bharti airtel analysis

An Analysis on Bharti Airtel

Presented By:Sandeep Singh

Roll No. : 48

Session spread

• Introduction and overview of Bharti Airtel

• Fundamental Analysis

• Industry Analysis

• Company analysis

• Technical Analysis

• Conclusion and recommendations

Introduction and overview of Bharti Airtel

• Airtel comes to you from Bharti Airtel Limited, one of Asia’s

leading integrated telecom services providers with operations

in 19 countries across Asia and Africa.

• Bharti Airtel since its inception, has been at the forefront of

technology and has pioneered several innovations in the

telecom sector.

• The company is structured into four strategic business units -

Mobile, Telemedia, Enterprise and Digital TV.

• The mobile business offers services in India, Sri Lanka and

Bangladesh.

Introduction and overview of Bharti Airtel

• The Telemedia business provides broadband, IPTV and

telephone services in 89 Indian cities.

• The Digital TV business provides Direct-to-Home TV services

across India.

• The Enterprise business provides end-to-end telecom solutions

to corporate customers and national and international long

distance services to telcos.

Fundamental Analysis

• India has become one of the fastest growing mobile markets in

the world.

• The mobile services were commercially launched in August

1995 in India.

• If 70% of total population is rural, the scope for growth in this

industry in unprecedented

• Most of the expansion in subscribers is set to occur in rural

India. India’s rural telephone density has been at around 1.9%


• The telecom sector revenues would touch $30bn by 2013

registering a compound annual growth rate of 12.5 % between

2009-2013

• Contribution to GDP is 1.6%

• India is ready for 3G, and is looking forward 4G and 5G

• Today the total number of telephone subscribers in the country

crossed the 600 million mark

• The overall tele-density has increased to 58.17%% in July 2010

• India will overtake China to become the world's largest mobile

telecommunications market by the year 2013


• Yearly Cell phone Addition: 178.25 million

• In 2013, the tele density will shoot up to 75% and the total

mobile subscriber base would be a staggering 1.159 billion !!!

Lets have a closer look !List of countries by number of mobile phones in use in

2010

RankCountry or

region Number of mobile phones Population % of

population

— World 4,600,000,000 6,797,100,000 67.6

1 China 815,000,000 1,338,610,000 61.5

2 India 670,600,000 1,185,000,000 56.6

3 United States 285,610,580 308,505,000 91

4 Russia 213,900,000 141,940,000 147.3

5 Brazil 189,400,000 191,480,630 98.9

6 Indonesia 168,264,000 229,965,000 73.17 Japan 107,490,000 127,530,000 84.1

8 Germany 107,000,000 81,882,342 130.1

9 Pakistan 99,185,844 168,500,500 60.410 Italy 88,580,000 60,090,400 147.4


• Telephone System :

• The telecommunications system in India is the 2nd largest

in the world

• The country is divided into several zones, called circles

• Government and several private operators run local and

long distance telephone services

• It was thrown open to private operators in the 1990s

• Competition has caused prices to drop and calls across

India are one of the cheapest in the world


• Call Rates Cutting Blows

• Internet Users – 4th largest in world

• Mobile market penetration is projected to increase to 63.5

percent in 2013 from 38.7 percent in 2009.

• The number of people with prepaid connections accounting

for 93 percent of the subscriber base in 2008, will continue to

swell to exceed 96 percent by 2013, surpassing 740

million

Industry Analysis

• Technology

• Government policies for Telecom Industry

• Business cycle

• Supply Analysis

• Profitability

• Increased FDI flows

• Heavy investment in Infrastructure

• Revenue Generation for Govt of India

• Employment Generation

Industry Analysis

• Competition

Very Important in this type of Industry

Industry Analysis

Bharti Airtel22%

Reliance Communications17%

Vodafone Essar17%

Tata teleservices11%

Idea Cellular11%

BSNL11% Aircel

7%

Uninor1%

MTNL1%

MTS India1%

LOOP Mobile (Formerly BPL)0%

Videocon (using Videocon mobileservices)0%

S Tel0%

Ping Mobile0%

Etisalat DB Telecom0%

Swot Analysis Of Indian Telecom

• Indian Telecom market is one of the fastest growing markets in the world.

• Indian telecom network has about 671 million connections as on 31 August 2010.

• With 671 million wireless connections, Indian telecom has become the second largest wireless network in the world after China.

• About 15 million connections are being added every month.

• Wireless telephones are increasing at faster rate. The share of wireless telephones as on August 31, 2010 is above 93% of the total phones.

• The share of private sector in total telephone is about 82.33%.

Strengths

• Huge Customer potential ▫ Tele density still being 56% and rural tele-density 21%.▫ The broadband subscribers grew from 0.18 million in 2005 to6.2 million as on 30

April 2009 and about 7.98 million, at the end of the December 2009.

• High Growth Rate▫ Wireless subscribers growing at a CAGR of 60 per cent per annum since 2004.

• Allowed FDI limit ranging from 74% to 100%▫ The total FDI equity inflows in telecom sector have been US$ 2223 million during

April-November 2009-10

• High return on Investment▫ Easier to create economies of scale thereby increasing return on

investment

• Liberalization efforts by Govt.▫ The share of private sector in total telephone connections is now 82.33% as per

the latest statistics available for December 2009 as against a meager 5% in 1999.

• Lower capital expenditure▫ The Indian telecom market is a high density area, which means more

population per tower. This means lower capital expenditure cost.

Weakness

• Poor Telecommunication Infrastructure

▫ Result : Large number of call drops.

• Late adopters of New Technology

▫ India will be among the last countries in the world to get access to 3G

technology. Some estimates suggest that nearly 132 countries across the world

already have 3G technology and mobile services in one form or the other.

• Most competitive market

▫ 10 to 12 companies offer mobile services in most parts of India, globally, the average is 4.

• A market strongly regulated by Government.

• Difficult to enter because of requirement of huge financial

resources.

• E.g. Auction of 3G license has reached Rs 15814.15 crores.

Opportunities

• 3G Telecom services and 4G services

• More Quality Service- Mobile Number Portability will force the Service provider to improve their quality to avoid

losing subscribers

• Value added Services (VAS)- The mobile value added services include, text or SMS, menu based services,

downloading of music or ringtones, mobile TV, videos, streaming, sophisticated m-commerce applications etc.

- Mobile banking, Mobile Ticketing etc

• Boost to Telecom Manufacturing Companies- Production of telecom equipments in value terms has increased from Rs. 412700 million

(2007-08) to Rs.488000 million during 2008-09 and expected to increase to Rs. 575840 million during 2009-10.

• Telecom Equipment Exports - The Indian telecom industry is expected to reach a size of Rs 344,921 crore by 2012 at a

growth rate of over 26 per cent, and generate employment opportunities for about 10 million people during the same period. The sector would create direct employment for 2.8 million people and for 7 million indirectly, according to a Frost and Sullivan report.

• Horizontal Integration

- Entry Into other consumer segments leveraging the present channels

- E.g.. DTH service like Reliance BIG TV, Tata SKY, Airtel digital TV by telecom

majors like Reliance, Tata and Airtel Respectively.

- Other examples : Airtel website builder

• Providing fibre Connectivity to 2,50,000 village panchayat by 2012.

• More scope in content related services, since, the consumer is influenced

by local culture.

- Local festivals like Baisakhi, Chhath Puja, religious festivals like Diwali, Christmas

etc., National festivals like Independence Day etc.

Opportunities

Threats

• Telecommunication Policies

▫ e.g. Trai's 2G direction affecting new players most notably Tata Teleservices,

Norway’s Telenor and Essar-owned Loop Telecom

▫ Renewal of 2G license on the basis of market rates of 3G auctions

▫ TRAI intentions of rolling out 4G or the fourth-generation technology, known as the

ultra-broadband in 2-3 years raising fears rendering 3G services somewhat

obsolete.

• Declining ARPU (average Revenue per user)

▫ E.g.. price wars like per-second billing which is deflating revenues and making sure

the ‘survival of the fittest’

• Partiality on the part of the Govt.

▫ E.g.. Allowing 3G service in a PSU (MTNL,BSNL) before auctioning to Private Sector .

• Content Piracy

Company / Technical AnalysisManagement - Bharti Airtel

Name Designation Identity

Sunil Bharti Mittal Chairman and Managing director

Ajay Lal Non Executive Director

Arun Bharat Ram Non Executive Director

Company / Technical Analysis

Management - Bharti AirtelName Designation Identity

Craig Edward Ehrlich Non Executive Director

Nikesh Arora Non Executive Director

Rajan Bharti Mittal Non Executive Director


Management - Bharti AirtelName Designation Identity

Tan Yong Choo Non Executive Director

Lord Evan Mervyn Davies Non.Exe.Independent Director

Manoj Kohli Joint Managing Director & CEO

Company / Technical AnalysisManagement - Bharti Airtel

Name Designation Identity

Akhil Gupta Non Executive Director

Chua Sock Koong Non Executive Director

N Kumar Non Executive Director


Director’s Report

• Net profit gained by 17% YOY

• General reserve – (Out of total profit of Rs 94,262 mn for the financial year 2009-10, an amount of Rs 7,100 mn has been transferred to the General Reserve.)

• Dividend - Rs. 2 for each 1 equity share of face value Rs.10

• Shahrukh Khan as brand ambassador

• Lots of agreements and alliances.


Chairman’s Report

• focus on the emerging markets of Asia and Africa

• successfully completed the acquisition of Zain for $10.7bn

• striking distance to be among the top three operators in the world by 2015

• won 3G spectrum in 13 circles for a total consideration of Rs 12,295.46 cr


Balance Sheet 1/2Liabilities Mar '06 Mar '07 Mar '08 Mar '09 Mar '10 12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 1,893.88 1,895.93 1,897.91 1,898.24 1,898.77

Equity Share Capital 1,893.88 1,895.93 1,897.91 1,898.24 1,898.77

Share Application Money 12.13 30 57.63 116.22 186.09

Preference Share Capital 0 0 0 0 0

Reserves 5,437.42 9,515.21 18,283.82 25,627.38 34,650.19

Revaluation Reserves 2.13 2.13 2.13 2.13 2.13

Networth 7,345.56 11,443.27 20,241.49 27,643.97 36,737.18

Secured Loans 2,863.37 266.45 52.42 51.73 39.43

Unsecured Loans 1,932.92 5,044.36 6,517.92 7,661.92 4,999.49

Total Debt 4,796.29 5,310.81 6,570.34 7,713.65 5,038.92

Total Liabilities 12,141.85 16,754.08 26,811.83 35,357.62 41,776.10


Balance Sheet 2/2Assets Mar '06 Mar '07 Mar '08 Mar '09 Mar '10 12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds

Gross Block 17,951.74 26,509.93 28,115.65 37,266.70 44,212.53Less: Accum. Depreciation 4,944.86 7,204.30 9,085.00 12,253.34 16,187.56Net Block 13,006.88 19,305.63 19,030.65 25,013.36 28,024.97Capital Work in Progress 2,341.25 2,375.82 2,751.08 2,566.67 1,594.74Investments 719.7 705.82 10,952.85 11,777.76 15,773.32Inventories 17.74 47.81 56.86 62.15 27.24Sundry Debtors 1,076.17 1,418.52 2,776.46 2,550.05 2,104.98Cash and Bank Balance 201.81 239.11 200.86 153.44 54.89Total Current Assets 1,295.72 1,705.44 3,034.18 2,765.64 2,187.11Loans and Advances 1,937.54 3,160.02 5,103.13 5,602.83 6,276.12Fixed Deposits 105.61 541.35 302.08 2,098.16 761.86Total CA, Loans & Advances 3,338.87 5,406.81 8,439.39 10,466.63 9,225.09Deffered Credit 0 0 0 0 0Current Liabilities 6,735.36 9,809.83 12,400.38 13,832.49 12,183.25Provisions 537.44 1,232.84 1,961.95 634.4 658.75Total CL & Provisions 7,272.80 11,042.67 14,362.33 14,466.89 12,842.00Net Current Assets -3,933.93 -5,635.86 -5,922.94 -4,000.26 -3,616.91Miscellaneous Expenses 7.94 2.66 0.2 0.09 0Total Assets 12,141.84 16,754.07 26,811.84 35,357.62 41,776.12


Contingent Liabilities 4,740.34

7,615.04

7,140.59

4,104.25

3,921.50

Book Value (Rs) (sh cap + res / no. of shares)

38.71 60.19 106.34 145.01 96.24


Profit & Loss account 1/2 Mar '06 Mar '07 Mar '08 Mar '09 Mar '10 Particulars 12 mths 12 mths 12 mths 12 mths 12 mthsIncome

Sales Turnover 11,259.12 17,851.61 25,761.11 34,048.32 35,609.54

Excise Duty 0 0 0 0 0

Net Sales 11,259.12 17,851.61 25,761.11 34,048.32 35,609.54

Other Income 26.94 105.62 104.04 -1,261.75 1,118.46

Stock Adjustments -13.84 30.07 9.05 5.29 -34.91

Total Income 11,272.22 17,987.30 25,874.20 32,791.86 36,693.09

Expenditure

Raw Materials 53.56 52.16 42.9 286.94 278.72

Power & Fuel Cost 0 0 0 0 0

Employee Cost 734.2 1,076.95 1,297.88 1,397.54 1,401.66

Other Manufacturing Expenses 3,299.73 5,017.27 7,339.01 8,627.13 11,882.41

Selling and Admin Expenses 2,804.85 4,030.48 5,892.50 9,385.68 6,856.42

Miscellaneous Expenses 314.37 444.28 535.46 1,409.89 1,482.39

Preoperative Exp Capitalised 0 0 0 -269.25 -293.31

Total Expenses 7,206.71 10,621.14 15,107.75 20,837.93 21,608.29


Profit & Loss account 2/2 Mar '06 Mar '07 Mar '08 Mar '09 Mar '10Operating Profit 4,038.57 7,260.54 10,662.41 13,215.68 13,966.34

PBDIT 4,065.51 7,366.16 10,766.45 11,953.93 15,084.80

Interest 236.81 282.07 393.43 434.16 283.35

PBDT 3,828.70 7,084.09 10,373.02 11,519.77 14,801.45

Depreciation 1,432.34 2,353.30 3,166.58 3,206.28 3,890.08

Other Written Off 127.39 137.8 266.07 178.82 207.84

Profit Before Tax 2,268.97 4,592.99 6,940.37 8,134.67 10,703.53

Extra-ordinary items 17.64 9.92 -60.67 -46.15 -50.78

PBT (Post Extra-ord Items) 2,286.61 4,602.91 6,879.70 8,088.52 10,652.75

Tax 273.68 566.79 632.43 321.78 1,177.87

Reported Net Profit 2,012.08 4,033.23 6,244.19 7,743.84 9,426.15

Total Value Addition 7,153.15 10,568.98 15,064.84 20,551.00 21,329.56

Preference Dividend 0 0 0 0 0

Equity Dividend 0 0 0 379.65 379.79

Corporate Dividend Tax 0 0 0 64.52 64.55

Per share data (annualised)

Shares in issue (lakhs) 18,938.79 18,959.34 18,979.07 18,982.40 37,975.30

Earning Per Share (Rs) 10.62 21.27 32.9 40.79 24.82

Equity Dividend (%) 0 0 0 20 20

Book Value (Rs) 38.71 60.19 106.34 145.01 96.24


Cash Flow Statement

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 2285.8 4601.37 6972.54 8161.54 10699.25

Net Cash From Operating Activities 4547.2 8107.95 10459.85 11853.15 12692.63

Net Cash (used in)/from-5000.26 -7975.05 -11648.4 -10894.4 -10601.7

Investing Activities

Net Cash (used in)/from Financing Activities

376.35 340.13 898.03 -672 -2539.32

Net (decrease)/increase In Cash and Cash Equivalents

-76.71 473.03 -290.53 286.77 -448.35

Opening Cash & Cash Equivalents 384.14 307.43 793.47 503.31 789.88

Closing Cash & Cash Equivalents 307.43 780.46 502.94 790.08 341.53


Comparison With Competitors

Click Here


Ratio Analysis


Investment Valuation Ratios

Face Value 10 10 10 10 5

Dividend Per Share -- -- -- 2 1

Operating Profit Per Share (Rs) 21.32 38.28 56.16 69.5 36.65

Net Operating Profit Per Share (Rs)

59.45 94.16 135.73 179.37 93.77

Free Reserves Per Share (Rs) 28.11 49.88 83.18 121.78 84.64

Bonus in Equity Capital 82.7 82.61 82.53 82.51 82.49


Ratio Analysis


Profitability Ratios

Operating Profit Margin(%) 35.86 40.65 41.37 38.74 39.08

Profit Before Interest And Tax Margin(%) 23.05 27.31 28.78 29.12 28.04

Gross Profit Margin(%) 23.14 27.47 29.08 29.33 28.15

Cash Profit Margin(%) 31.57 36.26 38.03 36.96 35.25

Adjusted Cash Margin(%) 31.57 36.26 38.03 36.96 35.25

Net Profit Margin(%) 17.8 22.46 23.99 22.58 26.36

Adjusted Net Profit Margin(%) 17.8 22.46 23.99 22.58 26.36

Return On Capital Employed(%) 20.74 29.06 27.95 28.4 23.86

Return On Net Worth(%) 27.47 35.35 30.94 28.13 25.79

Adjusted Return on Net Worth(%) 27.42 35.23 32.04 33.74 23.27

Return on Assets Excluding Revaluations 10.36 14.51 106.34 145.01 96.24

Return on Assets Including Revaluations 10.36 14.51 106.35 145.02 96.25

Return on Long Term Funds(%) 21.28 29.83 28.52 29.01 24.36


Ratio Analysis Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Liquidity And Solvency Ratios

Current Ratio 0.44 0.47 0.57 0.69 0.68

Quick Ratio 0.45 0.47 0.55 0.65 0.72

Debt Equity Ratio 0.65 0.47 0.33 0.28 0.14

Long Term Debt Equity Ratio 0.61 0.43 0.3 0.26 0.12

Debt Coverage Ratios

Interest Cover 12.76 23.45 34.38 46.28 85.82

Total Debt to Owners Fund 0.65 0.47 0.33 0.28 0.14

Financial Charges Coverage Ratio 17.22 26.09 27.77 30.93 49.64

Financial Charges Coverage Ratio Post Tax

16.08 24.13 25.6 26.63 48.73


Ratio Analysis Mar '06 Mar '07 Mar '08 Mar '09 Mar '10Management Efficiency Ratios

Inventory Turnover Ratio 634.52 373.35 453.06 547.83 1,307.05

Debtors Turnover Ratio 12.57 14.31 12.28 12.78 15.3

Investments Turnover Ratio 634.52 373.35 453.06 547.83 1,307.05

Fixed Assets Turnover Ratio 0.72 0.75 1.03 1 0.88

Total Assets Turnover Ratio 1.15 1.27 1.09 1.06 0.93

Asset Turnover Ratio 0.72 0.75 1.03 1 0.88

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held 0.74 1.36 1.18 0.98 0.41

Number of Days In Working Capital -125.78 -113.65 -82.77 -42.3 -36.57

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit -- -- -- 5.73 4.71

Dividend Payout Ratio Cash Profit -- -- -- 3.99 3.28

Earning Retention Ratio 100 100 100 95.22 94.78

Cash Earning Retention Ratio 100 100 100 96.5 96.48

Adjusted Cash Flow Times 1.34 0.82 0.66 0.61 0.4


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Bharti Airtel Price prediction as on 20/10/2010

Symbol Date Prev Close Open Price High Price Low Price Last Price Close Price Average Price

BHARTIARTL 22-Oct-10 337.1 338.9 341.8 331.45 333.9 333.45 336.54

BHARTIARTL 21-Oct-10 321.25 324.7 338.6 323.45 337.15 337.1 331.89

BHARTIARTL 20-Oct-10 327.2 325 329.7 318.8 321.25 321.25 323.44


Bharti Airtel Price prediction for year 2013

800600550

bharti airtel analysis

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