Name:

HASAN ARMOGHAN

Roll No.:

2014103

Company:

BHARTI AIRTEL

SECTION I
The BRAND- Airtel
[1]

Airtel was born free, a force unleashed into the market with a relentless and unwavering
determination to succeed. A spirit charged with energy, creativity and a team driven to seize
the day with an ambition to become the most admired telecom service provider globally.
Airtel, in just ten years of operations, rose to the pinnacle of achievement and continues to
lead. As India's leading telecommunications company, Airtel brand has played the role of a
major catalyst in India's reforms, contributing to its economic resurgence.

Vision and Promise

[2]

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

"Enriching lives means putting the customer at the heart of everything we do. We will meet
their needs based on our deep understanding of their ambitions, wherever they are. By having
this focus we will enrich our own lives and those of our other key stakeholders. Only then
will we be thought of as exciting, innovation, on their side and a truly world class company."

Company Details
[3]

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.
[4]

The businesses at Bharti Airtel have been structured into three individual strategic business
units (SBUs) 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 India's best DirecttoHome (DTH) service,
Airtel digital TV.

Milestones:
2014 Airtel crosses 200 million mobile customer mark in India
2013 Airtel signs definitive agreement to fully acquire Warid Uganda
2012 Bharti Airtel becomes 4th largest mobile operator in the world in terms of subscribers.

Achievements/ recognition:

Bharti Airtel has been awarded the 'Best Cellular Service Provider' and 'Best Broadband
Service Provider' at the 2008 V&D 100 Awards.
Bharti Airtel has been voted as India's most innovative company, in a survey conducted by
The Wall Street Journal.
Airtel has been voted the 2nd Most Trusted Service Brand in the Annual Economic Times
Brand Equity, Most Trusted Brands survey.

SECTION II

RESEARCH METHODOLOGY

Objective:

To carry out the Financial Statement Analysis of

BHARTI AIRTEL.

Period of study:

2012-13 and 2013-14.

Type of data:

Secondary data.

Analysis of data:

Ratio Analysis as a tool to analyze Financial Statements.

SECTION III

Revenue Generation
Bharti Airtel generates the maximum revenue of its business from the Voice Revenue
activity. Voice Revenue includes revenue from home network subscribers, roaming revenues
and interconnect revenues.
Voice Revenue accounted for 78.81% of the total Revenue from Operations of the 2012-13
financial period and 80.98% for the 2013-14 period.

Growth Drivers
Bharti Airtel being a telecom service provider company, its major growth driver for its
services is the Mobile Data. Precisely it is why the company has secured the spectrum in
the auction giving it a pan-India footprint for the 4G services as it believes it will be vital in
propelling the growth of the company. The dependence of Mobile Data as a growth driver
requires significant investments and focus on innovation and formulation of strategies to lead
in the era of cut-throat competition. Voice calling, which is another business booster will
continue to attract business but its contribution would decrease in the near future.

Accounting Policies
Basis for preparation of accounts
The financial statements of the Company have been prepared in accordance with the
generally accepted accounting principles in India (Indian GAAP). The financial statements
have been prepared to comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant
provisions of the Companies Act, 1956 read with General Circular 8/2014 dated April 4,
2014 issued by the Ministry of Corporate Affairs. The financial statements have been
prepared under the historical cost convention and on an accrual basis except in case of assets
for which revaluation is carried out and certain derivative financial instruments. The
accounting policies have been consistently applied by the Company and are consistent with
those used in the previous year.
Areas under consideration in Accounting Policies

Use of estimates
Tangible Assets
Intangible Assets
Leases
Borrowing Cost

Impairment of Assets
Assets Retirement Obligation (ARO)
Investment
Cash and Cash equivalents
Inventory
Revenue recognition and receivables
License fees Revenue share
Foreign currency translation
Share based compensation
Taxes
Segment reporting
Provision and Contingencies
Multiple elements contracts with Vendors

Policy for Depreciation

Depreciation on tangible assets is provided on the straight line method based on useful lives
of respective assets as estimated by the management or at the rates prescribed under Schedule
XIV of the Companies Act, 1956, whichever is higher. The assets residual values and useful
lives are reviewed at each financial year end or whenever there are indicators for review, and
adjusted prospectively. Freehold Land is not depreciated.
Policy for Inventory
Inventory is valued at the lower of cost and net realisable value. Cost is determined on First
in First out basis. Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs necessary to make the
sale.
The Company provides for obsolete and slow-moving inventory based on management
estimates of the usability of inventory.

Major Expense Heads

Table showing the major expense heads and also the total expenses of Bharti Aitel for the
financial periods 2013-14 and 2012-13. (All figures in Rs. Millions.)
Major Expenses

Access charges
License fee and spectrum charges
Employee benefit expense
Power and Fuel
Rent
Other Expenses
Overall Total Expenses

Year 2013-14

Year 2012-13

73,015
54,682
16,481
41,697
56,904
92,711
335,512

74,212
48,815
15,113
35,669
52,225
92,424
318,507

Bar chart showing the comparison of Major Expenses of Bharti Airtel for the two years:
100,000
90,000
80,000
70,000
60,000
50,000
40,000

Year 2013-14

30,000

Year 2012-13

20,000
10,000
0
Access
charges

License fee
and
spectrum
charges

Employee
benefit
expense

Power and
Fuel

Rent

Other
Expenses

Table showing the major heads of expenses under the category Other Expenses of Bharti
Airtel. (All figures in Million Rs.)
Expense Heads

Plant and Machinery repairs cost

Sales, commission, customer verification etc. cost
IT, Call centre outsourcing
Advertisement and Marketing
Internet access and Bandwidth charges

2013-14

2012-13

22,837
15,779
11,701
6,074
6,396

20,507
21,108
10,842
5,993
5,715

CASH FLOW ANALYSIS

Table showing the major Cash Flow from various activities of Bharti Airtel.
(All figures in Rs. Millions)
Heads

Net Cash Flow from Operating activities

Net Cash Flow from Investing activities
Net Cash Flow from Financing activities

Year 2013-14

Year 2012-13

160,220
(170,863)
11,822

138,847
(107,259)
(31,857)

Analysis of Net Cash Flow from Operating activities:

The net cash flow from operating activities went up from Rs. 138,847 million in the financial
year 2012-13 to Rs. 160,220 million in 2013-14. This was due to the following reasons
mentioned below:

Depreciation and Amortization expense: The depreciation and amortization

expense increased from Rs. 68,267 million in 2012-13 to Rs. 72,313 million in 201314. It means that more amount was spent on depreciation and amortization of assets
this year.
Profit before Tax: The PBT was higher for the year 2013-14 as compared to the year
2012-13 by Rs. 19,226 million. This was because Bharti Airtel had made higher
profits this year and thereby more cash flow was involved.
Unrealised foreign exchange: The amount realised from foreign exchange
transactions in the year 2013-14 was less than 2012-13 by a huge margin of Rs. 8610
million. This also affected the final cash flow from operating activities.
Profit on sale of assets: As compared to the year 2012-13 where was a loss of Rs.
481 million on the sale of assets, there was a profit of Rs. 95 million in the year 201314.

Analysis of Net Cash Flow from Investing activities:

The total amount of investments made in the year 2013-14 was Rs. 170,863 as compared to
Rs. 107,259 in the year 2012-13. This means that Bharti Airtel made more investments in the
year 2013-14 to the tune of Rs. 63,604 million. This was due to the following reasons:

Purchase of tangible assets: Bharti Airtel invested more on tangible assets this year
as compared to last year. In 2012-13 the total investments on tangible assets was Rs.
44,213 million whereas in 2013-14 it was Rs. 50,820 million.
Purchase of intangible assets: The Company adopted a new strategy of investing
heavily on intangible assets as was seen in the account statement. From a mere Rs.
2,974 million investment in 2012-13, it increased to a whopping Rs. 57,289 million in
the year 2013-14. This had a major impact on the overall cash flow of investment
activities.
Sale of investments: As compared to the year 2012-13 when Bharti Airtel has
purchased investments of Rs. 4,250 million, in 2013-14 there was sale of investments
of Rs. 8,005 million.
Net movement in advances: Bharti Airtel had paid Rs. 64,443 million as advances to
subsidiaries/associates/joint ventures. This was higher as compared to Rs. 20,201
million in the year 2012-13.

Analysis of Net Cash Flow from Financing activities:

In the financial year 2012-13 Rs. 31,857 million was earned on financing activities, wheras in
2013-14 Rs. 11,822 million was spent on financing activities. This was due to the following
reasons:

Proceeds from issuance of equity shares: In the financial year 2013-14, Bharti
Airtel issues equity shares to institutional investors which brought in Rs. 67,956

million. As per the financial statement, there was no such issuance of equity shares in
2012-13.
Proceeds from borrowings: The proceeds from borrowings increased from Rs.
54,511 million in the year 2012-13 to Rs. 69,914 in the year 2013-14.
Short-term borrowings: There was NIL short-term borrowings in the year 2013-14
as compared to Rs. 2,022 million in the year 2012-13. This means more repayments
were done, which is evident in the Repayment of borrowings head which increased
from Rs. 68,434 million in the year 2012-13 to Rs. 111,219 million in 2013-14.

MANAGEMENT DISCUSSION AND ANALYSIS

The major issues covered in the MDA are as follows:
1. Government Relations: Risk of political instability, civil unrest and other social
tensions in Asia and Africa. Issues of fragile political systems leading to regime
uncertainties and hence cloud over government support.
2. Economic Uncertainties: Lack of economic growth or slowing down of the economy
leads to reduction in consumer spending hence affecting all sectors including telecom.
Operating in developing countries has its own issues of growth.
3. Inadequate Infrastructure: Lack of proper infrastructure across the rural areas of
Asia and Africa pushes up operational costs, adversely impacts the service and hence
negatively affects the penetration of company.
4. Technical failures and Natural disasters: Repeated outrages, poor quality of
networks result in disruption of services, leading to loss of revenue, customer
dissatisfaction, reduction in market share and damage to the brand reputation.
5. Adverse Regulatory or Taxation Developments: The recent tax proceedings in
India have posed as a serious challenge to telecom sector. It is highly taxed with
enhanced revenue share-based licence fee and spectrum charges, service tax and
corporate tax.
6. Deficiencies in Internal Controls and Process Compliances: Gaps in internal
controls and / or process compliances not only lead to wastages, frauds and losses but
can also adversely impact the Airtels brand.
7. Quality of Customer Lifecycle Management: A rapid change is always seen in the
customer mindsets, habits, which leads to ever-rising expectations in terms of quality,
variety, features and pricing. Failure to keep pace with customers expectations might
result in loss of revenues, profits erosion and market share reduction.
8. Poor Quality of Customer Acquisitions: Since the market is dominated by prepaid
customers, several inefficient processes such as unhealthy commission structure for
agents, fraudulent practices by retailers, can occur. These issues may lead to high
operational costs, trade frauds etc.

9. Non-compliance with Subscriber Verification and KYC Regulations: Lack of

proper subscriber verification processes or a weak process may lead to uncompetitive
market position, especially if the customers are fast paced and the competitors are
faster and well coordinated in terms of customer verification.
10. Low Revenue and / or Low Utilisation Sites: This leads to recurring operating
losses in such sites, along with additional burden of sunk investment.
11. Technology Shifts: Evolving technologies (2G, 3G, 4G) result in change in customer
value propositions. Mobile money technologies, Cloud, M2M, SaaS and other
technology based VAS products are also evolving. Such rapid technology evolution
may impact the functionality of existing assets and accelerate obsolescence.
12. Ineffective Partner Governance: The risks of partners adaptability to new growth
opportunities, agility to implement new projects and changes, capability to match
Airtels new leadership expectations, etc. The risk of competitiveness, especially with
partners whose business models have become relatively inefficient over time, is also
high.

SECTION IV

BHARTI AIRTEL RATIO TABLE

RATIO HEAD

2013-14

2012-13

RETURN ON INVESTMENT RATIO

RETURN ON INVESTED CAPITAL

0.083

0.074

RETURN ON NET WORTH

0.99

0.094

ACTIVITY/TURNOVER RATIO
TOTAL SSET TURNOVER

0.51

0.52

INVESTED CAPITAL TURNOVER

0.631

0.662

2.835

3.131

DEBT EQUITY RATIO

0.185

0.264

DEBT TO TOTAL INVESTED CAPITAL

0.156

0.209

LIQUIDITY RATIO
CURRENT RATIO

SOLVENCY RATIO

EFFICIENCY RATIO[5]
FIXED CAPITAL/SALES

1.56

1.58

RECEIVABLE DAYS

16.13

17.63

INVENTORY DAYS

0.01

0.14

PAYABLE DAYS

62.66

55.36

RATIO ANALYSIS:
1. Return on Invested Capital is 0.083 in 2013-14 which means that for one rupee of
invested capital the company is generating 0.083 Profit after tax. It means the return
on invested capital is not so good for the company because the efficiency of using the
capital employed is very low in generating profits for the company. The Return on
invested capital has not increased a lot from last year, so the returns have not
increased much for the company.

2. Return on Net Worth is 0.99 in 2013-14 compared to 0.094 in 2012-13 which means
that for one rupee of shareholders fund the company is generating 0.99 Profit after
tax in 2013-14 and 0.094 in 2012-13. It means the Return on shareholders fund have
improved in this year. We can infer that the profits must have increased on the same
shareholders fund to that of last year.
3. Total Asset Turnover is 0.51 in 2013-14 compared to 0.52 in 2012-13 which means
the company is generating revenues around 51 % of total assets in 2013-14 and 52%
in 2012-13. The asset utilization has just decreased by 1% which means the company
is more or less generating revenues similar to previous year.
4. Invested Capital Turnover is 0.631 in 2013-14 compared to 0.622 in 2012-13 which
means that for one rupee of invested capital the company is generating 0.0631 sales
revenue. It means the invested capital turnover is not very ideal for the company
because the efficiency of using the capital employed is very low in generating sales
for the company. It is approximately same in both the years..
5. Current Ratio in 2013-14 is 2.835 compared to 3.131 in 2012-13. The current ratio
has decreased in 2013-14 from last year which means the difference in the current
liabilities from its current assets have marginally reduced but the current asset is still
enough to pay off all the current liabilities.
6. Debt Equity Ratio for the company is 0.185 in 2013-14 and 0.264 in 2012-13. It
means that the debt has decreased from the last year which has resulted in lower debt
equity ratio.
7. Debt to Total Invested Capital is the calculation of debt being a percentage of total
invested capital. It is 0.156 in this year compared to 0.209 in the last year. It means
that the debt as a percentage of invested capital has reduced in this year. Either the
company must have reduced debt or must have issued more equity.

BIBLIOGRAPHY
1. http://www.airtel.in/about-bharti/about-bharti-airtel/Our-Brand-airtel
2. http://www.airtel.in/about-bharti/about-bharti-airtel/Our-Brand-airtel/our3.
4.
5.
6.
7.

vision-and-promise
http://www.airtel.in/about-bharti/about-bharti-airtel
http://profit.ndtv.com/stock/bharti-airtel-ltd_bhartiartl/reports
http://money.livemint.com/IID64/F132454/Financial/Ratios/Company.aspx
Bharti Airtel ANNUAL REPORT 2012-13
Bharti Airtel ANNUAL REPORT 2013-14