tells us that the Stock prices of the company
have fluctuated a lot during the year.

Slope of the regression is 1.06. The Stock price changes by 1.06 for every 1 unit change in Index. The company has 2% weight of
BSE Sensex.

Estimate of Risk has low accuracy since market factors cover more than 50% of the risk in the Stock price.

Risk -1.02% Market Factors, 0.83% Firm Specific. It is important since major fluctuations are attributable to the Market Factors
which are uncontrollable and the controllable risk is attributed to Companys internal decisions which can be easily mitigated.

Comparison of risk
The Figure on the right:
shows how the total risk has
moved for the
company over the period .
After a patch of high volatility it
appears to
be stabilizing

Airtel

2.10%

BSE Sensex

2.24%

1.84%

1.76%
1.17%

0.96%

1.20%
0.96%

31/08/10 to 31/08/11

1/9/11-30/08/12

31/8/12-29/08/13

28/8/13-28/8/14

17

WACC- Long Term Purpose

Choosing Between Betas

We have estimated only Top-Down Beta since the Business model of the Company is only of providing telecom and allied
activities. The Allied activities are considered as part of the Telecom Business. Separate Data's of each of the various sectors
would result in erroneous results

18

WACC- Short Term Purpose

How does the WACC help ?

As a manager this long term and short term WACC will be used by us for discounting Cash Flows and applying other
Capital Budgeting Techniques for new projects & assessing existing projects.

19

Cash Flow of Bharti Airtel

Net Profit Before Tax
Net Cash From Operating Activities
Net Cash (used in)/from
Investing Activities
Net Cash (used in)/from Financing Activities
Net (decrease)/increase In Cash and Cash
Equivalents
Opening Cash & Cash Equivalents
Closing Cash & Cash Equivalents

in Rs. Cr.
Mar '14
12 mths
8377.4

Mar '13
12 mths
6454.8

Mar '12
12 mths
6956.2

Mar '11
12 mths
8725.8

Mar '10
12 mths
10699.25

16022

13884.7

11437.8

13293.2

12692.63

-17086.3

-10725.9

-12611.8

-19102.1

-10601.7

1182.2

-3185.7

1400.8

5594.8

-2539.32

117.9

-26.9

226.8

-214.1

-448.35

327.9
445.8

354.8
327.9

128
354.8

342.1
128

789.88
341.53

Source : Dion Global Solutions Limited

Cash Flow Analysis

The Company had negative Cashflows in FY 12-13 but it has bounced back to +ve Figures.
It's targeting kick starting the stalled Indian Projects and Increase investement in Africa
Idea Cash Flow -ve 950 Cr for FY 13-14
Tata Communication Cash Flow though +ve it decreased by 30% YOY
RCOM -ve Cash flow of 101 Cr for FY 13-14

20

Sources of Funds

Debt ratio

Particulars
1
2
3
4

amount ( millions)

Issue of share to Instl investors

Sale of investments
Sale of undertaking
from borrowings

67,956.00
8,005.00
1,771.00
69,914.00

Total

147,646.00

Different kinds used to raise funds

The borrowings are mainly from banks

the other borrowings are in the nature of lease transactions by
way of operating leases for tower business, these borrowings do
not fall under the debt equity ratio calculations due to their
nature involved. These are further not reflected in the balance
sheet

Debt ratio of Indian companies

optimal d/e
ratio
Sector

1.25

sources - TRAI report

market

0.83

sources - live mint

Fig in Crs

FY 13-14

FY 12-13

Intangible Assets

240682

264362

Tangible Assets
Other Assets

Total Assets

Net Debt

Debt ratio

158100
583259

982041

605416

0.62

167464
447006

878832

583567

0.66

The company is in expansion mode and it will need funds to feed

the growth. Moreover the company will have to pay towards
further capital commitment and also towards repaying back the
loans.
Since the d/e ratio is quite low, the company has an option to go
for debt funding to the extent of making d/e = 1.25 as per trai's
report
in quantitative terms the debt can be raised by 176,207.14
crores.

21

gradual / sudden shift to optimal d/e ?

The shift should be gradual as one can avail of getting a lower cost
of debt along with market absorbing the correction in stock prices
gradually.

Marginal tax YOY basis of Airtel Vs Competition

400.0%
300.0%

alter mix / buy back stock

200.0%

The company should not buy back since it has requirement of

funds for future growth plans and repayment of spectrum fees is
due.

100.0%
0.0%
Mar '14
-100.0%

Mar '13

Mar '12

Mar '11

-200.0%

short term upto 2 years to be used and should be in japanese yen

as it is available at a cheaper cost.

-300.0%
-400.0%

special features --- no prepayment penalty clauses and should not

have specific covenants as to usage.
company should not pay back cash to shareholders as it is in
requirement of funds. There has been constant growth in tower
business which would need a lot of cash. And it would require more
funds in other lines of business too

Airtel

Idea Cellular

Reliance Comm.

Tata Comm.

Mar '14

Mar '13

Mar '12

Mar '11

Airtel

0.2%

3.4%

6.1%

0.6%

Idea Cellular

-1.3%

3.4%

25.9%

-3.3%

Reliance Comm. 196.3%

Tata Comm.

4.9%

0.6%
-6.9%

-369.7% 294.5%
44.4%

-47.2%
22

ADVANTAGES OF DEBT COMPARED TO EQUITY

Because the lender does not have a claim to equity in the business, debt does not dilute
the owner's ownership interest in the company.
A lender is entitled only to repayment of the agreed-upon principal of the loan plus
interest, and has no direct claim on future profits of the business. If the company is
successful, the owners reap a larger portion of the rewards than they would if they had
sold stock in the company to investors in order to finance the growth.

DISADVANTAGES OF DEBT COMPARED TO EQUITY

Except in the case of variable rate loans, principal and interest obligations are known
amounts which can be forecasted and planned for.

Unlike equity, debt must at some point be repaid.

Interest is a fixed cost which raises the company's break-even point. High interest costs during
difficult financial periods can increase the risk of insolvency. Companies that are too highly
leveraged (that have large amounts of debt as compared to equity) often find it difficult to
grow because of the high cost of servicing the debt.
Cash flow is required for both principal and interest payments and must be budgeted for. Most
loans are not repayable in varying amounts over time based on the business cycles of the
company.

Interest on the debt can be deducted on the company's tax return, lowering the actual
cost of the loan to the company.

Debt instruments often contain restrictions on the company's activities, preventing

management from pursuing alternative financing options and non-core business opportunities.

Raising debt capital is less complicated because the company is not required to comply
with state and federal securities laws and regulations.
The company is not required to send periodic mailings to large numbers of investors,
hold periodic meetings of shareholders, and seek the vote of shareholders before taking
certain actions.

The larger a company's debt-equity ratio, the more risky the company is considered by lenders
and investors. Accordingly, a business is limited as to the amount of debt it can carry.
The company is usually required to pledge assets of the company to the lender as collateral,
and owners of the company are in some cases required to personally guarantee repayment of
the loan.

Recent Rating

Rating of Bharti Airtel as per Crisil India

As on 31st August 2014, the long term rating is AA+ Interest rate is 9.55%, Default Spread is +- 1.96%

Short Term Rating is A1+ Rating Default Spread is +- 2.76%

Companys Marginal Tax Rate is 12.2% & Effective Tax Rate is 16.62%

1.

Market Value of Equity Rs. 147,784 crores

2.

Market Value of Debt book value of debt (since debts are not traded in the market) Rs. 9,113 crores Long Term
and Rs. 1,251 crores Short Term Debt- as per Mar14 Balance Sheet

3.

We- 99.28% & Wd 0.72% Long Term and 99.90% and 0.10% respectively for short Term
23

Measuring Investment Returns

Is there a typical project for this firm? If yes what would it look like in terms of life ( long term or short term), investment
needs and cash flows patterns ?
There are four segments namely
Telecom-Tele media 86%
Consultancy 6%
DTH 2%
Tower Business 5% ( Co. had recently sold its African Tower Business this has not been considered in our report
and calculations)
All are long term
The company has positive operative and financial cash flows . According to last year data company had +16022 crs
cash flow and -17086.3 crs Investing activity and +1182 crs from financing activities ( March 14 data)
Investment needs- The Company is Capital Intensive

24

Measuring Investment Returns

How good are the projects that the company has on its books currently?
Currently the company has gone for the restructuring and it has sold of its tower business in Africa and have exited form
certain projects ( Not considered in the our calculation ). The company operates in all major circles in India and is currently
the leading telecom service provider with approx. 205 million subscriber.

Are the projects in the future likely to look like the projects in the past? Why or why not?
Yes as the company is consolidating its core strength of Telecom-Tele Media services and currently expanding its 3G network
to all circles as well as 4G network in major cities to attract the internet savvy crowd.

Accounting Returns on Projects- ROE-9.89%. V/s Ke- 18.58%, the Company is not picking up good projects.

ROCE 13.18%, WACC is 18.49%. The firm is not performing well in terms of long term projects.

25

EVA Calculation

EVA shows the not so rosy picture here as there has been no value creation for Either Equity Share holders or the
company over the years except for year ended 2010.
This is despite the Companys Net Worth has exhibited an increasing trend.
For a firm to create Value, the ROE and ROCE should be higher than WACC which is not the case in here.
26

ROCE Comparison with Peers

ROE Comparison with Peers

35.00%

30.00%

30.00%

25.00%

25.00%

Bharti Airtel
20.00%

Idea Cellular
20.00%
15.00%

Idea Cellular

Reliance
Communication
s

15.00%
10.00%

10.00%

0.00%

0.00%
March'11

Marc h'12

March'13

Reliance
Communication
s

5.00%

5.00%

March'10

Bharti Airtel

March'10

March'14

-5.00%

March'11

March'12

March'13

March'14

-5.00%
Source: Livemint.com

Source: Livemint.com

From the above charts we see that though ROE & ROCE of Airtel has been highest till date but Idea Cellular is catching up
pretty fast. This trend should ring the bells for Airtels Managers and performance should be improved.

27

CONCLUSION

Through Various Analysis we have could say :

The Company is mostly financed by Equity and gives a healthy ROE & ROCE as compared to its peers.
Based on its Ratings and Strong Results the Company is in a better position to raise funds at a lower rate than its peers.
Since both its competitors (Idea Cellular & R Comm.) have borrowed heavily.
The Company, according to us, should also think about increase debt and reduce equity as it would be able to have a lower
WACC and able to give higher returns to Equity Investors.
A lot of volatility is seen in Companys results since past few years which might be attributed to Macro Factors such as the
legal battles and fierce competition.
Companys YOY returns to the share holders in last 2 years is 29.67% , 20.14% in comparison to BSE 48.02 and 3.09%
which sends a strong signal of stability among stakeholders
ROE has gradually decreased from 25.66% in 2010 to 9.89% over the last 5 years mainly due to surge in net worth and
shrinking margin due the competition and stringent TRAI regulations.
Speaking of Softer aspect as per TRAI Customer Satisfaction Survey 2014 it places Airtel on second spot behind Vodafone
as most preferred and known brand in terms of network performance, reliability and availability, maintainability and
supplementary services

28

Challenges
Inadequate infrastructure in Indian and African rural
regions pushing cost of operations
Continuously innovating and investing in greater
reach
Integration in operations across continents
Combining common platforms across
countries

all 20

Understanding evolving customer perceptions in a

multi-cultural and multi-lingual environment
Reach across all 22 circles in India, covering both
rural and urban areas
Diversity across 20 countries

Opportunities
threats
Untapped telecom market in Africa and rural India
Newer, more meaningful products targeted to
specific customer segments

Falling Average Revenue per User

Changing rates across wide array of products

Successful spectrum acquisition in India for a secure

future

Political and economic uncertainties in Africa and

India

Reach to the less penetrated areas across the

country
Increasing data consumption over voice consumption
Data explosion at its cusp with new and improved
devices and increased penetration

Frequent changes in policies

Rise in operating costs across countries
Large investments in licence renewals and spectrum

Increasing capex network costs

Continuously upgrading network infrastructure

Th nk you
Thanking Prof.A. Kanagaraj for his valuable time and support in our learning process

29