FUNDAMENTAL ANALYSIS OF RELIANCE

COMMUNICATIONS LTD

NAME –SHAFIA AHMAD

ENROLLMENT NUMBER-09BS0002138

SUBJECT-SECURITY ANALYSIS

INTRODUCTION

Fundamental analysis is the examination of the underlying forces that affect the well being

of the company, industry groups and companies. As with most analysis the goal is to

develop a forecast of future price movement and profit from it. At the company level,

fundamental analysis may involve examination of financial data, management, business

concept and competition. At the industry level their might be an examination of supply and

demand forces of the products. For the national economy fundamental analysis might focus

on economic data to asses the present and future growth of the economy.

Fundamental analysis is a method of evaluating a security by attempting to measure its

intrinsic value by examining related economy, financial and other qualitative and

quantitative factors. Fundamental analysis attempt to study every thing that can effect the

securities value including macro economic factors and individual specific factors.

Three phase of the fundamental analysis

A. Understanding of the Macro Economic environment and developments

(Economy analysis)

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

analysis)

C. Assessing the projected performance of the company( Company analysis)

ECONOMIC ANALYSIS

Introduction:

The fiscal year 2009-10 began as a difficult one. There was a significant slowdown in the

growth rate in the second half of 2008-09, following the financial crisis that began in the

industrialized nations in 2007 and spread to the real economy across the world. The

growth rate of the gross domestic product (GDP) in 2008-09 was 6.7 per cent, with growth

in the last two quarters hovering around 6 per cent. There was apprehension that this

trend would persist for some time, as the full impact of the economic slowdown in the

developed world worked through the system. It was also a year of reckoning for the

policymakers, who had taken a calculated risk in providing substantial fiscal expansion to

counter the negative fallout of the global slowdown. Inevitably, India’s fiscal deficit

increased from the end of 2007-08, reaching 6.8 per cent (budget estimate, BE) of GDP in

2009-10. A delayed and severely subnormal monsoon added to the overall uncertainty. The

continued recession in the developed world, for the better part of 2009-10, meant a

sluggish export recovery and a slowdown in financial flows into the economy. Yet, over the

span of the year, the economy posted a remarkable recovery, not only in terms of overall

growthfigures but, more importantly, in terms of certain fundamentals, which

justifyoptimism for the Indian economy in the medium to long term.

KEY INDICATORS

AE GDP figures for 2009-10 are advance estimates; QE quick estimates

na -not yet available / released for 2009-10

a- for 2008-09 the figures are the 4th advance estimates as on July 21, 2009.

b- Average Apr.-Dec. 2009.

c -Apr.-Dec. 2009.

d -CAB to GDP ratio for 2009-10 is for the period Apr.-Sept. 2009

e -as of December 31, 2009

f- Average exchange rate for 2009-10 (Apr.-Dec. 2009).

g- As on January 15, 2010.

h- fiscal indicators for 2008-09 are based on the provisional actuals for 2008-09.

i- fiscal indicators are as per revised GDP at current market prices based on National

Accounts 2004-05 series.

j -fiscal deficit, revenue deficit and primary deficit were envisaged at 6.8, 4.8 and 3.0 per cent

of GDP respectively at the time of presentation of the 2009-10 Budget.

Growth Projects:

The overall growth of GDP at factor Cost at constant prices in 2008-09 as per

revised estimates released by the Central statistical organization was 6.7 %.

The turnaround in the Indian economy came in the second quarter of 2009-10 when

India’s economy grew by 7.9 %.

As per the advance estimates for GDP for 2009-10 released by the central statistical

organization the economy is expected to grow at 7.2% in 2009-10.

Industry and service sectors are expected to grow by 8.2 & 8.7% respectively.

The manufacturing sector had shown a declining trend for last 8 quarters (since

2007-08), but now has got some momentum.

There was also a decline of agricultural output by 0.2 % in 2009-10 due to poor

Monsoons.

The economic survey expected that economy is likely to grow by 8.75% in 2010-11

and return to 9% growth in 2010-12. Following chart shows the growth of GDP (at

Factor Cost 2004-05 prices)

Over all Savings rate for 2008-09 is 32.5% of GDP which is slightly less than the

previous year 2007-08 (34.9%). The Capital Formation rate for 2008-09 is 34.9% of

GDP which is too slightly less than last year 2007-08 (37.7%)

Per capita National Income for the Year 2009-10 is Rs. 43749 (factor cost at

current prices) compared to Rs. 40141 for the previous year 2008-09.

Per Capita Income Growth:

The growth rates in per capita income and consumption are the gross measures of

welfare in general. The per capita income as well as consumption has increased, yet

the growth in these two parameters has decreased. This reflects the decline in

overall GDP growth.

Growth in per capita income in 2007-08 was 8.1% which declined to 5.3% in 2009-

10.

Growth in per capita consumption was 8.3% in 2007-08 which has declined to 2.7 %

in 2009-10.

India's Trade Performance

Foreign Trade Policy of India 2009-14 had set a target of annual export growth of

15% with an export target US$ 200 Billion by March 2011.

However the government did not fix any export target for year 2009-10, because of

global recession and uncertain situation of the world trade.

Exports in April-December 2009 down 20.3 per cent.

Imports in April-December 2009 down 23.6 per cent.

Gold and Silver imports registered a negative growth of 7.3% which is primarily on

account of volatility in Gold Prices.

The following Graphic Shows India’s Overall Trade performance, (Click for a clearer

View)

IndIa’s share In World’s merchandIse trade: India’s share in world merchandise exports, after remaining unchanged at

1.1 per cent between 2007 and 2008, reached 1.2 per cent in 2009 (January-

June).

However this growth was attributed to to the relatively greater fall in world

export growth than India.

The following graphics show the trend of the per capita income and consumption at

2004-05 market prices.

Inflation Economic Survey 2009-10 says that WPI (Wholesale Price Index) inflation

has been volatile in 2009-10 and it is a major concern for the country.

It was 1.2 % in March 2009 and declined continuously to go into negative

zone during June-August 2009.

While turning to positive in September 2009, accelerated to 4.8% in

November and 7.3% in December 2009.From march to December 2009 the

WPI inflation is 8%.

This soaring inflation was mainly contributed by the Composite Food Index

which has a weight age of 25.4% in overall inflation calculation.

India's Monetary Policy

Bank Credit:

In the starting of 2009 the stance of the monetary policy was towards

supporting the early recovery of the growth momentum.

The measures taken by the monetary policy were successful in bringing

down the lending rates , including BPLR (Benchmark Prime Lending Rates) ,

yet the decline of these rates was not sufficient in accelerating the demand

for the bank Credit.

The borrowers turned to alternate sources of money (cheaper finance) and

banks flushed with liquidity (due to monetary policy decisions) parked their

surplus funds under the reverse repo window.

This means that in spite of the monetary policy being focused on maintaining

a market environment which was to bring about a flow of credit to the

productive sectors of the economy the growth of Bank Credit was low in

2009-10.

This was partly attributed to economic conditions prevalent during 2009-10.

In addition, banks also reined in credit to the retail sector due to perceptions

of increased risk on account of the general slowdown and to guard against

bad loans.

Fiscal deficit is estimated at 6.8 per cent of GDP in 2009-10 that was partially

supplemented by a fall in indirect tax collections and delay in 3G auction.

The Survey says that subsidies given to food, fertilizer, diesel and kerosene,

have a "questionable" impact and recommends the government to decontrol

their prices as freeing prices from government control could help deploy

large resources for financing other vital activities in the economy that could

promote productivity and eradicate poverty.

The survey says: Now constitutes a major fiscal burden and tends to crowd

out the government's ability to finance other vital activities in the economy

that could promote productivity and eradicate poverty .

There are two ways to reduce the fiscal deficit. One is reducing spending and

other is raising non-borrowed receipts. Main part of non-borrowed receipts

is tax receipts, so tax net should be widened. Dividend and interest receipts,

as well as loan repayments to the Centre are also non-borrowed receipts.

These also include things like revenues from auctioning off telecom spectrum

and disinvestment proceeds.

INDUSTRY ANALYSIS

The telecom network in India is the fifth largest network in the world meeting up

with global standards. Presently, the Indian telecom industry is currently slated to an

estimated contribution of nearly 1% to India’s GDP. The Indian Telecommunications

network with 110.01 million connections is the fifth largest in the world and the second

largest among the emerging economies of Asia. Today, it is the fastest growing market in

the world and represents unique opportunities for U.S. companies in the stagnant global

scenario. The total subscriber base, which has grown by 40% in 2005, is expected to reach

250 million in 2007. According to Broadband Policy 2004, Government of India aims at 9

million broadband connections and 18 million internet connections by 2007. The wireless

subscriber base has jumped from 33.69 million in 2004 to 62.57 million in FY2004-2005. In

the last 3 years, two out of every three new telephone subscribers were wireless

subscribers. Consequently, wireless now accounts for 54.6% of the total telephone

subscriber base, as compared to only 40% in 2003. Wireless subscriber growth is expected

to bypass 2.5 million new subscribers per month by 2007. The wireless technologies

currently in use are Global System for Mobile Communications (GSM) and Code Division

Multiple Access (CDMA). There are primarily 9 GSM and 5 CDMA operators providing

mobile services in 19 telecom circles and 4 metro cities, covering 2000 towns across the

country.

MARKET SHARE OF OPERATORS(IN %) AS ON 31ST MARCH 2009

SUBSCRIBER BASE(IN MILLION) AND MARKET SHARE (%) OF GSM OPERATORS AS ON

31ST MARCH 09

SOURCE-SERVICE PROVIDER

SUBSCRIBER BASE (IN MILLIONS) AND MARKET SHARE(%)OF DIFFERENT CDMA

OPERATORS AS ON 31ST MARCH 2009.

The Indian telecom industry shows two major divisions:

Fixed Service Providers (FSP's): These include the basic service providers that are the state operators like MTNL India and BSNL India who collectively account to over 90% of the total basic telecom services and private sector telecom service providers in India who mainly focus on leased lines, ISDN, videoconferencing and other high-end services.

Cellular Service Providers (CSP's)

The cellular services in India are also categorized as GSM (Global Mobile Communications System) and CDMA (Code Division Multiple access) system. The leading GSM services providers in the Indian telecom industry 2009 were Hutchison (Now Vodafone and known as Orange in Maharashtra), Airtel, Idea Telecom, Tata, and Reliance. These include both pre-paid and post paid mobile phone cards and services providers. The leading CDMA providers are still Reliance communications and Tata Indicom with Airtel and Touchtel just entering the market.

Public and Private Players-MTNL, BSNL, VSNL are the major Public Players, whereas Airtel, Idea, Vodafone, Tata, Reliance, BPL are the leading Private Players in the country. Some of them are entering foreign markets as well. The Bharti Telecom will be launching its services for the NRIs in the US with the help of Airtel CALLHOME service. Rate of growth this industry -Customer rate of growth is still very high. It has been around 20 million in the last few months.. It’s not necessarily all new customers because there are lot of people who have multi SIMs, who carry more than one SIM or change SIMs quickly. The revenue growth has actually been disappointing in the last six quarters. Although there was a lot of growth in customers, which does not necessarily translate into more minutes or use or into more money. There was quite some effects of competition last year. The tariffs dropped to much lower levels than we were used to. Now, the tariff is around 1 paisa per second or 50 paise per minute and that used to be a lot high before that. This has had an effect on the overall revenues. A lot of customers are apparently a little bit tired of all the promotions. This is in a way good news, but the tariffs are already so cheap, so they don’t bother so much anymore. It is projected that the telecom industry will be enjoying over 150% growth in the next 4-6 years. Liberalization policy and some socio-economic factors are mainly responsible for the immense growth in the sales volumes. The lifestyle of the people has changed. They need to be connected to the other people all the time. With the lowering down of the tariffs the affordability of the mobile phones has increased. The finance sector has also come up with loans for handsets on 0% interest. Mobile services providers are also expanding their

coverage area by installing more and more antennas and other equipments.Also, the telecom industry will be focusing more on rural areas to connect them with the urban areas so that the farmers and the small-scale industries can have faster access to information related to weather and market conditions

TELECOM INDUSTRY AS ON FY2009 FY09 saw the continuance of strong growth for the Indian telecom market, which witnessed a 49% YoY increase in its subscriber base during the 12-month period. At the end of March 2009, the country’s total telecom subscriber base (fixed plus mobile) stood at about 429 m. The tele-density level stood at about 36% by the end of the fiscal.Growth remained robust in the GSM mobile space, with the same growing its subscriber base by 96 m, thus contributing to about 70% of the total incremental subscriber addition for the entire Indian telecom market. During FY09, India's mobile subscriber base grew by 50% YoY, from 261 m to 391 m, while the fixed subscriber base declined by about 4%, from 39.4 m to about 37.9 m.

The market shares of the leading Public and Private Players as on December 2009

COMPANY ANALYSIS

Reliance Communications Limited founded by the late Shri Dhirubhai H Ambani (1932-2002) is the flagship company of the Reliance Anil Dhirubhai Ambani Group. The Reliance Anil Dhirubhai Ambani Group currently has a market capitalization of over Rs. 170,000 crore, net worth in excess of Rs. 40,000 crore, cash flows of Rs. 9,000 crore, net profit of Rs. 5,000 crore and zero net debt.

Rated among "Asia's Top 5 Most Valuable Telecom Companies", Reliance Communications is India's foremost and truly integrated telecommunications service provider. The company with a customer base of over 35 million including over one million individual overseas retail customers' ranks among the Top 10 Asian Telecom companies by number of customers. Reliance Communications corporate clientele includes 600 Indian and 250 multinational corporations, and over 200 global carriers.

RCOM has established a pan-Indian, next generation, integrated (wireless and wireline), convergent (voice, data and video) digital network that is capable of supporting best-of-class services spanning the entire Infocomm value chain, covering over 10,000 towns and 300,000 villages. Reliance Communications owns and operates the World's largest next generation IP enabled connectivity infrastructure, comprising over 150,000 kilometres of fibre optic cable systems in India, USA, Europe, Middle East and the Asia Pacific region.

Business mix

The Company is very well positioned to capitalise on growth opportunities in the

converged telecom market supported with integrated composite telecom infrastructure

setup. The Company will be able to leverage its strengths in all the operating service areas

across its business groups. The Company's strength and leadership is inspired by:

* Enriched human resources and talent repository;

* Growth potential and track record of ability to penetrate into the market with cutting

edge;

* Expansion of network and covering the untapped rural areas;

* Optimum utilisation of future technology compliant assets;

* International presence with owned submarine network and gateways.

The Company has consistently demonstrated its leadership with several 'Reliance Firsts'

and introduction of many innovative products, services leading to enhanced customer

delight.

Adequacy of internal control

The Company has built adequate systems of internal controls towards achieving efficiency

and effectiveness in operations, optimum utilisation of resources, and effective monitoring

thereof as well as compliance with all applicable laws. The internal control mechanism

comprises a well-defined organisation structure, documented policy guidelines,

predetermined authority levels and processes commensurate with the level of

responsibility. The Management Audit Team undertakes extensive checks and reviews

through external firms of chartered accountants, who provide independent and

professional observations. Audit Committee of the Board reviews major internal audit

reports and periodically reviews the adequacy of internal controls.

Risk Management Framework

The Company has instituted a Risk Management framework which comprises the

identification of potential risk areas, evaluation of intensity, mitigation plans and

procedures for the risk management and policies formulated both atthe enterprise and

atthe Operating level. The framework seeks to facilitate building a common understanding

of the exposure to the various risks and uncertainties at an early stage, for timely response

and their effective mitigation.

Human resource and employees relations:

During the year an innovative and first of its kind Employee Stock Options Scheme (ESOS)

was implemented and options were granted to employees for recognizing their loyalty and

performance. The stock option grants would infuse ownership amongst employees since

they would also benefit from their continued contribution to the Company.

Many other organisation development initiatives like revised designation structure for all

employees were introduced, which contributed enhancing the motivation and thus

productivity of our internal stakeholders.

During the year the Company was successfully able to meet the manpower requirements

emerging from our expanding business. The manpower as on 31 ' March, 2008 was 36,650

across all business.

Our Company is geared to meetthese challenges. Various retention schemes have been

implemented. The meritocracy, performance driven and entrepreneurial culture in the

Company is also a big retention measure. We have also started the process of role sculpting

which would lead to further optimizing of manpower costs.

The overall human resource outlook is positive and we would be able to effectively achieve

the desired objectives.

The Company has developed an environment of harmonious and cordial relations with its

employees.

Information technology

1 . Reliance Technology Innovation Centre (RTIC):- Overview

RTIC is instrumental in evaluating multiple vendor equipment and testing the

Interoperability with existing network elements. RTIC has a well established Lab, which is

an exact replica of the RCOM network, in a reduced scale. RTIC also conducts the database

audit of the systems to enable a smooth deployment without initial hitches that follow any

major deployment. All the network elements are acceptance tested after installation and

certified before commercial deployment.

Handset testing

Allthe mobile devices including Mobile handsets, SIM/ RUIM cards, data cards, FWP/ FWT

and modems go through rigorous and automated lab testing process, drive test, field

testing and certification before deployed in the network.

GSM systems

The interop testing of the GSM system with existing Network elements is nearing

completion.

2. RTIC development division

The following unique RTIC products have been launched during the financial year:

One Office Duo (Fixed-Mobile Converged (FMC) and Virtual Private Network (VPN)) -

India's first fixed-Mobile converged VPN (CUG) service.

This service will be used by Enterprise post-paid customers with Reliance Mobile, Fixed

Wireless and Fixed line connections. Reliance PABX as well as Centrex customers can also

use this service. Even non-Reliance customers can be part of VPN for call termination. The

users will be part of a VPN and can use short dialing codes. They enjoy concessional tariff

within the group, thereby significantly reducing the overall cost of the communication

within the enterprise. The enterprise customers can manage their own VPN by adding,

deleting users and granting them different calling permissions.

Inter-standard roaming

Reliance Communication launched the World phone, by which the Reliance CDMA

customer can roam in the GSM network anywhere in the world with the same Directory

number.

INRich

IN Rich is an Intelligent Network system, hosting Variety of Services targeting Wireless /

Wire line customers as well as Enterprise domains. The service provides facilities for call

restrictions (within SDCA, Intra circle, N LD, ILD, etc) to various customers. It provides

much needed facilities for PCO subscribers, like the mobility restriction, Voucher

Management, CustomerAccount Management, Recharge and Balance Enquiry through IVR,

1 6Khz metering from Network and Fraud Management. This is a high capacity system (2

Million BHCA) catering to both wire line and Wireless customers.

Achievements and Awards

The Company's focus on Information Technology (IT) is demonstrated by more than 5,600

person-years of rich experience across various domains, with more than 13% of the IT

team members having more than 9 years of experience. The IT team's innovation and

delivery continues to win recognition for its ability to use information technology for

enabling and enhancing business value. The key accolades won by the Company include the

following:

* SAP ACE Awards 2007 for Customer Excellence in the Best Telecommunications Sector

Implementation Category.

* 2007 CIO 100 Award (2nd year in a row) for innovation in Enterprise IT.

* CIO 100 Smart Infrastructure Award for exceptional use of network technology deployed

to further business objectives,reduce spending, improve profits.

* CTO Forum - Hall of Fame Award given to CIO for having made significant contribution to

organisation.

* Symantec 2007 Visionary Award for technology innovation and business value impact in

the areas of High Availability, Backup and Recovery.

* Government of Maharashtra, Directorate of Industries honored the Company as IT Service

Provider for Maharashtra Information Technology Award for the year 2007.

* The Company was selected in NASSCOM's 100 IT Innovators-2007 for creating exciting IP

and using business model and process innovation to realize significant business benefits

and extend these advantages to their customers.

* NetApp Innovation 2007 award (Enterprise Infrastructure Category for Business Impact

and Innovation).

The Company continues to excel in creating advertisements for its products and services.

Reliance Mobile was recently awarded 1 3

ABBY awards for its advertising campaigns overthe last 1 2 months. Some of our

advertising campaigns which won top honors at ABBY's are Apun Ka Sapna, Bol India Bol

and Network. ABBY is the industry goldstandard for creative excellence and is adjudged by

'Advertising Agencies Association of India' (AAAI).

During the year, the Company continued to invest in IT to increase efficiency, scale,

availability and uptime of all mission and business critical systems. Notable achievements

include creation of valueadded solutions for services like IPTV and DTH, international long

distance calling, optimisation of the collection and invoice processes in the ERP system,

enhancement of revenue assurance and fraud control system, significant automation of

back-office processes.

Capitalising on the robust foundations already laid, the Company will continue investments

into IT to drive the vision of managing scale and growth to newer heights. Special emphasis

will be given to the following areas:

* Increased implementation of 'Green computing' principles to reduce the Company's

carbon footprint- reduction of energy and waste in the existing systems in addition to

evaluating environmental attributes while selecting new IT equipment.

* Introduction of GSM-based services.

* Enhancement of all back office operations like HR management, supply chain and

financial processes to maintain world class standards.

* Enhancement of business continuity processes to recover out of unforeseen situations.

* Continued emphasis on design and implementation of control systems that enable the

Company to deliver benchmark level quality in the area of information risk management.

* Increased usage of convergent IT architecture with reusable components.

* Creation of Loyalty Program Management system to track and offer benefits to loyal

customers.

VALUATION

PROJECTED

Rs in Crores Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Free Cash Flows 13592.359 3640.019 3856.495 6900.604 4957.765

PV of Estimated FC Flows

11445.96 3640.02 3856.49 6900.60 4957.77

Total Present Value OF 5 YRS(EV)

30800.84 19354.88 15714.86 11858.37 4957.77

GROWTH 0.05

Horizon/Terminal Value

37852.39

PV of Estimated Perpetuity Flows

16028.00

Total Present Value (EV)

46828.84

Add: Current Cash Balance

5814.79

Book Value of Debt 22030.45

Fundamental Value of Equity

30613.18

No of Outstanding Shares (cr.)

206.00

Fundamental Value per share (Rs)

148.61

Current Market Price

162.85

Recommendation Sell as stock is overvalued

From the calculation we can see that the Intrinsic share price of the company comes at

148.61, where as the current market price of the firm is 162.85. Thus the share price is

overvalued and it is advisable to sell the stock

RATIO ANALYSIS OF RELIANCE COMMUNICATION

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

ROE 11.74% 10.41% 9.29% 0.95%

BOOK VALUE PER SHARE(Rs.) 99.64 120.58 250.92 245.14

EPS(Rs.) 11.69 12.56 23.31 2.32

DPR(%) 4.24% 5.99% 3.44% 36.63%

PE RATIO (retrospective) 4.30 4.77 0.62 0.64

PE RATIO (prospective) 45.78 6.67 67.68

no. of outstanding shares 206 206 206 206

mkt price per share 428.2 574.75 155.45 157.35

ROE- The company’s ROE is declining for the four years. A company with a steady low

return on equity is not necessarily going out of business -- it might occupy a niche in its

industry that none of its more profitable competitors find attractive. And a company with a

low and falling return on equity could make an attractive turnaround investment for value

stock pickers who can see signs that the company has put a new and viable strategy in

place.

EPS- The EPS have increased for three years but it has dropped to Rs.2.32 which is not

good sign for the company.

Pe ratio- The price earning ratio measures the returns to investors for every rupees

invested in the company. A high P/E ratio may indicate that it may take the firm several

years to recoup its investment in the company.

ANNEXURES

P/L ACCOUNT 0F RELIANCE COMMUNICATIONS LTD

ACTUAL PROJECTED

Rs. in Cr. Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

Mar-12 Mar-13 Mar-14 Mar-15

INCOME :

Sales Turnover

12,756.30

14,792.05

15,086.66

13,554.60

13557.3

13557.34 13557.343

13557.34 13557.343

Other Income

260.82 520.58 4,246.80 2,484.06 1763.80

2135.45 2550.0292

2233.46 2170.684

Total Income

13,017.12

15,312.63

19,333.46

16,038.66

15321.14

15692.79 16107.37 15790.80 15728.03

EXPENDITURE :

Excise Duty 1,031.04 1,375.86 1,476.08 1,263.99

Power & Fuel Cost

266.74 91.76 138.32 144.27

Other Manufacturing Expenses

4,110.99 5,207.99 6,931.39 8,890.69

Employee Cost

639.9 823.12 757.06 670.45

Selling and Administration Expenses

1,745.06 2,339.46 2,019.82 1,691.04

Miscellaneous Expenses

509.87 156.64 226.53 134.38

total expenses

8,303.60 9,994.83 11,549.20

12,794.82

8,825.03

9,160.55 10,378.47 12,797.41

10,290.37

Profit before Interest, Depreciation & Tax

4,713.52 5,317.80 7,784.26 3,243.84 6496.11

6532.24 5728.90 2993.39 5437.66

Interest & Financial Charges

456.55 870.05 1,035.68 1,113.13 3722.63

3345.73316 3005.7244

2699.134 2436.3284

Profit before Depreciation & Tax

4,256.97 4,447.75 6,748.58 2,130.71 2773.48

3186.51 2723.18 294.26 3001.33

Depreciation

1,836.12 1,843.66 1,933.51 1,511.24 1903.43

1840.81 1792.19 1805.24 1844.50

Profit Before Tax

2,420.85 2,604.09 4,815.07 619.47 870.06 1345.70 930.99 -1510.98 1156.83

Tax 12 17.64 12.4 140.54 52.4595

99.7551257 84.689625

-170.8401

97.884383

Profit After Tax

2,408.85 2,586.45 4,802.67 478.93 817.60 1245.95 846.30 -1340.14 1058.95

P & L Balance brought forward

5.65 2,294.90 4,300.24 502.75

Appropriations

119.6 581.11 8,600.16 319.54

P & L Bal. carried down

2,294.90 4,300.24 502.75 662.14

Equity Dividend

102.23 154.8 165.12 175.44 102.81 182.622866 142.39356

-270.3377

170.0403

Corporate Dividend Tax

17.37 26.31 28.06 29.14 17.3725

30.8163032 23.984523

-45.43391

28.661192

transfer to Reserve

2,289.25 2,405.34 4,609.49 274.35 697.41 1,032.51 679.92 -1,024.37 860.25

Equity Dividend (%)

8 15 16 17

Earning Per Share (Rs.)

9.36 12.4 23.13 2.18

Book Value 100.39 120.35 250.44 244.66

Extraordinary Items

-7.15 -9.92 3,459.99 -14.83

BALANCE SHEET OF RELIANCE COMMUNICATION LTD

ACTUAL PROJECTED

Rs. in Cr. Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

SOURCES OF FUNDS :

Share Capital 1,022.31

1,032.01

1,032.01

1,032.01

1,032.01 1,032.01

1,032.01

1,032.01

1,032.01

Reserves & Surplus

19,503.23

23,808.02

50,658.31

49,466.88

50,106.98

51,062.03

51,677.20

50,612.18

51,412.39

Total Shareholders Funds

20,525.54

24,840.03

51,690.32

50,498.89

51,138.99

52,094.04

52,709.21

51,644.19

52,444.40

Secured Loans 5,113.57

950.00 3,000.00

3,000.00

104.45 66.28 72.98 76.25 79.99

Unsecured Loans

9,454.27

19,336.43

27,903.61

21,478.28

21,926.01

19,761.13

17,771.68

15,983.95

14,374.19

Total Debt 14,567.84

20,286.43

30,903.61

24,478.28

22,030.45

19,827.41

17,844.67

16,060.20

14,454.18

Total Liabilities

35,093.38

45,126.46

82,593.93

74,977.17

73,169.44

71,921.45

70,553.87

67,704.39

66,898.58

APPLICATION OF FUNDS :

Gross Block 20,625.82

21,576.32

37,941.15

39,838.17

29,995.37

32,337.75

35,028.11

34,299.85

32,915.27

Less: Accum. Depreciation

2,527.37

4,688.69

6,533.38

9,225.69

11,200.61

13,142.37

15,023.23

16,888.43

18,813.66

Net Block 18,098.45

16,887.63

31,407.77

30,612.48

18,794.75

19,195.38

20,004.88

17,411.42

14,101.61

Capital Work in Progress

2,185.60

7,117.56

3,643.86

1,683.52

3,351.29 3,698.89

2,710.76

2,444.16

2,280.54

Investments 5,434.43

13,844.14

31,364.75

31,898.60

33,493.53

35,168.21

36,926.62

38,772.95

40,711.60

total fixed assets and investments

25,718.48

37,849.33

66,416.38

64,194.60

55,639.57

58,062.48

59,642.26

58,628.52

57,093.75

Current Assets, Loans & Advances

Inventories 98.51 201.22 253.14 298.34 203.75 228.51 239.54 242.55 228.59

Sundry Debtors

802.11 1,093.21

1,482.22

1,738.63

1,535.48 1,637.23

1,586.35

1,611.79

1,599.07

Cash and Bank Balance

68.45 192.66 535.15 82.18 5,814.79 2,062.43

-956.78 -105.04 -1,286.45

Loans and Advances

19,137.97

17,028.20

23,272.50

17,886.79

18,687.60

18,274.56

18,941.49

18,448.51

18,588.04

total current assets

20,107.04

18,515.29

25,543.01

20,005.94

26,241.62

22,202.74

19,810.60

20,197.81

19,129.25

Current Liabilities

6,309.33

7,207.76

5,781.49

5,836.53

8,711.74 8,343.77

8,898.98

11,121.95

9,324.42

Provisions 4,422.81

4,030.40

3,583.97

3,386.84

5,207.83 4,684.27

4,211.27

4,374.18

4,645.83

total current liabilities

10,732.14

11,238.16

9,365.46

9,223.37

8,711.74 8,343.77

8,898.98

11,121.95

9,324.42

Net Current Assets

9,374.90

7,277.13

16,177.55

10,782.57

17,529.87

13,858.97

10,911.62

9,075.86

9,804.83

Miscellaneous Expenses not w/o

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Assets 35,093.38

45,126.46

82,593.93

74,977.17

73,169.44

71,921.45

70,553.87

67,704.39

66,898.58

check 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Contingent Liabilities

1,067.94

3,053.92

5,904.67

3,054.61

ASSUMPTIONS

Important ratios ACTUAL

PROJECTED

Profit & Loss Ac ratios

Mar '07

Mar '08 Mar '09

Mar '10

Mar '11

Mar '12 Mar '13

Mar '14

Mar '15

net sales growth% 2.02%

other income as a % of net sales

2.04% 3.52% 28.15%

18.33%

13.01%

15.75% 18.81%

16.47%

16.01%

total expense as a % of sales

65.09%

67.57% 76.55%

94.39%

75.90%

78.60% 81.36%

82.57%

79.61%

depreciation as a % of gross block

8.90% 8.54% 5.10% 3.79% 6.58% 6.00% 5.37% 5.44% 5.85%

net interest as % of total debt

3.13% 4.29% 3.35% 4.55% 3.83% 4.00% 3.93% 4.08% 3.96%

corporate tax rate 16.99%

17.00% 16.99%

16.61%

16.90%

16.87% 16.84%

16.81%

16.86%

tax 0.50% 0.68% 0.26% 22.69%

6.03% 7.41% 9.10% 11.31%

8.46%

equity dividend as a % of pat

4.24% 5.99% 3.44% 36.63%

12.57%

14.66% 16.83%

20.17%

16.06%

Balance Sheet Ratios

sundry debtors as a % of sales

6.29% 7.39% 9.82% 12.83%

11.33%

12.08% 11.70%

11.89%

11.79%

long term assets as a % of sales

42.60%

93.59% 207.90%

235.33%

144.86%

170.42% 189.63%

185.06%

172.49%

current liabilities as a % of total exp

129.25%

112.44%

81.09%

72.09%

98.72%

91.08% 85.74%

86.91%

90.61%

provision as a % of debtors

551.40%

368.68%

241.80%

194.80%

339.17%

286.11% 265.47%

271.39%

290.53%

inventory as a % of sales

0.77% 1.36% 1.68% 2.20% 1.50% 1.69% 1.77% 1.79% 1.69%

assets as a% of sales 161.69%

145.86%

251.49%

293.91%

213.24%

226.12% 246.19%

244.87%

232.60%

Secured loans as a % of total sh holders fund

24.91%

3.82% 5.80% 5.94% 10.12%

6.42% 7.07% 7.39% 7.75%

wcapital wip % of net block

12.08%

42.15% 11.60%

5.50% 17.83%

19.27% 13.55%

14.04%

16.17%

loans and adv as a % of sasles

150.03%

115.12%

154.26%

131.96%

137.84%

134.79% 139.71%

136.08%

137.11%

CASH FLOW(PROJECTED) 0F RELIANCE COMMUNICATIONS LTD

Cash Flow Statement 2011 2012 2013 2014 2015

CASH FLOW FROM OPERATING ACTIVITIES

Retained Earnings 640.10 955.05 615.17 -1,065.02 800.21

Add: Depreciation 1974.92 1941.76 1880.86 1865.20 1925.23

Cash Flow Before Change in non-cash working capital

2615.03 2896.81 2496.02 800.18 2725.44

Less: Increase in non-cash current assets 503.06 -286.52 627.08 -464.52 112.84

Add: Increase in current liability -511.63 -367.98 555.22 2,222.97 -1,797.53

Net Cash Generated from Operation 1,600.34 2,815.35 2,424.16 3,487.67 815.07

CASH USED IN INVESTING ACTIVITIES

CAPEX -8,175.03 2,689.99 1,702.22 -994.86 -1,548.19

Increase in Investment 1,594.93 1,674.68 1,758.41 1,846.33 1,938.65

Cash flow from investing activities -6,580.10 4,364.66 3,460.63 851.47 390.45

CASH FLOW FROM FINANCING ACTIVITIES

Increase in Capital (Equity + Preference) 0 0 0 0 0

Increase in long term total borrowing -2,447.83 -2,203.05 -1,982.74 -1,784.47 -1,606.02

Cash flow from financing activities -2,447.83 -2,203.05 -1,982.74 -1,784.47 -1,606.02

NET CASH FLOW 5,732.61 -3,752.36 -3,019.21 851.74 -1,181.40

Calculation of Weighted Average Cost of Capital

Beta 1.406

Rf (10 yr G-Sec)

8.00%

Rm 20.00%

Ke 24.87%

kd 4.55%

DEBT 22030.45

Equity 51138.99

WACC 18.75%

REFERENCES

http://www.rcom.co.in/Rcom/personal/home/index.html

Moneycontrol.com

Ibef.org

Bseindia.com

http://indiabudget.nic.in/es2009-10/esmain.htm

Search.ebscohost.com

www.rbi.gov.in

www.edeiweiss.in

www.investopedia.com