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 11445.96 3640.02 3856.49 6900.60 4957.77

Flows
Total Present Value 30800.84 19354.88 15714.86 11858.37 4957.77
OF 5 YRS(EV)
GROWTH 0.05
Horizon/Terminal 37852.39
Value
PV of Estimated 16028.00
Perpetuity Flows
Total Present Value 46828.84
(EV)
Add: Current Cash 5814.79
Balance
Book Value of Debt 22030.45
Fundamental Value 30613.18
of Equity
No of Outstanding 206.00
Shares (cr.)
Fundamental Value 148.61
per share (Rs)

Current Market 162.85

Price
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- Mar-12 Mar-13 Mar-14 Mar-15
11
INCOME :
Sales 12,756.3 14,792.0 15,086.6 13,554.6 13557. 13557.34 13557.34 13557.34 13557.34
Turnover 0 5 6 0 3 3 3
Other 260.82 520.58 4,246.80 2,484.06 1763.8 2135.45 2550.029 2233.46 2170.684
Income 0 2
Total 13,017.1 15,312.6 19,333.4 16,038.6 15321. 15692.79 16107.37 15790.80 15728.03
Income 2 3 6 6 14

EXPENDITU
RE :
Excise Duty 1,031.04 1,375.86 1,476.08 1,263.99
Power & 266.74 91.76 138.32 144.27
Fuel Cost
Other 4,110.99 5,207.99 6,931.39 8,890.69
Manufacturi
ng Expenses
Employee 639.9 823.12 757.06 670.45
Cost
Selling and 1,745.06 2,339.46 2,019.82 1,691.04
Administrat
ion
Expenses
Miscellaneo 509.87 156.64 226.53 134.38
us Expenses

total 8,303.60 9,994.83 11,549.2 12,794.8 8,825.0 9,160.55 10,378.47 12,797.4 10,290.37
expenses 0 2 3 1
Profit 4,713.52 5,317.80 7,784.26 3,243.84 6496.1 6532.24 5728.90 2993.39 5437.66
before 1
Interest,
Depreciatio
n & Tax
Interest & 456.55 870.05 1,035.68 1,113.13 3722.6 3345.73316 3005.724 2699.134 2436.328
Financial 3 4 4
Charges
Profit 4,256.97 4,447.75 6,748.58 2,130.71 2773.4 3186.51 2723.18 294.26 3001.33
before 8
Depreciatio
n & Tax
Depreciatio 1,836.12 1,843.66 1,933.51 1,511.24 1903.4 1840.81 1792.19 1805.24 1844.50
n 3
Profit 2,420.85 2,604.09 4,815.07 619.47 870.06 1345.70 930.99 -1510.98 1156.83
Before Tax
Tax 12 17.64 12.4 140.54 52.459 99.7551257 84.68962 - 97.88438
5 5 170.8401 3
Profit After 2,408.85 2,586.45 4,802.67 478.93 817.60 1245.95 846.30 -1340.14 1058.95
Tax
P&L 5.65 2,294.90 4,300.24 502.75
Balance
brought
forward
Appropriati 119.6 581.11 8,600.16 319.54
ons
P & L Bal. 2,294.90 4,300.24 502.75 662.14
carried
down

Equity 102.23 154.8 165.12 175.44 102.81 182.622866 142.3935 - 170.0403

Dividend 6 270.3377
Corporate 17.37 26.31 28.06 29.14 17.372 30.8163032 23.98452 - 28.66119
Dividend 5 3 45.43391 2
Tax
transfer to 2,289.25 2,405.34 4,609.49 274.35 697.41 1,032.51 679.92 -1,024.37 860.25
Reserve
Equity 8 15 16 17
Dividend
(%)

Earning Per 9.36 12.4 23.13 2.18

Share (Rs.)
Book Value 100.39 120.35 250.44 244.66

Extraordina -7.15 -9.92 3,459.99 -14.83

ry Items
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 1,022.3 1,032.0 1,032.0 1,032.0 1,032.01 1,032.0 1,032.0 1,032.0 1,032.0
1 1 1 1 1 1 1 1
Reserves & 19,503. 23,808. 50,658. 49,466. 50,106.9 51,062. 51,677. 50,612. 51,412.
Surplus 23 02 31 88 8 03 20 18 39
Total 20,525. 24,840. 51,690. 50,498. 51,138.9 52,094. 52,709. 51,644. 52,444.
Shareholders 54 03 32 89 9 04 21 19 40
Funds
Secured Loans 5,113.5 950.00 3,000.0 3,000.0 104.45 66.28 72.98 76.25 79.99
7 0 0
Unsecured 9,454.2 19,336. 27,903. 21,478. 21,926.0 19,761. 17,771. 15,983. 14,374.
Loans 7 43 61 28 1 13 68 95 19
Total Debt 14,567. 20,286. 30,903. 24,478. 22,030.4 19,827. 17,844. 16,060. 14,454.
84 43 61 28 5 41 67 20 18

Total 35,093. 45,126. 82,593. 74,977. 73,169.4 71,921. 70,553. 67,704. 66,898.
Liabilities 38 46 93 17 4 45 87 39 58

APPLICATION
OF FUNDS :

Gross Block 20,625. 21,576. 37,941. 39,838. 29,995.3 32,337. 35,028. 34,299. 32,915.
82 32 15 17 7 75 11 85 27
Less: Accum. 2,527.3 4,688.6 6,533.3 9,225.6 11,200.6 13,142. 15,023. 16,888. 18,813.
Depreciation 7 9 8 9 1 37 23 43 66
Net Block 18,098. 16,887. 31,407. 30,612. 18,794.7 19,195. 20,004. 17,411. 14,101.
45 63 77 48 5 38 88 42 61
Capital Work 2,185.6 7,117.5 3,643.8 1,683.5 3,351.29 3,698.8 2,710.7 2,444.1 2,280.5
in Progress 0 6 6 2 9 6 6 4
Investments 5,434.4 13,844. 31,364. 31,898. 33,493.5 35,168. 36,926. 38,772. 40,711.
3 14 75 60 3 21 62 95 60
total fixed 25,718. 37,849. 66,416. 64,194. 55,639.5 58,062. 59,642. 58,628. 57,093.
assets and 48 33 38 60 7 48 26 52 75
investments
Current Assets,
Loans &
Advances
Inventories 98.51 201.22 253.14 298.34 203.75 228.51 239.54 242.55 228.59
Sundry 802.11 1,093.2 1,482.2 1,738.6 1,535.48 1,637.2 1,586.3 1,611.7 1,599.0
Debtors 1 2 3 3 5 9 7
Cash and Bank 68.45 192.66 535.15 82.18 5,814.79 2,062.4 -956.78 -105.04 -
Balance 3 1,286.4
5
Loans and 19,137. 17,028. 23,272. 17,886. 18,687.6 18,274. 18,941. 18,448. 18,588.
Advances 97 20 50 79 0 56 49 51 04
total current 20,107. 18,515. 25,543. 20,005. 26,241.6 22,202. 19,810. 20,197. 19,129.
assets 04 29 01 94 2 74 60 81 25
Current 6,309.3 7,207.7 5,781.4 5,836.5 8,711.74 8,343.7 8,898.9 11,121. 9,324.4
Liabilities 3 6 9 3 7 8 95 2
Provisions 4,422.8 4,030.4 3,583.9 3,386.8 5,207.83 4,684.2 4,211.2 4,374.1 4,645.8
1 0 7 4 7 7 8 3
total current 10,732. 11,238. 9,365.4 9,223.3 8,711.74 8,343.7 8,898.9 11,121. 9,324.4
liabilities 14 16 6 7 7 8 95 2
Net Current 9,374.9 7,277.1 16,177. 10,782. 17,529.8 13,858. 10,911. 9,075.8 9,804.8
Assets 0 3 55 57 7 97 62 6 3

Miscellaneous 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Expenses not
w/o

Total Assets 35,093. 45,126. 82,593. 74,977. 73,169.4 71,921. 70,553. 67,704. 66,898.
38 46 93 17 4 45 87 39 58
check 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Contingent 1,067.9 3,053.9 5,904.6 3,054.6
Liabilities 4 2 7 1
ASSUMPTIONS
Important ratios ACTU PROJECT
AL ED
Profit & Loss Ac Mar Mar '08 Mar Mar Mar Mar '12 Mar Mar Mar
ratios '07 '09 '10 '11 '13 '14 '15
net sales growth% 2.02%
other income as a % 2.04% 3.52% 28.15 18.33 13.01 15.75% 18.81 16.47 16.01
of net sales % % % % % %
total expense as a % 65.09 67.57% 76.55 94.39 75.90 78.60% 81.36 82.57 79.61
of sales % % % % % % %
depreciation as a % 8.90% 8.54% 5.10% 3.79% 6.58% 6.00% 5.37% 5.44% 5.85%
of gross block
net interest as % of 3.13% 4.29% 3.35% 4.55% 3.83% 4.00% 3.93% 4.08% 3.96%
total debt
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 4.24% 5.99% 3.44% 36.63 12.57 14.66% 16.83 20.17 16.06
% of pat % % % % %
Balance Sheet
Ratios
sundry debtors as a 6.29% 7.39% 9.82% 12.83 11.33 12.08% 11.70 11.89 11.79
% of sales % % % % %
long term assets as a 42.60 93.59% 207.90 235.33 144.86 170.42% 189.63 185.06 172.49
% of sales % % % % % % %
current liabilities as 129.25 112.44 81.09 72.09 98.72 91.08% 85.74 86.91 90.61
a % of total exp % % % % % % % %
provision as a % of 551.40 368.68 241.80 194.80 339.17 286.11% 265.47 271.39 290.53
debtors % % % % % % % %
inventory as a % of 0.77% 1.36% 1.68% 2.20% 1.50% 1.69% 1.77% 1.79% 1.69%
sales
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 % 24.91 3.82% 5.80% 5.94% 10.12 6.42% 7.07% 7.39% 7.75%
of total sh holders % %
fund
wcapital wip % of 12.08 42.15% 11.60 5.50% 17.83 19.27% 13.55 14.04 16.17
net block % % % % % %
loans and adv as a % 150.03 115.12 154.26 131.96 137.84 134.79% 139.71 136.08 137.11
of sasles % % % % % % % %
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 2615.03 2896.81 2496.02 800.18 2725.44
capital
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- 8.00%
Sec)
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