financial magment- comparative study of sources of finance

ADVANCE FINANCIAL MANAGEMENT 2013-14

A PROJECT

ON

“Project Report on Comparative Study of Sources of Finance”

(MTNL and Reliance Communication)

In the subject ADVANCE FINANCIAL MANAGEMENT

SUBMITTED TO

UNIVERSITY OF MUMBAI

FOR SEMESTER-IV

OF MASTER OF COMMERCE

BY

SUNITA KUMARI YADAV

MCOM PART-II AND ROLL NO- 3601

UNDER THE GUIDANCE OF

MRS. MONALI RAY

YEAR- 2013-2014


DECLARATION BY THE STUDENT

I, SUNITA KUMARI YADAV student of M COM PART-II Roll Number 3601 hereby declare

that the project for the Paper ADVANCE FINANCIAL MANAGEMENT titled,


Submitted by me for semester-III during the academic year 2013-2014, is based on actual work

carried out by me under the guidance and supervision of MRS. MONALI RAY.

I further state that this work is original and not submitted anywhere else for any examination.

Signature of Student

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project on


Submitted by SUNITA KUMARI YADAV Student of M COM Part-II.

This project is original to the best of our knowledge and has been accepted for internal assessment.

Internal Examiner External Examiner vice Principle


PILLAI’S COLLEGE OF ARTS, COMMERCE & SCIENCE

Internal Assessment: Project 40 Marks

Name of Student Class Division Roll

Number.

First Name: SUNITA KUMARI M COM

Father’s Name: BBS PART II 3601

Surname: YADAV

Subject: ADVANCE FINANCIAL MANAGEMENT

Topic for the Project:


Mark Awarded Signature

DOCUMENTATION

Internal Examiner (Out of 10 Marks)

External Examiner (Out of 10 Marks)

Presentation (Out of 10 Marks)

Viva and Interaction (Out of 10 Marks)

TOTAL MARKS (Out of 40)


INDEX S. NO. TOPIC PAGE

NO.

1. Introduction 1

2. Type of Finance-Definition, Features 1-19

3. Introduction Of MTNL

Balance Sheet And Profit & Loss A/C

2011-12

19

4. Introduction Of Reliance

Communication

Balance Sheet And Profit & Loss A/C

2011-12

23

5. Comparative of Source Of finance

between MTNL & Reliance Comm.

29

6. Conclusion 30

7. Bibliography 31


Introduction

Finance is the lifeblood of business concern, because it is interlinked with all activities performed by the

business concern. In a human body, if blood circulation is not proper, body function will stop. Similarly,

if the finance not being properly arranged, the business system will stop. Arrangement of the required

finance to each department of business concern is highly a complex one and it needs careful decision.

Quantum of finance may be depending upon the nature and situation of the business Sources of finance

mean the ways for mobilizing various terms of finance to the industrial concern. Sources of finance state

that, how the companies are mobilizing finance for their requirements. The companies belong to the

existing or the new which need sum amount of finance to meet the long-term and short-term requirements

such as purchasing of fixed assets, construction of office building, purchase of raw materials and day-to-

day expenses.

SHORT-TERM FINANCE:

The finance is generally required for a period of one year or the business cycle which may be slightly

greater than period. Apart from the long-term source of finance, firms can generate finance with the help

of short-term sources like loans and advances from commercial banks, moneylenders, etc. Short-term

source of finance needs to meet the operational expenditure of the business concern. Types of short-term

source


LONG-TERM FINANCE:

The long term finance generally exceeds 5 years period. Finance may be mobilized by long-term or short-

term. When the finance mobilized with large amount and the repayable over the period will be more than

five years, it may be considered as long-term sources. Share capital, issue of debenture, long-term loans

from financial institutions and commercial banks come under this kind of source of finance. Long-term

source of finance needs to meet the capital expenditure of the firms such as purchase of fixed assets, land

and buildings, etc. Types of long-term sources

MEDIUM-TERM FINANCE:

This is also called intermediate finance. The period of medium term finance may be 3 to 5 year.

Based on Ownership

Sources of Finance may be classified under various categories based on the period:

An ownership source of finance include

● Shares capital, earnings ● Retained earnings ● Surplus and Profits

Borrowed capital include

● Debenture ● Bonds ● Public deposits ● Loans from Bank and Financial Institutions.


Based on Sources of Generation

Sources of Finance may be classified into various categories based on the period.

Internal source of finance includes

● Retained earnings ● Depreciation funds ● Surplus

External sources of finance may be include

● Share capital ● Debenture ● Public deposits

● Loans from Banks and Financial institutions

Based in Mode of Finance

Security finance may be include

● Shares capital ● Debenture

Retained earnings may include

● Retained earnings ● Depreciation funds

Loan finance may include

● Long-term loans from Financial Institutions

● Short-term loans from Commercial banks.

The above classifications are based on the nature and how the finance is mobilized from various sources.

But the above sources of finance can be divided into three major classifications:

● Security Finance

● Internal Finance

● Loans Finance

SECURITY FINANCE

If the finance is mobilized through issue of securities such as shares and debenture, it is called as security

finance. It is also called as corporate securities. This type of finance plays a major role in the field of

deciding the capital structure of the company.


Characters of Security Finance

Security finance consists of the following important characters:

1. Long-term sources of finance.

2. It is also called as corporate securities.

3. Security finance includes both shares and debentures.

4. It plays a major role in deciding the capital structure of the company.

5. Repayment of finance is very limited.

6. It is a major part of the company’s total capitalization.

Types of Security Finance

Security finance may be divided into two major types:

1. Ownership securities or capital stock.

2. Creditorship securities or debt capital.

Ownership Securities

The ownership securities also called as capital stock, is commonly called as shares. Shares are the most

Universal method of raising finance for the business concern. Ownership capital consists of the following

types of securities.

● Equity Shares ● Preference Shares ● No par stock ● Deferred Shares

EQUITY SHARES

Equity Shares also known as ordinary shares, which means, other than preference shares. Equity

shareholders are the real owners of the company. They have a control over the management of the

company. Equity shareholders are eligible to get dividend if the company earns profit. Equity share

capital cannot be redeemed during the lifetime of the company. The liability of the equity shareholders is

the value of unpaid value of shares. Equity shareholders are residual owners who have unrestricted claim

on income and assets. They possess all the voting power in the company. The rate of dividend on these

shares is not fixed. The rate of dividend depends on the availability of divisible profits and the discretion

of the directors. Equity shareholders have the opportunity of earning high dividend in times of prosperity.

They run the risk of earning nothing in periods of adversity. They control the company on account of

their entitlement to vote at the general meeting of the company. These shares are purchased by persons

who prefer risk to better return and also wish to have the voice in the management of the company. The

equity share capital is also called as venture capital as there is a greater risk involved in it.


TYPES OF EQUITY SHARES:

BONUS SHARES: It refers to issue of shares in place dividend. It is just capitalization of reserves or

conversion of reserves into equity share capital. A company which has sufficient profits may issue bonus

shares.

SWEAT EQITY SHARES: These are the shares issued to the employees of an organisation. These

shares are always issued at a discount. It is a reward to those employees who have done work for

organisation. It helps to motivate the employees.

Features of Equity Shares

Equity shares consist of the following important features:

1. Maturity: Equity share capital is the permanent capital as a company is not under contractual

obligation to refund the capital during its life time. Equity shareholders can demand there capital

only in the event of liquidation and too when funds are left after paying all prior claims. A

company cannot compel the equity shareholders to sell back their shares if they were fully paid-up

and shareholders are engaged in business competitive to the business of the company. However,

equity shareholders can be persuaded to sell their shares.

2. Claim on Income: Equity shareholders are residual owners. Their claims on income arise only

when the claims of creditors and preference shareholders have been met. In many cases, residual

owners of the creditors. The equity shareholders cannot legally compel the company to pay

dividends to them even if the company has sufficient income left after distribute profits. It is

internal management which possesses the discretion to distribute profits. It has entire right to

utilise business income in whatever manner it likes. The rate of dividend is not fixed. It depends

upon the availability of profits and discretion the management.

3. Claim on Assets: As the equity shareholders are residual owners, they are the last claimants to

assets of the company. In case the company winds up the business , assets are disposed off to

satisfy the claims of the creditors and also preference shareholders prior to equity shareholders.

The equity shareholders are entitled to receive all the amount left after meeting the business

obligations. As the equity share capital provides a cushion for creditors of the company.


4. Control: The equity shares run the risk of loss. However , the risk is compensated to some extend

as they have controlling power that rests with residual owners. In fact they have unchallenged

voice in management of the company. The equity shareholders retain control of the company

through voting power. Every equity shareholder has the right to vote on every resolution placed

before the company. A company is managed by the Board of Directors who control and direct the

affairs of the company. However , the supreme control is endowed with the equity shareholders

has the right to exercise on vote for each share of the stock he owns.

5. Pre- Emptive Rights: equity shareholders enjoy the power to maintain their proportion interest in

the assets, earning and control of the company. This power is exercised by the equity shareholders

through their to purchase additional issues of equity shareholders through their right to purchase

issues of equity shares.

PREFERENCE SHARES

The parts of corporate securities are called as preference shares. It is the shares, which have preferential

right to get dividend and get back the initial investment at the time of winding up of the company.

Preference shareholders are eligible to get fixed rate of dividend and they do not have voting rights.

Preference shares may be classified into the following major types:

1. Cumulative preference shares: Cumulative preference shares have right to claim dividends for

those years which have no profits. If the company is unable to earn profit in any one or more

years, C.P. Shares are unable to get any dividend but they have right to get the comparative

dividend for the previous years if the company earned profit.

2. Non-cumulative preference shares: Non-cumulative preference shares have no right to enjoy the

above benefits. They are eligible to get only dividend if the company earns profit during the years.

Otherwise, they cannot claim any dividend.

3. Redeemable preference shares: When, the preference shares have a fixed maturity period it

becomes redeemable preference shares. It can be redeemable during the lifetime of the company.

The Company Act has provided certain restrictions on the return of the redeemable preference

shares.


4. Irredeemable Preference Shares

Irredeemable preference shares can be redeemed only when the company goes for liquidator. There is no

fixed maturity period for such kind of preference shares.

5. Participating Preference Shares

Participating preference shareholders have right to participate extra profits after distributing the equity

shareholders.

6. Non-Participating Preference Shares

Non-participating preference shareholders are not having any right to participate extra profits after

distributing to the equity shareholders. Fixed rate of dividend is payable to the type of shareholders.

7. Convertible Preference Shares

Convertible preference shareholders have right to convert their holding into equity shares after a specific

period. The articles of association must authorize the right of conversion.

8. Non-convertible Preference Shares

There shares, cannot be converted into equity shares from preference shares.

Features of Preference Shares

The following are the important features of the preference shares:

a. Maturity: Preference shares can be redeemable or irredeemable. Irredeemable preference shares

capital has to be repaid on winding up of the company. However, the companies (Amendment)

Act, 1988 has prohibited the issue of irredeemable preference share capital or redeemable after the

expiry of a period of 10 years from the date of issue. Thus, companies are prohibited from issuing

the redeemable preference shares greater than 10 years period.

b. Conversion: Preference shares can be convertible or non-convertible. Convertible preference

shares are those which are convertible in to equity shares. As against this non-convertible shares

are those which are not convertible in to equity shares.


c. Participation in Income: Preference shares can be participating or non-participating.

Participating preferences have a right to shares the surplus profits remaining after paying dividend

to equity shareholders at affixed rate as laid down by a company A/A. however non-participating

preference shares do not carry such right. Preference shareholders have priority claim to dividend

over equity shareholders. These shareholders are paid dividend at a fixed rate which is specified in

the agreement. The company can distribute earning among equity shareholders. The preferences

shareholders have no legal recourse against the company for not distributing dividend even

through it has earned large income.

d. Claim on Assets: No specific assets are pledged against the preference share capital. However ,

they have a claim on the general assets of the company. The preference shareholders claims on

assets are superior to those of equity shareholders. In the event of dissolution of the company , the

preference shareholders will receive their portion of the proceeds before holders of equity shares.

e. Controlling Power: In the ordinary course , the preference shareholders do not enjoy direct right

to participate in the management through voting for directors and on the other matters. Section 87

of the companies Act 1956 , preference shareholders are given on the right to vote on resolutions

which directly affect the rights attached to their preference shares. In respect of this , any

resolution for winding up the company or the repayment or reduction of its share capital is to be

regarded as directly affecting the rights attached to the preference shares.

DEBENTURES

Debenture is a creditor ships security which enables a company to raise finance. A debenture is a written

instrument signed by the company under its common seal acknowledging the debt due by it to its holders.

Through this document the company promises to pay a specific amount of money as stated their in at

affixed date in future together with period payment of interest to compensate the holders for the use of

funds. Debenture loan may be with or without a cargo on the assets of the company. Thus, debenture is a

certificate issued by a company under its seal acknowledging a debt due by it to its holders. The company

act, 1956 does not define debenture. It merely states that denture includes “ debenture stock , bonds and

any other securities of a company whether constituting a change on the assets of the company or not”.


Types of Debentures

Debentures may be divided into the following major types:

1. Unsecured debentures: Unsecured debentures are not given any security on assets of the

company. It is also called simple or naked debentures. This type of debentures are treaded as

unsecured creditors at the time of winding up of the company.

2. Secured debentures: Secured debentures are given security on assets of the company. It is also

called as mortgaged debentures because these debentures are given against any mortgage of the

assets of the company.

3. Redeemable debentures: These debentures are to be redeemed on the expiry of a certain period.

The interest is paid periodically and the initial investment is returned after the fixed maturity

period.

4. Irredeemable debentures: These kind of debentures cannot be redeemable during the life time of

the business concern.

5. Convertible debentures: Convertible debentures are the debentures whose holders have the

option to get them converted wholly or partly into shares. These debentures are usually converted

into equity shares. Conversion of the debentures may be: Non-convertible debentures, Fully

convertible debentures, Partly convertible debentures

6. Other types: Debentures can also be classified into the following types. Some of the common

types of the debentures are as follows:

a. Collateral Debenture

b. 2. Guaranteed Debenture

c. 3. First Debenture

d. 4. Zero Coupon Bond

e. Zero Interest Bond/Debenture


Features of Debentures

1. Maturity period: Debentures consist of long-term fixed maturity period. Normally,

debentures consist of 10–20 years maturity period and are repayable with the principle investment at

the end of the maturity period.

2. Residual claims in income: Debenture holders are eligible to get fixed rate of interest at

every end of the accounting period. Debenture holders have priority of claim in income of the

company over equity and preference shareholders.

3. Residual claims on asset: Debenture holders have priority of claims on Assets of the

company over equity and preference shareholders. The Debenture holders may have either specific

change on the Assets or floating change of the assets of the company. Specific change of Debenture

holders are treated as secured creditors and floating change of Debenture holders are treated as

unsecured creditors.

4. No voting rights: Debenture holders are considered as creditors of the company. Hence

they have no voting rights. Debenture holders cannot have the control over the performance of the

business concern.

5. Fixed rate of interest: Debentures yield fixed rate of interest till the maturity period.

Hence the business will not affect the yield of the debenture.

INTERNAL FINANCE

A company can mobilize finance through external and internal sources. A new company may not raise

internal sources of finance and they can raise finance only external sources such as shares, debentures and

loans but an existing company can raise both internal and external sources of finance for their financial

requirements. Internal finance is also one of the important sources of finance and it consists of cost of

capital while compared to other sources of finance.

Internal source of finance may be broadly classified into two categories:

A. Depreciation Funds

B. Retained earnings


Depreciation Funds

Depreciation funds are the major part of internal sources of finance, which is used to meet the working

capital requirements of the business concern. Depreciation means decrease in the value of asset due to

wear and tear, lapse of time, obsolescence, exhaustion and accident.

Generally depreciation is changed against fixed assets of the company at fixed rate for every year. The

purpose of depreciation is replacement of the assets after the expired period. It is one kind of provision of

fund, which is needed to reduce the tax burden and overall profitability of the company. There is a

controversy among the experts regarding the treatment of depreciation as a source of funds , argue that

funds are raised of finance , a company would have improved its financial position by charging periodical

depreciation. The experts argue that the depreciation is a non- cash expenditure and as such , it does not

affect the working capital of the company and therefore , it is not a source of finance. The above

arguments cannot be questioned. It cannot be derived that depreciation being a non-cash expenditure does

not result in to cash outlay. As such, part of the profits adjusted for depreciation being a non-cash

expenditure does not result in to cash outlay. As such, part of the profits adjusted for depreciation can be

used by management to increase any of the current assets or pay taxes, dividend etc. Hence depreciation

can be considered as a source of finance in a limited sense. Depreciation can be regarded as a source of

finance because of the following reasons.

(i). Depreciation being non-cash expense, finds its way in to current assets through charging.

(ii). Although depreciation does not raise funds, it certainly saves funds

(iii). Depreciation result in to reduction of taxable income and hence, income tax liability for the period is

reduced.

Retained Earnings

Retained earnings are another method of internal sources of finance. Actually is not a method of raising

finance, but it is called as accumulation of profits by a company for its expansion and diversification

activities.

Retained earnings are called under different names such as; self finance, inter finance, and plugging back

of profits. According to the Companies Act 1956 certain percentage, as prescribed by the central

government (not exceeding 10%) of the net profits after tax of a financial year have to be compulsorily

transferred to reserve by a company before declaring dividends for the year.

Under the retained earnings sources of finance, a part of the total profits is transferred to various reserves

such as general reserve, replacement fund, reserve for repairs and renewals, reserve funds and secrete.


LOAN FINANCING

Loan financing is the important mode of finance raised by the company. Loan finance may be divided

into two types:

(a) Long-Term Sources

(b) Short-Term Sources reserves, etc.

TRADE CREDIT

Trade credit is one of the most important sources of short-term finance. Trade credit refers to the sale of

merchandise on non-cash terms by one business organisation to another. There are three categories of

trade credit viz. open account is better known as accounts, notes payable and trade acceptances. Open

account is better known as accounts payable and is the most prevalent form of trade credit. Notes payable

is used in those situations where formal acknowledgment of the debt is called for. These notes are called

as promissory notes. In some business lines, the trade acceptance is employed in place of open account.

This kind of credit also involves a formal recognition of debt. Trade credit terms specified period of time.

The credit terms also include the payment period. Availability of trade credit are dependent on several

factors such nature and extend of competition.

COMMERCIAL BANKS

The commercial banks plays play a significant role in providing industrial finance to business enterprise.

Traditionally, the commercial banks used to provide short-term loans to the industries. However, the

commercial banks have been providing medium-term and long-term finance to industrial enterprises. The

bank loan can take the form of cash credit, overdrafts, loans are granted against the security of current

assets like inventories, shares, receivable etc.

LOANS: A loans is an advance to the business enterprise made with or without security. In respect of a

loan, the banker makes a lump-sum payment to the borrowed or credits his deposit account with the

money advanced. Loan is advanced for a fixed period at an agreed rate of interest. Repayment of loan

may be made either in instalments or at the end of the expiry period. The borrower has to pay interest on

the total amount of advance. Interest payment has to be made whether he with draws the money from his

account or not.


CASH CREDIT: A cash credit is a financial arrangement through which the commercial banks allow the

borrower to borrow money up to certain limit. Cash credit arrangement is ordinarily made against the

security of commodities hypothecated or pledged with the banker. Interest is charged on the amount

actually withdrawn for the actual period of use. Cost of finance is the interest charged by the bank. The

amount can be adjusted as per the need of finance. The security may be pledge of movable property.

HYPOTHECATION: Under this arrangement, the possession of goods is not given to the banker. The

commodities remain at the disposal and in the go down of the borrower. The banker is given access to

goods whenever he so desires. The borrowing unit has to furnish periodical return of the stock to the

banker. The banker advances the money only to the borrower in whose integrity it has full confidence.

PLEDGE: Under this arrangement, the goods are placed in custody of the banker with its name on the go

down where they stored. In the case of pledge, the borrower does not enjoy the right to deal with them.

OVERDRAFTS: If the borrower requires temporary finance, the banker may allow him to overdraw on

his account with or without security. As compared to cash credit, overdraft is advantageous to the

borrower, since the borrower has to pay interest only on the actual amount withdrawn by him.

BILLS DISCOUNTED AND PURCHASED: The commercial banks advance to the borrower by

discounting his bill. The account of the customer is credited with the net amount after deducting the

amount of discount. The banker may discount the bill with or without security from the debtor.

PUBLIC DEPOSITS

In the recent years, business firms are raising short-term finance from their members, directors and the

general public. This is a suitable method of raising short-term finance. It is a cheaper source of short-term

finance as compared to bank credit. A company cannot accept deposits for a period less than 6 months

and more than 36 months. Raising of finance through public deposits does not require any security.

BUSINESS FINANCE COMPANIES

Business finance companies are established primarily for providing short-term and medium-term loans to

business firms. As these firms have limited financial resources, they provide only short-term and

medium-term finance, such business firms raise the financial resources mostly from their owners ad their

relatives or friends. Lending by these business finance companies is generally secured against accounts

receivable, stock and other assets. These companies may specialise their lending for special purpose such

as financing of consumer durables, transport finance etc.


ACCRUAL ACCOUNTS

These accounts are spontaneous and self-generating such as wages and taxes. In case of this source, the

amounts become due but are not paid immediately. There is a time lag between provision of payment of

expenses and actual payment which makes the finance available.

INDIGENOUS BANKERS

These are private individuals business is to provide finance to small and local business units. They are

engaged in providing short-term and medium-term finance to business units. These bankers charge very

high rate of interest and therefore, they should be approached only as a last resort.

COMMERCIAL PAPER

It is a short term issue of promissory note issued by a company in a private sector or public sector at a

such a interest on face value as may be decided by the issuing company. It is negotiable by endorsement

and delivery.


Mahanagar Telephone Nigam Limited (MTNL) Mahanagar Telephone Nigam Limited (MTNL) was set up in 1st April of the year 1986 by the

Government of India to upgrade the quality of telecom services, expand the telecom network, introduce

new services and to raise revenue for telecom development needs of India's key metros, Delhi (the

political capital) and Mumbai (the business capital of India).

The company has also been in the forefront of technology induction by converting 100% of its telephone

exchange network into the state-of-the-art digital mode. MTNL as a company, over last nineteen years,

grew rapidly by modernizing the network, incorporating the State-of-the-art technologies and a customer

friendly approach.

The Company providing various types of telecommunication services including Telephone, telex,

wireless, data communication, telemetric and other like forms of communication (Internet).

First digital exchange world technology brought to India by the company during the year 1986. In the

year of 1987, Large Scale came to existence, introduction of push button telephone made dialing easier.

Phone plus services was offered by the company in the year 1988, it gives multiplied benefits to

telephone users. During the year 1992, the company introduced Voice Mail Service.

MTNL had introduced the Integrated Services Digital Network (ISDN) services in the period of 1996. In

the year 1997, the Wireless in Local loop was introduced. In addition to phone plus facilities like dynamic

locking, call waiting/call transfer, hot lines etc were extended to the customers. Apart from this IVRS

(Interactive Voice Response System) like local assistance changed number information, and fault booking

system ensuring round the clock service, a CD-ROM version of the telephone directory and an on-line

directory enquiry through PC was introduced during the year 1997. To facilitate the clientele, MTNL

launched the country's first toll-free service in Delhi in the period of 1998.

The Company made tied up with Billjunction.com in the year of 2001 to provide online bill

presenting and payment facility to its customers.

The Company launched pre-paid GSM Mobile services under the brand name Trump during the year

2002, and in the same year MTNL's Email on PSTN lines were introduced under the brand name mtnl

mail.

MTNL had set up a new software venture called ComSoft for developing communications software in

the year 2002, as a part of its strategy to offer value-added communications software in e-commerce,


e-governance and intelligent networking.

The Company brought in to market, the CDMA 1x 2000 Technology under the brand name Garuda 1-

x in the year of 2003. During the same period MTNL introduced pilot project of ADSL based

Broadband services and also launched the Virtual Phone services.

Mahanagar Telephone Mauritius Ltd. bagged second operator license in Mauritius. The company has

joined the hands with Nokia, Samsung for WLL handsets in the year 2003.

MTNL has set up its 100% subsidiary as Mahanagar Telephone Mauritius Limited. (MTML) in

Mauritius, for providing basic, mobile and international long distance services as 2nd operator in

Mauritius.

Public sector telecom service provider MTNL on June 18th of the year 2008 received the much-

awaited International Long Distance (ILD) Licence from the Department of Telecom (DOT), a

development that could signal further lowering of ISD rates as the PSU is gearing up to carrying its

own traffic in the near future. To remain market leader in providing world class Telecom and IT

related services at affordable prices, the company partaking its all efforts in the same business area

and MTNL wants to become a global player, also find a place in the Fortune 500' companies.


RELIANCE COMMUNICATIONS

Reliance Communications Limited is the flagship Company of

Reliance Anil Dhirubhai Ambani Group, India's third largest business

house. The company is India's largest private sector information and

communications company, with over 100 million subscribers. They

have established a pan-India, high-capacity, integrated (wireless and

wire line), convergent (voice, data and video) digital network, to offer

services spanning the entire info comm. value chain.

The company shares are listed on the Bombay Stock Exchange Ltd

and the National Stock Exchange Ltd. The company offers the full

value chain of wireless (CDMA and GSM), wire line, national long

distance, international, voice, data, video, Direct-To-Home (DTH) and

internet based communications services under various business units

organized into three strategic customer-facing business segments;

Wireless, Global and Broadband.

These strategic business units are supported by passive infrastructure connected to nationwide backbone

of Optic Fiber Network fully integrated network operation system and by the largest retail distribution

and customer services facilities. The company also owns through their subsidiaries, a global submarine

cable network infrastructure and offers managed services, managed Ethernet and application delivery

services.

The company is India's first telecom service provider offering nationwide CDMA and GSM mobile

services with digital voice clarity. Their mobile portal, R World, offers the widest range of mobile content

spanning e-commerce, m-commerce entertainment, music, news, astrology, cricket, bollywood, maps,

search, one-click set-up, access to email and social networking.

The company offers the most comprehensive portfolio of enterprise voice, data, video, internet

and IT infrastructure services catering to large, medium and small enterprises for their

communications, networking and IT infrastructure needs.

Their product portfolio includes national and international private leased circuits, broadband

internet access, audio solutions including Centrex, toll free services, voice VPN, video

conferencing , MPLS-VPN, remote access VPN, Global MPLS VPN managed internet data

centre (IDC) services to name a few. The company operates nationwide Direct-to-Home satellite


TV services under its wholly owned subsidiary, Reliance Big TV Limited (Big TV).

They formed an alliance with Poly com Inc., the global leader in tele -presence, video and voice

solutions, to introduce world's first wireless, high-resolution video and CD-quality audio,

conferencing service along with simple-to-use content sharing capabilities - at a bandwidth speed

of 256 kbps at any place. They own and operate the world's largest next generation IP enabled

connectivity infrastructure, comprising over 2,77,000 kilometers of fibre optic cable systems in

India, USA, Europe, Middle East and the Asia Pacific region.

Company profile

Reliance Communications Limited is the flagship Company of Reliance Group, one of the leading

business houses in India.

Reliance Communications is India’s foremost and truly integrated telecommunications service provider.

The Company, with a customer base of 161 million as on March 31, 2012 including over 2.5 million

individual overseas retail customers, ranks among the Top 4 Telecom companies in the world by number

of customers in a single country. Reliance Communications corporate clientele includes over 35,000

Indian and multinational corporations including small and medium enterprises and over 800 global,

regional and domestic carriers.

Reliance Communications has established a pan-India, next generation, integrated (wireless and wire

line), convergent (voice, data and video) digital network that is capable of supporting best-of-class

services spanning the entire communications value chain, covering over 24,000 towns and 600,000

villages.

Mission: Excellence in Communication Arena

To attain global best practices and become a world-class communication service provider –

guided by its purpose to move towards greater degree of sophistication and maturity.

To work with vigor, dedication and innovation to achieve excellence in service, quality,

reliability, safety and customer care as the ultimate goal.

To earn the trust and confidence of all stakeholders, exceeding their expectations and make the

Company a respected household name.

To consistently achieve high growth with the highest levels of productivity.

To be a technology driven, efficient and financially sound organization.

To contribute towards community development and nation building.

To be a responsible corporate citizen nurturing human values and concern for society, the

environment and above all, the people.


To promote a work culture that fosters individual growth, team spirit and creativity to overcome

challenges and attain goals.

To encourage ideas, talent and value systems.

To uphold the guiding principles of trust, integrity and transparency in all aspects of interactions

and dealings.

Reliance Global.com retail expansion

The global calling card market is experiencing extremely high competition. We have been able to

maintain our margins despite the introduction of aggressive tariffs by other operators both in the US and

UK markets. We have focused on delivering more value to our existing base of over 2.5 million Reliance

Global Call customers through event-based campaigns and Digital affiliate campaigns. We are

operational in USA, UK, Canada, Australia, New Zeland, Singapore, Hong Kong, Spain, Austria,

Belgium, France, Ireland, the Netherlands and India taking the total number to 14 countries, where

Reliance Global Call is now present.

Telecom Infrastructure

a. Indian telecom sector has witnessed an exponential growth in the last few years. The demand for

telecom infrastructure in India is driven by the subscriber growth in the mobile Companies and focus on

expansion of rural market.

b. India’s tower sector is expected to continue to grow in terms of both capacity and tenancies in next few

years.

c. With the completion of network footprint expansion, the focus will be on ensuring delivery of the best

QoS to customers and also building up network capacity as traffic grows.

d. Telecom Industry structure is impacted due to cancellation of 122 licenses by the Hon’ble Supreme

Court. Clarity on continuation of the said licenses will emerge in due course after Government concludes

the spectrum auctions and other matters related to such licenses.

Global

Our global business participates in diverse industry segments, viz.

(i) Global submarine capacity sales;

(ii) Gateways facility for international traffics;

(iii) National long distance for voice and data;

(iv) International voice transit;

(v) International retail voice;

(vi) Enterprise connectivity and managed services business.


Reliance Communications Ltd was incorporated on July 15, 2004 as a private limited company

with the name of Reliance Infrastructure Developers Pvt Ltd. In July 25, 2005, the company was

converted into public limited company and the name was changed to Reliance Infrastructure

Developers Ltd.

In August 3, 2005, they further changed their name to Reliance Communication Ventures Ltd. In

August 11, 2005, the equity shares of the company were acquired by Reliance Industries Ltd and

thus the company became the wholly owned subsidiary of Reliance Industries Ltd

. As per the scheme of arrangement, all the properties, investments, assets and liabilities related to

Telecommunication Undertaking of Reliance Industries Ltd was transferred and vested in the

company on a going concern basis with effect from December 21, 2005.

Reliance Communications Maharashtra Pvt Ltd became the wholly owned subsidiary of the

company through Reliance Telecom Ltd (RTL) during the year and merged into RTL, with effect

from May 25, 2011.


COMPARISION

(Amount in Crore)

Particular MTNL RELIANCE COMM.

Shareholder Fund 26,907.14 86,005.00

Long Term Fund 81,139.68 27,873.00

Short Term Fund 6,230.68 12,935.00

Equity and Liabilities 2,536.70 45,197.00

In Above table it can be clearly seen comparative analysis on Source of Finance of two

companies MTNL and Reliance Communication. This shows that

In Shareholder Fund Reliance communication having Rs. 86005.00 which is

higher as compare to MTNL where shareholder fund is Rs.26907.14.

In Long Term Fund Reliance communication having Rs. 27873.00 which is less

as compare to MTNL where Long Term fund is Rs.81139.68 .Its means long

term borrowed fund is more used in MTNL firm.

In Short Term Fund Reliance communication having Rs. 12935.00 which is

more as compare to MTNL where Short Term fund is Rs.6230.68 .Its means

Short term borrowed fund is more used in Reliance Communication firm.

In equity and liabilities Reliance communication having Rs. 45197.00 which is

higher as compare to MTNL where shareholder fund is Rs.2536.70


CONCLUSION

In assessing the significance of various companies’ financial data there are

Various sources of financing available. Not every business can use all of the

available financing choices. Choosing the right financing source is based on

these vital points; business condition and the interest rate or the other cost of

the finance. Some sources of finance are more flexible than the others,

according to the business situation, while refunding risks should also be

considered.

There are many difficulties involved in raising funds to finance business

activities by developing partnerships that lead to a variety of key investment

opportunities for its clients.

In a world where the external environment is constantly changing, it help us by

providing them with stability and certainty.


BIBLIOGRAPHY

Advance financial management book

Thanks to MRS. MONALI RAY for help and cooperation for completing this

project

Other site which help us to find matter on related topic are:

http://wiki.answers.com/Q/How_do_you_write_conclusion_in_business_project

_on_source_of_finance_for_class_11?#slide=1

http://www.slideshare.net/pvmoney/sources-offinance

http://wiki.answers.com/Q/How_do_you_write_conclusion_in_business_project_on_source_of_finance_for_class_11?#slide=1

http://wiki.answers.com/Q/How_do_you_write_conclusion_in_business_project_on_source_of_finance_for_class_11?#slide=1

financial magment- comparative study of sources of finance

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