“AN ANALYSIS ON WORKING CAPITAL MANAGEMENT

& RATIOS ”

By
Rinki Kumari

A Project Report submitted in partial fulfillment of the requirements of the

Post Graduate Program In Management

Institute of Business Management & Research

IBMR House, 6th Cross, Wilson Garden, Hosur Main Road,
Bangalore 560030
www.ibmr.in
 A Project Report of

Rinki Kumari

“ AN ANALYSIS ON WORKING CAPITAL MANAGEMENT & RATIOS ”

is approved and is acceptable in quality and from

Research Guide’s Name……………

Signature………………..
Qualification and Designation……………
Phone Number…………

2
 CERTIFICATE

This is to certify that the Project Report titled

““ AN ANALYSIS ON WORKING CAPITAL MANAGEMENT & RATIOS ”

Submitted in partial fulfillment of the requirements for the

Post Graduate Program In Management

Rinki Kumari

has worked under my supervision and guidance and that no part of this report has been
submitted for the award of any other Degree, Diploma, Fellowship or other similar titles
or prizes and that the work has not been published in any journal or magazine.

Registration No.: MP08171

Attested Certified

Dr.Chandra Niranjan Faculty Guide’s Name -------------------

3
 The Project Report of

Rinki Kumari

“ AN ANALYSIS ON WORKING CAPITAL MANAGEMENT & RATIOS ”

is approved and is acceptable in quality and from

Internal Examiner External Examiner

Signature: _____________ Signature: ___________
Name: Name:

4
 STUDENT DECLARATION

I hereby declare that the Project Report titled

“AN ANALYSIS ON WORKING CAPITAL MANAGEMENT &

RATIOS ”

Submitted in partial fulfillment of the requirements for the

POST GRADUATE PROGRAM IN MANAGEMENT

to IBMR Business School, Bangalore.

It is my original work and not submitted for the award of any other
Degree, Diploma, Fellowship or other similar title or prizes.

Place: Bangalore Name: Rinki Kumari

Date: Reg No: MP08171

5
Acknowledgement

The successful completion of this project has been the result of the help
extended by a number of people. Hence I would like to place on record my
acknowledgment.

My special thanks to Mr. PANKAJ KUMAR, Chartered Accountant, Finance

Department, Bharti Airtel limited who guided me throughout the project giving
adequate guidance & feedback during my project completion.

The other members who have also helped me significantly during the project
completion were :

 Mr. Muthu Mayappan, Chartered Accountant – (Finance Department)

 Mr. Suresh Kumar K. G - Head – Legal & Regulatory
 Mrs. Rakhee Kamat / Devika Umesh - Sr. Manager – H.R
Department

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 EXECUTIVE SUMMARY

To run a business, we need Capital and thus Finance is the blood for any
organization to function efficiently. Since every single business activity
revolve around a broad common objective, i.e. to earning a PROFIT. The
subject on Finance gives an opportunity to understand their effective
application, utilization & funding the business & playing a pivotal role in the
success of the organization. Therefore, though not completely covering the
financial aspects of the business, still brief study on the Working Capital &
Ratio Analysis forming the part of Financial Statements are interpreted in this
Topic.

In the above context, the Topic provides me the insights on financial standing
of the organization. It helps in understanding & explore, how the financial
resources are being utilized during the operations of the business, the
application & source of funds in various fixed assets & working capital, how
the company is perceived in the eyes of the shareholders which reflects
through the Earnings Per Share, and many more such financial expressions…

Apart from the given reason, there are other dimensions to choose this topic.
unlike manufacturing or trading industries, Service industries are much
different in managing their Working Capital. Like; the inventories are most of
the time in the intangible form. The working capital is funded mostly from the
long-term sources; like in the case of Bharti Airtel Limited.
1
 Table of Content

Chapter-I Introduction to the Company

1. Corporate profile

2. Bussiness profile

3. Milestones of the Company

4. Product profile

5. Swot of Company

Chapter-II Introduction to the Project

Chapter-III Project Profile

1. Topic of the project

2. Objective of the study
3.Research Methodology

Chapter-IV Limitation of the study

Chapter-V Data Analysis & Interpretation

Chapter-VI Findings & Recommendation

Chapter-VII Conclusion & Suggestions

Chapter-VIII References

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 Chapter 1

“INTRODUCTION”

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Introduction To The Industry :

Telecommunications started in the nineteenth century with the Telegraphy, and

developed through the Telephone and Ratio to Television to Satellites and the
Internet etc. The data transmitted has advanced from signals (Morse code)
through voice to pictures and data and, with the development of convergence,
to combinations of these. Every year, new technologies increase the services
available and the speed of delivery. A combination of factors is resulting in the
ever-decreasing cost of these services. This free report gives an overview of
this development, and the role of regulators to control it.

Since people wanted to say something to other people who were out of earshot,
there have been attempts at communication. These attempts have advanced
from carrier pigeons, signaling towers, smoke signals through telegraph,
telephone, radio and satellite. Technology has advanced to allow TV, the
Internet, high speed data transmission and a combination of these. This report
includes a time line of the major developments in physical means of
communication, then telecommunications for the past 25 years

Despite retaining their role as cash cows for incumbent operators, fixed and
mobile voice services are progressively being overtaken by broadband.
Increasingly, operators will need to take a holistic view of the market,
necessitating a total review of this 100-year-old product. For various reasons,
4
fixed-line operators have not introduced significant new products, services or
cost-saving technologies in the same way that mobile operators have. There is
certainly room for new premium voice services, based on more intuitive
navigation, CD sound quality and interactivity between handset and TV.
Fixed-line voice will probably be with us forever, but will become a subset of
broadband, instead of the other way around. Broadband will combine voice
and data, providing the opportunity to open up a number of triple play markets.
High mobile charges are also an interesting target for VoIP over wireless
broadband. This report includes BuddeCommn’s analysis of the future of
voice, with a focus on fixed, mobile and VoIP.

The larges sector of the telecommunications industry continues to be made up

of wired telecommunications carriers. Establishments in this sector mainly
provide telecommunications services via wires and cables that connect
customers’ premises to central offices maintained by telecommunications
companies. The central offices contain switching equipment that routes
content to its final destination or to another switching center that determines
the most efficient route for the content to take. These companies also maintain
the cable network that connects different regions of the country as well as
foreign countries, and forms the backbone of the industry. While voice used to
be the main type of data transmitted over the wires, wired telecommunications
service now includes the transmission of all types of graphic, video and
electronic data mainly over the Internet.

These new services are made possible through the use of digital technologies
that provide much more efficient use of the telecommunications networks.
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One major technology breaks digital signals into packets during transmission.
Networks of computerized switching equipment route the packets. Packets
may take separate paths to their destination and may share the paths with
packets from other users. At the destination, the packets are reassembled, and
the transmission is completed. Because packet switching considers alternate
routes, and allows multiple transmissions to share the same route, it results in a
more efficient use of telecommunications capacity as packets are routed along
less congested routes.

The transmission of voice signals requires relatively small amounts of capacity

on telecommunications networks. By contrast, the transmission of data, video
and graphics requires much higher capacity. This transmission capacity is
referred to as “bandwidth”. As the demand increased for high-capacity
transmissions- especially with the rising volume of Internet data-
telecommunications companies have been expanding and upgrading their
networks to increase the amount of available bandwidth.

Cable and other program distribution is another sector of the

telecommunications industry. Establishments in this sector provide television
and other services on a subscription or fee basis. these establishments do not
include cable networks. (Information on cable networks is included in the
section on broadcasting, which appears elsewhere in the Career Guide.)
Distributors of pay television services transmit programming through two
basic types of systems. Cable systems transmit programs over fiber optic and
coaxial cables. Direct Broadcasting Satellite (DBS) operators constitute a
growing segment of the pay television industry. DBS operators transmit
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programming from orbiting satellites to customers’ receivers, known as
‘minidishes’. Establishments in the cable and other program distribution
industry generate revenue through subscriptions, providing Internet access,
providing phone service, and advertising sales. They also charge fees for pay-
per-view or video-on-demand programs.

Wireless telecommunications carriers, many of which are subsidiaries of the

wired carriers, transmit voice, graphics, data, and Internet access through the
transmission of signals over networks of radio towers. The signal is
transmitted through an antenna into the wire line network. Increasing numbers
of consumers are choosing to replace their hoe landline phones with wireless
phones. Other wireless services include beeper and paging services.

Resellers of telecommunications services are another sector of the

telecommunications industry. These resellers lease transmission facilities,
such as telephone lines or space on a satellite, from existing
telecommunications networks, and then resell the service to other customers.
Other sectors in the industry include message communications services such as
e-mail and facsimile services, satellite telecommunications, and operators of
other communication services ranging from radar stations to radio networks
used by taxicab companies.

Recent Developments:

Telecommunications carriers are expanding their bandwidth by replacing

copper wires with fiber optic cables. Fiber optic cable, which transmits light
7
signals along glass strands, permits faster, higher capacity transmissions than
traditional copper wire lines. In some areas, carries are extending fiber optic
cable to residential customers, enabling them to offer cable television, video-
on-demand, very high-speed Internet, and conventional telephone
communications over a single line. However, the high cost of extending fiber
to homes has slowed deployment. In most areas, wired carries are instead
leveraging existing copper lines that connect most residential customers with a
central office, to provide digital subscribe lines (DSL) Internet service.
Technologies in development will further boost the speeds and services
available through a DSL connection.

Changes in technology and regulation now allow cable television providers to

compete directly with telephone companies. An important change has been the
rapid increase in two-way communications capacity. Conventional pay
television services provided communications only from the distributor to the
customer. These services could not provide effective communications from
the customer back to other points in the system due to single interference and
the limited capacity of conventional cable systems. Cable operators are
implementing new technologies to reduce signal interference and increase the
capacity of their distribution systems by installing fiber optic cables and
improving data compression. this allows some pay television systems to offer
two-way telecommunications services, such as video-on-demand and high-
speed Internet access.

Cable companies are increasing their share of the telephone communications

market by using high-speed Internet access to provide VoIP (Voice over
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Internet Protocol). VoIP is sometimes called Internet telephony, because it
uses the Internet to transmit phone calls. While conventional phone networks
use packet switching to break up a call onto multiple shared lines between
central offices, VoIP extends this process to the phone. A VoIP phone will
break the conversation into digital packets and transmit those packets over a
high-speed Internet connection. Cable companies use the technology to offer
phone services without building a conventional phone network. Wire line
providers’ high-speed Internet connections also can be used for VoIP and
cellular phones are being developed that use VoIP to make calls using local
wireless Internet connections. All of the major sectors of the
telecommunications industry ware or will increasingly use VoIP.

Wireless telecommunications carriers are deploying several new technologies

to allow faster data transmission and better Internet access that should make
them more competitive with wire line carriers. With faster Internet
connections speeds, wireless carriers are selling music, videos, and other
exclusive content that can be downloaded and a played on cellular phones.
Wireless equipment companies are developing the next generation of
technologies that will allow even faster data transmission. The replacement of
landlines with cellular service should become increasingly common because
advances in wireless systems will provide ever faster data transmission speeds.

Telecommunication Reforms in India

Indian telecom snapshot - growing share in world telecom.

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- Total telecom base ~ 310 million 3rd largest in the world

- Tele-Density ~ 26% Lowest in the world

- Wireless Sub Base ~ 270 million 3rd largest in the world

- Wireless Penetration ~ 23 % Lowest in the world

- ARPU ~ USD 9 One of the Lowest

- MOU/Sub/Month ~ 450 minutes 2nd highest in the world

- Realized RPM ~ 2 US cents/min Lowest in the world (All

Inclusive)

- Fixed line Sub Base ~ 40 million

- Broadband Sub Base ~ 3.5 million Large potential market

- Subscriber base is growing by CAGR 90% year on year in last 3-4

years


 Indian Telecom- well placed in world telecom space

Other reasons for choosing ‘Indian Telecom’ sector are: (Consumerist

Outlook)
 One of the largest Working Population giving huge market potential

 Emerging Economy

 Rising Income & Growing availability of Retail Credit resulting in

increased consumerism

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  Largest youth population

 Communication being a necessity in professional & personal lives

Telecommunication Reforms in India revolutionized the telecom industries

sector in India, which is an important factor for the growth of the Indian
telecom sector and in turn helped the Indian economy to perform well for the
past few years. The Telecommunication reforms in India were development
and growth oriented. Technological advancements and innovations
contributed largely towards the reformation of the telecom sector in India. The
sector of telecom was a monopoly under the Central Government of India.
During the 1990s this sector faced fierce challenges due to the development in
the technological sector. The sector was privatized and with the abolition of
the monopoly new player entered the consumer market. The competition
increased in the telecom sector, the rates were slashed in order to grab the
share of the market and the customers were provided with better services.

The telecommunication reforms in India started in the eighties with the

mission better communication. This is regarded as the first phase of the
reformation process. Several private manufacturers of tailor made equipments
entered the market. There were private developer for indigenous technologies
and the franchisee for STD/ISD and PCO increased. The Videsh Sanchar
Nigam Limited (VSNL) and Mahanagar Telephone Nigam Limited (MTNL)
were set up under the Government of India’s Department of
Telecommunication.

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The second phase of telecommunication reforms in India came in the early
nineties. The introduction of the New Economic Policy (NEP) in the year 1991
was a landmark in the history of telecom industry sector in India. The
manufacturing of equipments pertaining to telecom sector was decentralized
and several value added services were introduced into the market. The telecom
services were divided into basic telephony, radio paging and cellular mobile
The TRAI was established an independent regulatory body pertaining to
telecom sector. The growth of the private sector increased.

The third phase of the telecommunication reforms in India took place in the
period of the late nineties. The government of India introduced the New
Telecom Policy 1999. The TRAI was endowed with more power. The concept
of revenue sharing was introduced to replace the fixed license fee. The
National Long Distance was introduced with free entrance. Moreover, there
was introduction of International Long Distance schemes. The Bharat Sanchar
Nigam Limited (BSNL), a corporate body of the telecom service sector was
formed, followed by the introduction of the Internet to the Indian market.

Impact of Telecommunication Reforms in India

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 • The rates of the National Long Distance were cut down by 60%
• The prices of the hand sets and telephone equipments were reduced
• The charges on calls were reduced by 8 times
• The introduction of the cellular mobile phone
• The bandwidth availability was increased

Telecommunication Companies in India

The stupendous growth of the telecommunication companies in India over

the last fifteen years can be attributed to the liberal government of India,
economic policy. The economic renaissance effected in the early 1990s
brought around a paradigm shift on the overall business scenario of India. The
telecommunication companies in India went through a huge make-over during
the implementation of the open-market policy of India. The erstwhile closed
market policy was replaced by a more liberal form of economic policy. A
whole new form of Indian Telecommunication Policy was drafted to
compliment the change effected in the economic policy of India. The
amendment effected the new telecommunication policy of India made huge
changes with respect to investments and entry of Foreign Direct Investments
(FDI) and Foreign Institution Investors (FII) respectively, into the virgin
Indian telecommunication market. This resulted entry of private, domestic and
foreign telecommunication companies in India.

The Telecommunication companies in India

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 • Bharat Sanchar Nigam Limited
• Videsh Sanchar Nigam Limited
• Mahanagar Telephone Nigam Limited
• Bharti Airtel Limited
• Vodafone Essar
• Tata Teleservices
• Spice Telecom
• Idea Cellular
• Sasken Network Engineering Limited
• BPL Mobile Communications Limited

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Introduction to the Company

Bharti Airtel

Incorporated on July 7, 1995, Bharti Airtel Ltd is a division of Bharti

Enterprises.The businesses of Bharti Airtel are structured into two main
strategic groups - Mobility and Infotel. The Mobility business provides GSM
mobile services in all23 telecommunications circles in India, while the Infotel
business group provides telephone services and Internet access over DSL in 15
circles. The company complements its mobile, broadband, and telephone
services with national and international long-distance services. The company
also has a submarine cable landing station at Chennai, which connects the
submarine cable connecting Chennai and Singapore. Bharti Tele-Ventures
provides end-to-end data and enterprise services to corporate customers by
leveraging its nationwide fibre-optic backbone, last mile connectivity in fixed-
line and mobile circles, VSATs, ISPand international bandwidth access
through the gateways and landing station. Allof Bharti Tele-Ventures' services
are provided under the Airtel brand.As of September 2005, Bharti Tele-
Ventures was the only company to providemobile services in all 23 telecom
circles in India.By the end of October 2005, Bharti Tele-Ventures was serving
more than 14.74 million GSM mobile subscribers and 1.10 million broadband
and telephone (fixed line) customers.The equity shares of Bharti Tele-Ventures
are currently listed on the NationalStock Exchange of India Ltd (NSE) and the
Stock Exchange, Mumbai (BSE). As of September 30, 2005, the main
shareholders of Bharti Tele-Ventures were: Bharti Telecom Ltd (45.65%), a
subsidiary of Bharti Enterprises;Singapore Telecom (15.69%), through its
investment division Pastel Ltd; and, Warburg Pincus (5.65%), through its
investment company Brentwood Investment Holdings Ltd). Other shareholders
with more than a 1% stake were: Citi Group Global Markets Mauritius Pvt Ltd
(2.99%); Europacific Growth Fund (2.04%); MorganStanley & Co
International Ltd (1.93%); CLSA Merchant Bankers Ltd A/C Calyon (1.33%);
Life Insurance Corporation of India (1.34%); and, The Growth Fund of
America Inc (1.11%).
Sunil Bharti Mittal, the founder-chairman of Bharti Enterprises (which owns
Airtel), is today, the most celebrated face of the telecom sector in India. He
symbolises the adage that success comes to those who dream big and then
15
work assiduously to deliver it. Sunil Bharti Mittal began his journey
manufacturing spare parts for bicycles in the late 1970s. His strong
entrepreneurial instincts gave him a unique flair for sensing new business
opportunities. In the earlyyears, Bharti established itself as a supplier of basic
telecom equipment. His true calling came in the mid 1990s when the
government opened up the sector and allowed private players to provide
telecom services.Bharti Enterprises accepted every opportunity provided by
this new policy to evolve into India's largest telecommunications company and
one of India's mostrespected brands. Airtel was launched in 1995 in Delhi. In
the ensuing years, as the Airtel network expanded to several parts of India, the
brand came to symbolise the very essence of mobile services.
Product Airtel provides a host of voice and data products and services,
including high- speed GPRS services. Airtel also offers a wide array of
'postpaid' and 'prepaid' mobile offers, with a range of tariff plans that target
different segments. A comprehensive range of value-added, customised
services are part of the unique package from Airtel. The company's products
reflect a desire to constantly innovate. Some of these are reflected in the fact
that Airtel was the first to develop a 'single integrated billing system'

Airtel comes to you from Bharti Airtel Limited - a part of the biggest private
integrated telecom conglomerate, Bharti Enterprises. Bharti is the leading
cellular service provider, with an all India footprint covering all 23 telecom
circles of the country. It has over 21 million satisfied customers. Bharti
Enterprises has been at the forefront of technology and has revolutionized
telecommunications with its world class products and services. Established in
1976, Bharti has been a pioneering force in the telecom sector with many firsts
and innovations to its credit. Bharti has many joint ventures with world leaders
like Singtel (Singapore Telecom); Warburg Pincus, USA; Telia, Sweden;
Asian infrastructure find, Mauritius; International Finance Corporation, USA
and New York Life International, USA. Bharti provides a range of telecom
services, which include Cellular, Basic, Internet and recently introduced
National Long Distance. Bharti also manufactures and exports telephone
terminals and cordless phones. Apart from being the largest manufacturer of
telephone instruments in India, it is also the first company to export its
products to the USA.
Airtel's journey to leadership began in Delhi in 1995. Since then, Airtel has

16
established itself across India in sixteen states covering apopulation of over
600 million people. Airtel will soon cover the entire country through a process
of acquisitions and green field projects. With a presence in
over 1,400 towns, Airtel today has the largest network capacity in the country.
In the last nine years Airtel has achieved many firsts and unique records: it was
the first to launch nationwide roaming operations, it was the first to cross the
one million and the five million customer marks. It was also the first to launch
services overseas.
There are other 'firsts' credited to Airtel - many of them in the area of
innovative products and services. Today, Airtel innovates in almost everything
that it presents to the market. An excellent example is Easy Charge - India's
first paperless electronic recharging facility for prepaid customers. As evidence
of its fine record, Airtel has also been conferred with numerous awards. It won
the prestigious Techies Award for 'being the best cellular services provider' for
four consecutive years between 1997 and 2000 - a record that is still
unmatched. And in 2003, it received the Voice & Data Award for being 'India's
largest cellular service provider', amongst others. As part of its continuing
expansion, Airtel has invested over Rs. 1,065 billion in creating a new telecom
infrastructure. In 2003/04, Bharti Tele-Ventures earned a gross profit of Rs. 16
billion on revenues of Rs. 50 billion.

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The
Bharti Group, has a diverse business portfolio and has created global brands in
the telecommunication sector. Bharti has recently forayed into retail business
as Bharti Retail Pvt. Ltd. under a MoU with Wal-Mart for the cash & carry
business. It has successfully launched an international venture with EL
Rothschild Group to export fresh agri- products exclusively to markets in
Europe and USA and has launched Bharti AXA Life Insurance Company Ltd
under a joint venture with AXA, world leader in financial protection and
wealth management.

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Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and
the first private telecom services provider with a footprint in all the 23 telecom
circles. Bharti Airtel since its inception has been at the forefront of technology
and has steered the course of the telecom sector in the country with its world
class products and services. The businesses at Bharti Airtel have been
structured into three individual strategic business units (SBU’s) - Mobile
Services, Airtel Telemedia Services & Enterprise Services. The mobile
business provides mobile & fixed wireless services using GSM technology
across 23 telecom circles while the Airtel Telemedia Services business offers
broadband & telephone services in 94 cities. The Enterprise services provide
end-to-end telecom solutions to corporate customers and national &
international long distance services to carriers. All these services are provided
under the Airtel brand.

Bharti Airtel is one of India's leading private sector providers of

telecommunications services based on an aggregate of 71.77 million customers
as on June 2008, consisting of 69.38 million GSM mobile customers and 2.39
Bharti Telemedia Customers.

Bharti Airtel Limited, a group company of Bharti Enterprises, is India’s

leading integrated telecom services provider with an aggregate of 71.77
million customers as of end of June 2008, consisting of 69.38 million mobile
customers. Bharti Airtel has been rated among the best performing companies
in the world in the Business Week IT 100 list 2007. Bharti Airtel is structured
into three strategic business units - Mobile services, Telemedia services and
Enterprise services. The mobile business provides mobile & fixed wireless
18
services using GSM technology across 23 telecom circles. The Telemedia
business provides broadband and telephone services in 94 cities and is foraying
into the IPTV and DTH segments. The Enterprise business provides end-to-
end telecom solutions to corporate customers and national and international
long distance services to carriers. All these services are provided under the
Airtel brand. Airtel’s high-speed optic fibre network currently spans over
78,540 kilometers covering all the major cities in the country. The company
has two international landing stations in Chennai that connects two submarine
cable systems - i2i to Singapore and SEA-ME-WE-4 to Europe.

Company shares are listed on The Stock Exchange, Mumbai (BSE) and The
National Stock Exchange of India Limited (NSE).

Vision & Promise :

By 2010 Airtel will be the most admired brand in India :

• Loved by more customers

• Targeted by top talents
• Benchmarked by more businesses

“We at Airtel always think in fresh and innovative ways about the needs of our
customers and

19
how we want them to feel. We deliver what we promise and go out of our way
to delight the
customer witha little bit more”

Quality Policy :

We will deliver error free service to our customer by doing our jobs right
and first time every time.

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Partners :

The company has a strategic alliance with SingTel. The investment made by
SingTel is one of the largest investments made in the world outside Singapore,
in the company.

The company’s mobile network equipment partners include Ericsson and

Nokia. In the case of the broadband and telephone services and enterprise
services (carriers), equipment suppliers include Siemens, Nortel, Corning,
among others. The Company also has an information technology alliance with
IBM for its group-wide information technology requirements and with Nortel
for call center technology requirements. The call center operations for the
mobile services have been outsourced to IBM Daksh, Hinduja TMT, Teletech
& Mphasis.

Airtel was born free, a force unleashed into the market with a relentless and
unwavering determination to succeed. A spirit charged with energy, creativity
and a team driven “to seize the day” with an ambition to become the most
globally admired telecom service. Airtel, after just ten years, has risen to the
pinnacle of achievement.

As India’s leading Telecommunications Company, Airtel brand has played the

role as a major catalyst in India’s reforms, contributing to its economic
resurgence.

21
Today, we touch people’s lives with our Mobile services, Telemedia services,
to connecting India’s leading 1000+corporate. We also connect Indians living
in USA with our call home service.

Corporate Governance

Bharti Airtel Limited firmly believes in the principles of Corporate

Governance and is committed to conduct its business in a manner, which will
ensure sustainable, capital-efficient and long-term growth thereby maximizing
value for its shareholders, customers, employees and society at large.
Company’s policies are in line with Corporate Governance guidelines
prescribed under Listing Agreement/s with Stock Exchanges and the Company
ensures that various disclosures requirements are complied in ‘letter and spirit’
for effective Corporate Governance.

During the financial year 2003-04, your Company was assigned highest
Governance and Value Creation (GVC) rating viz. ‘Level 1’ rating by CRISIL,
which indicates that the company’s capability with respect to creating wealth
for all its stakeholders is the highest, while adopting sound Corporate
Governance practices. This rating was re-affirmed by CRISIL on 20th April
2006.

• Board of Directors
• Audit Committee
• Human Resource (HR)/ Remuneration Committee

22
 • ESOP Compensation Committee
• Investors Grievance Committee
• Memorandum of Association
• Article of Association

Business Divisions

Mobile Services:

Bharti Airtel offers GSM mobile services in all the 23-telecom circles of India
and is the largest mobile service provider in the country, based on the number
of customers.

Enterprise Services (Corporate):

The group focuses on delivering telecommunications services as an integrated

offering including mobile, broadband & telephone, national and international
long distance and data connectivity services to corporate, small and medium
scale enterprises.

23
Airtel Telemedia Services :

The group offers high speed broadband internet with a best in class network.
With Landline services in 94 cities we help you stay in touch with your friends
& family and the world.

Enterprise Services (Carrier Services):

The Company compliments its mobile and broadband & telephone services
with national and international long distance services. It has over 35,016 route
kilometers of optic fibre on its national long distance network. For
international connectivity to east, it has a submarine cable landing station at.
For international connectivity to the west, the Company is a member of the
South East Asia-Middle East-Western Europe – 4 (SEA-ME-WE-4)
consortiums along with 15 other global telecom operators.

Board of Directors :

The board of directors of the Company has an optimum mix of executive and
non-executive directors, which consists of two executive and twelve non-
executive directors. The Chairman and Managing Director,
Mr. Sunil Bharti Mittal, is an Executive Director and the number of
Independent Directors on the Board is 50% of the total board strength. The
independence of a director is determined on the basis that such director does
24
not have any material pecuniary relationship with the Company, its promoters
or its management, which may affect the independence of the judgment of a
Director. The board members possess requisite skills, experience and expertise
required to take decisions, which are in the best interest of the Company.

The composition of the Board is as under:

• Sunil Bharti Mittal

• Rajan Bharti Mittal
• Akhil Gupta
• Rakesh Bharti Mittal
• Chua Sock Koong
• N. Kumar
• Kurt Hellstrom
• Donald Cameron
• Paul O'Sullivan
• Pulak Chandan Prasad
• Bashir Abdulla Currimjee
• Ajay Lal
• Arun Bharat Ram
• Francis Henggm

25
Organization Chart – Bharti Airtel

26
 Awards and Recognitions :
Bharti Airtel has recently won multiple recognitions in the field of
Information Technology including Spamhaus Group‘Whitehat Network
Star’; ‘Security Strategist Award’ and‘Intelligent Enterprise Award‘ at
the Technology Senate2009 and ‘CIO Hall of Fame’
Bharti Airtel has won the CNBC-TV18 India Business Leader Award for
the Outstanding Company of the year, 2007
 Bharti draws top honours at the NDTV Profit Business Leadership
Awards 2007
 Bharti Airtel Ranked 3rd on Shareholder Returns in Business Week IT
100 List
 Sunil Bharti Mittal conferred Degree of Doctor of Science (Honoris
Causa) by G. B. Pant University

27
Highlights :

 Overall customer base crosses 7.17 crore

 Market leader with a market share of all India wireless subscribers at

24.2%

 Bharti Airtel and Pacnet join forces to deliver enhanced connectivity

to and from India

 Bharti Airtel, India’s leading private telecom services provider would

observe a 'Silent Period' from the close of business on June 30, 2008
(Monday), till the declaration of results for the first quarter ended
June 30, 2008, as a commitment towards highest level of corporate
governance.

 Bharti Airtel and Apple to Bring iPhone 3G to India

 Joins hands with IFFCO to usher in the Second Green Revolution to

benefit millions of rural consumers

 Airtel Spells “End of Distance” in India

 ]Financial Year 2008 : Strong Revenue Growth of 46% and ending at
over Rs. 27,000 Crore
28
 Product Profile

Normal Plan

My Plan – 299
249 Delight
Supersaver 399
399 full value
All-in-one 699
1299 pack
2499 pack
125 pack (for government employee)
Corporate plan:

CUG-EMI-249CUG-249 (R1)CUG- 249 AES

CUG Gold- 299
CUG platinum- 399
Toppings Available

Local Mobile pack

Local Airtel pack
Local Landline pack
Night pack
STD pack
Local SMS pack
Local + National SMS pack
International pack

29
 SWOT ANALYSIS :

STRENGTH WEAKNESS

Very focused on
telecom.
Leadership in fast
growing cellular
segment.
Pan-India
footprint.
The only Indian
operator, other
than
VSNL, that has an
international
submarine cable.

OPPORTUNITY

The fast-expanding
IPLC
m
a
r
k
e
t
.
Latest technology
and low cost
advantage.
Huge market.

30
 Price Competition from
BSNL and MTNL
Untapped Rural market

THREATS

Competition from other

cellular and mobile
operaters.
Saturation point in Basic
telephony service

31
 Chapter – 2
Introduction to the Project
Introduction to Working Capital Management

Working Capital Management (WCM) is the management of short-term

financing requirements of a firm. This includes maintaining optimum balance
of working capital components – receivables, inventory and payables – and
using the cash efficiently for day-to-day operations. Optimization of working
capital balance means minimizing the working capital requirements and
realizing maximum possible revenues. Efficient WCM increases firm’s free
cash flow, which in turn increases the firm’s growth opportunities and return to
shareholders. Even though firms traditionally are focused on long term capital
budgeting and capital structure, the recent trend is that many companies across
different industries focus on WCM efficiency. There is much evidence in the
financial literature that present the importance of WCM. Results of empirical
analysis show that there is statistical evidence for a strong relationship between
the firm’s profitability and its WCM efficiency. The Telecommunication
industry is characterized by high intensive working capital requirements and
high competition because of rapid technology changes, which make the WCM
crucial to bring attractive earnings to shareholders. The analysis is done to get
insight into how efficiently WCM is managed in Bharti Airtel Limited is more
inclined to in improving WCM efficiency.

Management of short term assets and short run sources of finance is described
as working capital management. Working capital management is concerned
with all decisions and acts that influence the size and effectiveness of working
capital. The goal of working capital management is to manage each of the
firm’s current assets and current liabilities in such a way that an acceptable
level of working capital is maintained. It is concerned with the determination
of appropriate levels of current assets and their efficient use as well as the
choice of financing mix for raising the current resources.

Proper management of working capital is very important for the success of a

concern. It aims at protecting the purchasing power of assets and maximizing
the return on investment. The manner of management of working capital to a
very large extent determines the success of operations of the concern. Failure
of business is undoubtedly due to poor management of working capital.
Shortage of working capital is so often advanced as the main cause of failure
of an industrial concern.

Working Capital refers to the cash a business requires for day-to-day

operations, or, more specifically, for financing the conversion of raw materials
into finished goods, which the company sells for payment. Among the most
important items of working capital are levels of inventory, debtors and
creditors. These items are looked at for signs of a company’s efficiency and
financial strength.

The better a company manages its working capital, the less the company needs
to borrow. Even companies with cash surpluses need to manage working
capital to ensure that those surpluses are invested in ways that will generate
suitable returns for investors.

Working Capital Management Concepts :

The working capital meets the short-term financial requirements of a business
enterprise. It is the investment required for running day-to-day business. It is
the result of the time lag between the expenditure for the purchase of raw
materials and the collection for the sales of finished products. The components
of working capital are inventories, accounts to be paid to suppliers, and
payments to be received from customers after sales. Financing is needed for
receivables and inventories net of payables. The proportions of these
components in the working capital change from time to time during the trade
cycle. The working capital requirements decide the liquidity and profitability
of a firm and hence affect the financing and investing decisions. Lesser
requirement of working capital leads to less need for financing and less cost of
capital and hence availability of more cash for shareholders. However, the
lesser working capital may lead to lost sales and thus may affect the
profitability. The management of working capital by managing the
proportions of the WCM components is important to the financial health of
businesses from all industries. To reduce accounts receivable, a firm may
have strict collections policies and limited sales credits to its customers. This
would increase cash inflow. However the strict collection policies and lesser
sales credits would lead to lost sales thus reducing the profits. Maximizing
account payables by having longer credits from the suppliers also has the
chance of getting poor quality materials from supplier that would ultimately
affect the profitability. Minimizing inventory may lead to lost sales by stock-
outs. The working capital management should aim at having balanced;
optimal proportions of the WCM components to achieve maximum profits and
cash flow.
Gross Working Capital :

The gross working cycle refers to the length of time between the firms paying
cash for material, etc., entering into the production process / stock and the
inflow of cash from debtors (sales). Some raw materials will be available on
credit but, cash will be paid out for the other part immediately. Then it has to
pay labour costs and incurs factory overheads. These three combined together
will constitute work-in-progress. After the production cycle is complete,
work-in-progress will get converted into finished products. The finished
products when sold on credit into sundry debtors. Sundry debtors will be
realized in cash after the expiry of credit period. This cash can again be used
for financing raw materials, work-in-progress, etc. Thus there is a complete
cycle from cash to cash wherein cash get converted into raw materials, work-
in-progress, finished goods, debtors, and finally into cash again. This cycle is
also known as Operating Cycle.
The determination of working capital cycle helps in the forecast, control and
management of working capital. It indicates the total time lag and the relative
significance of its constituent parts.

the operating cycle consists of the following event which continues throughout
the life of business.

 Conversion of cash into raw materials;

 Conversion of raw materials into work-in-progress;
 Conversion of work-in-progress into finished stock;
 Conversion of finished stock into accounts receivables through sales;
and
 Conversion of accounts receivables into cash
Working Capital of Bharti Airtel Limited has been analysed by using
Ratio Analysis :

Meaning of Ratio :

A Ratio is a simple arithmetical expression of the relationship of one number

to another.

Definition :

According to Accountants Handbook of Wixon, Kell & BedFord, “Ratio

Analysis is the expression of the quantitative relationship between two
numbers”

Use & Significance of Ratio Analysis :

The ratio analysis is one of the most powerful tools of financial analysis. It is
used as a device to analyse and interpret the financial health of the enterprise.

(A) Management use of Ratio Analysis

 Helps in Decision making

 Helps in Financial forecast and planning
  Helps in Communicating
 Helps in Co-ordination
 Helps in Control

(B) Utility to share holders and investors

(C) Utility to Creditors
(D) Utility to Employees
(E) Utility to Government
Chapter – 3
Project Profile
 Project Topic :

“AN ANALYSIS ON WORKING CAPITAL MANAGEMENT &

RATIOS

Objectives & Scope of the study

• To study the working capital of Bharti Airtel Limited

Secondary Objective :

• To find out the size of working capital and to measure its liquidity and
operational efficiency by using ratio analysis

• To make an element wise analysis of working capital and to identify the

elements responsible for variations in working capital

• To evaluate the performance of the company through Net Assets,

inventory, Receivables and cash management

• To analyze the relationship existing between liquidity and profitability

Methodology and Procedure of Work

The project work was carried on along with the expert guidance from
company’s Finance Team and Legal & Regulatory Team, while collecting &
collating the information & models in the endeavor of preparing the project.

The source of information is purely from Secondary Data, fetched out from
sites like – Google, Airtel.in & other Finance management publications.

Micro-soft application is used extensively for entire project work. Spread sheet
in MS-Excel used to compute Comparative Statements & Working Capital
Analysis. And Flow charts, Line Diagrams were computed for graphical
presentation to give a feel of comprehensive understanding in the project. MS-
Word used to draft the entire project, placing Tables & Diagram wherever
necessary in describing.

Key insights on the back ground of evolution of Tele-communication & the

telecommunication Industry in India were fetched from “Google”, “the
information searching engine”. And about the company (Bharti Airtel Ltd),
the latest information and abstracts were derived & used as source for
preparing the project. These were indeed easy if search options were applied
accurately, to fetch from the internet & intranet tool while preparing the
introduction to the project. However, the data on figures for the last three
years from the annual reports of the company were meticulously derived for
computing various ratios & interpreting the results with the guidance from the
Finance Managers, were the key time consumer apart from giving the project
“The conclusion”.

The secondary data which was to an extent easily available had a very good
influence on my project in terms of getting the relevant data & information in
time. And Secondly, it gave me immense opportunity & pleasure to explore the
content in understanding the subject matter in context to my academics.
Despite of the heavy work load & audit schedules, the finance & legal
personnel’s were able to manage with their time to cooperate with me in
various clarifications & fact establishments in the accomplishment of the
project.
 Chapter – 4
Limitation of the study
Limitations of the study

Following limitations were encountered while preparing this project:

1) Limited data:-
This project has completed with annual reports; it just constitutes one part
ofdata collection i.e. secondary. There were limitations for primary
datacollection because of confidentiality.

2) Limited period:-
This project is based on five year annual reports. Conclusions
andrecommendations are based on such limited data. The trend of last five
yearmay or may not reflect the real working capital position of the company

3) Limited area:-
Also it was difficult to collect the data regarding the competitors and their
financial information. Industry figures were also difficult to get.
 Chapter – 5
DataAnalysis & Interpretation
Comparison of Balance Sheet
Any financial statement that reports the comparisons of data of two are more
consecutive accounting periods is known as “Comparative Financial
Statement”. According to A.F.Foulke “Comparative financial statement are
statements of the financial position of the business so designed as to provide
time prospective to the consideration of various elements of financial position
embodied in such statements”. Such a statement spotlights trends and
establishes relationship between items that appear on the same row of a
comparative balance sheet. It discloses changes in items on financial
statements over time in both rupees and percentage form. Each item on a row
for one fiscal period is compared with same item in a different period.

Comparative Balance sheet of Bharti Airtel Limited for the year ended
2005 - 2006

Increase / Increase /
Particulars 005 (Rs. In ' 000 ) 2006 (Rs. In ' (Decrease) (Rs. In Decrease in
000 ) '000) %
Assets
Current Assets :
Inventories 315,838 177,444 (138,394) (43.82)
Sundry Debtors 7,157,443 10,761,709 3,604,266 50.36
Cash & Bank Balances 3,841,352 3,074,285 (767,067) (19.97)
Loans & Advances 10,676,095 15,529,497 4,853,402 45.46
Total (A) 21,990,728 29,542,935 7,552,207 34.34
Fixed Assets 107,594,459 153,481,269 45,886,810 42.65
Investments 9,318,953 7,196,981 (2,121,972) (22.77)
Miscellaneous 583,483 79,400 (504,083) (86.39)
Expenses
Profit and Loss 7,864,333 - (7,864,333) (100.00)
Account
Total (B) 125,361,228 160,757,650 35,396,422 28.24
Grand Total (A + B) 147,351,956 190,300,585 42,948,629 29.15
Liabilities
Current Liabilities :
Current Liabilities 42,079,834 64,655,783 22,575,949 53.65
Provisions 1,119,910 2,335,851 1,215,941 108.57
Total (C) 43,199,744 66,991,634 23,791,890 55.07
Long Term Liabilities :
Share Capital 18,560,889 18,938,793 377,904 2.04
Reserve & Surplus 34,639,403 54,395,531 19,756,128 57.03
Secured Loans 39,598,760 28,633,707 (10,965,053) (27.69)
Unsecured Loans 10,344,149 19,329,201 8,985,052 86.86
Deferred Payments 1,009,011 1,890,459 881,448 87.36
Employee - 121,260 121,260 100.00
Compensation
Total (D) 104,152,212 123,308,951 19,156,739 18.39
Grand Total (C + D) 147,351,956 190,300,585 42,948,629 29.15
Interpretation :

The analysis of the above comparative Balance sheet reveals that the monetary
balance in each account has increased between 2005 – 2006, with exception of
inventories, cash & bank balance, investment. The significant changes which
have occurred in specific balance account during the two years are :

 There is 50.36 % increase in sundry debtors, 45.46 % increase in loans

and advances, 43.82 % decrease in inventories, 19.97 % decease in cash
& bank balance.

 There is 34.34 % increase in current assets and subsequently there is also

55.07 % increase in current liabilities. This change has affected the
liquidity of the company.

 There has been increase in share capital and reserve & surplus by 2.04 %
and 57.03 % respectively. This is might due to fresh issue of shares &
retained earnings.
 Comparative Balance sheet of Bharti Airtel Limited for the year ended
2006 - 2007

Increase
Increase / Decrease (Rs. /
Particulars 2006 (Rs. In ' 000 ) 2007 (Rs. In ' 000 )
In '000) Decrease
in %
Assets
Current Assets :
Inventories 177,444 478,145 300,701 169
.46
Sundry Debtors 10,761,709 14,185,170 3,423,461 31
.81
Cash & Bank Balances 3,074,285 7,804,605 4,730,320 153
.87
Loans & Advances 15,529,497 21,986,846 6,457,349 41
.58
Total (A) 29,542,935 44,454,766 14,911,831 50.
48
Fixed Assets 153,481,269 216,814,497 63,333,228 41
.26
Investments 7,196,981 7,058,179 (138,802) (1.
93)
Miscellaneous Expenses 79,400 26,630 (52,770) (66.
46)
Profit & Loss a/c
Total (B) 160,757,650 223,899,306 63,141,656 39.
28
Grand Total (A + B) 190,300,585 268,354,072 78,053,487 41
.02
Liabilities
Current Liabilities :
Current Liabilities 64,655,783 94,294,231 29,638,448 45
.84
Provisions 2,335,851 4,152,480 1,816,629 77
.77
Total (C) 66,991,634 98,446,711 31,455,077 46.
95
Long Term Liabilities :
Share Capital 18,938,793 18,959,342 20,549 0
.11
Reserve & Surplus 54,395,531 95,173,342 40,777,811 74
.97
Secured Loans 28,633,707 2,664,475 (25,969,232) (90.
69)
Unsecured Loans 19,329,201 50,443,577 31,114,376 160
.97
Deferred Payments 1,890,459 2,366,621 476,162 25
.19
Employee Compensation 121,260 300,004 178,744 147
.41
Total (D) 123,308,951 169,907,361 46,598,410 37.
79
Grand Total (C + D) 190,300,585 268,354,072 78,053,487 41
.02
Interpretation :

The analysis of the above comparative Balance sheet reveals that the monetary
balance in each account has increased between 2006 – 2006, with exception of
inventories, cash & bank balance, investment. The significant changes which
have occurred in specific balance account during the two years are :

 There is 169.46 % increase in inventories, 74. 07 % increase in sundry

debtors, 153.87 % increase in Cash & Bank balance. It is observed
during the study period, some portion of the inventory is capitalized
for internal use

 There is Parallel increase in both Current Asset & Current Liabilities

respectively to 50.47 % & 49.96 %

 There has been a marginal increase in share capital by 0.11 % and

increase in reserve & surplus by 74.96 %. The secured loans have
decreased by 90.69%. However, there is sharp increase of 160.97% of
Unsecured Loans. There is shift in the approach by the company for
deriving funds from the financial market, observed in the study.

 There is increase of 147.41% in Employee compensation. This is due

to additional ESOPs outstanding
 Comparative Balance sheet of Bharti Airtel Limited for the year ended
2007 - 2008

Increase /
Particulars 2007 (Rs. In ' 000 ) 2008 (Rs. In ' 000 ) Increase / (Decrease) Decrease
(Rs. In '000) in %

Assets
Current Assets :
Inventories 478,145 568,607 90,462 18
.92
Sundry Debtors 18,732,958 27,764,572 9,031,614 48
.21
Cash & Bank Balances 7,804,605 5,029,390 (2,775,215) (35.
56)
Loans & Advances 17,439,058 29,147,541 11,708,483 67
.14
Total (A) 44,454,766 62,510,110 18,055,344 40.
62
Fixed Assets 216,814,497 217,817,263 1,002,766 0
.46
Investments 7,058,179 109,528,528 102,470,349 1,451
.80
Miscellaneous Expenses 26,630 2,034 (24,596) (92.
36)
Total (B) 223,899,306 327,347,825 103,448,519 46.
20
Grand Total (A + B) 268,354,072 389,857,935 121,503,863 45
.28
Liabilities
Current Liabilities :
Current Liabilities 94,294,231 119,002,139 24,707,908 26
.20
Provisions 4,152,480 2,098,762 (2,053,718) (49.
46)
Total (C) 98,446,711 121,100,901 22,654,190 23.
01
Long Term Liabilities :
Share Capital 18,959,342 18,979,074 19,732 0
.10
Reserve & Surplus 95,173,342 182,859,525 87,686,183 92
.13
Secured Loans 2,664,475 524,244 (2,140,231) (80.
32)
Unsecured Loans 50,443,577 65,179,172 14,735,595 29
.21
Deferred Payments 2,366,621 638,684 (1,727,937) (73.0
1)
Employee Compensation 300,004 576,335 276,331 92
.11
Total (D) 169,907,361 268,757,034 98,849,673 58.
18
Grand Total (C + D) 268,354,072 389,857,935 121,503,863 45
.28
CHANGES IN WORKING CAPITAL

There are so many reasons to changes in working capital as follow

1. Changes in sales and operating expanses:- The changes in sales and

operating expanses may be due to three reasons

a. There may be long run trend of change e.g.The price of row material say
oil may constantly raise necessity the holding of large inventory.

b. Cyclical changes in economy dealing to ups and downs in business

activity will influence the level of working capital both permanent and
temporary

c. Changes in seasonality in sales activities

4. Policy changes:- The second major case of changes in the level of working
capital is because of policy changes initiated by management. The term current
assets policy may be defined as the relationship between current assets and
sales volume.

5. Technology changes:- The third major point if changes in working capital

are changes in technology because change sin technology to install that
technology in our business more working capital is required A change in
operating expanses rise or full will have similar effects on the levels of
working following working capital statement is prepared on the base of
balance sheet of last two year
 Schedule of changes in working capital for the year ended
2005 - 2006

Effects in Working Capital

2005 (Rs. In ' 2006 (Rs. In '
Particulars Increase Decrease
000 ) 000 )
(Rs. In '000) (Rs. In '000)
Current Assets :
315,83 138,
Inventories 8 177,444 394
7,157,44 3,604,2
Sundry Debtors 3 10,761,709 66
3,841,35 767,
Cash & Bank Balance 2 3,074,285 067
10,676,09 4,853,4
Loans & Advances 5 15,529,497 02
21,990,72 8,457,6 905,
Total (A) 8 29,542,935 68 461
Current Liabilities :
Sundry Creditors & 42,079,83 22,575,
Other Current Liabilities 4 64,655,783 949
1,119,91 1,215,
Provisions 0 2,335,851 941
43,199,74 - 23,791,
Total (B) 4 66,991,634 890
(21,209,01 (37,448,69 8,457,6 24,697,
Grand total ( A+B) 6) 9) 68 351
(Increase) / Decrease in 16,239,6
Working Capital 16,239,683 83
(21,209,01 (21,209,01 24,697,3 24,697,
6) 6) 51 351

Interpretation

The working capital has substantially iincreased in 2006. The decreased in

current assets is greater than current liabilities. This is due to strategic
partnership with Ericsson. This could be one of the main reasons why the
working capital reflects adverse
Schedule of changes in working capital for the year ended
2006 - 2007

Effects in Working Capital

2006 (Rs. In ' 2007 (Rs. In '
Particulars Increase Decrease
000 ) 000 )
(Rs. In '000) (Rs. In '000)
Current Assets :
Inventories 177,44 300,7
4 478,14 01
5
Sundry Debtors 10,761,70 3,423,4
9 14,185,17 61
0
Cash & Bank Balance 3,074,28 4,730,3
5 7,804,60 20
5
Loans & Advances 15,529,49 6,457,3
7 21,986,84 49
6
Total (A) 29,542,93 14,911,8
5 44,454,766 31 -
Current Liabilities :
Sundry Creditors & 64,655,78 29,638,4
Other Current Liabilities 3 94,294,231 48
Provisions 2,335,85 1,816,6
1 4,152,480 29
Total (B) 66,991,63 - 31,455,0
4 98,446,711 77
Grand total ( A+B) (37,448,69 (53,991,94 14,911,8 31,455,0
9) 5) 31 77
(Increase) / Decrease in 16,543,2
Working Capital 16,543,246 46
(37,448,69 (37,448,69 31,455,0 31,455,0
9) 9) 77 77

Interpretation :
The Current Asset is partially increased compared to the previous year.
However, the Current Liability is substantially higher than the current year’s
Current Asset. This resulted in considerable amount of decrease in working
capital. This is due to strategic partnership with Ericsson. This could be one of
the main reasons why the working capital reflects adverse.
 Schedule of changes in working capital for the year ended
2007 - 2008

Particulars 2007 (Rs. In ' 000 ) 2008 (Rs. In ' Effects in Working Capital
000 )
Increase Decrease
(Rs. In '000) (Rs. In '000)
Current Assets :
90,4
Inventories 478,14 568,60 62
5 7
9,031,6
Sundry Debtors 18,732,95 27,764,57 14
8 2
2,775,
Cash & Bank Balance 7,804,60 5,029,39 215
5 0
11,708,4
Loans & Advances 17,439,05 29,147,54 83
8 1
20,830, 2,775,2
Total (A) 44,454,76 62,510,110 559 15
6
Current Liabilities :
Sundry Creditors & Other 24,707,
Current Liabilities 94,294,23 119,002,139 908
1
2,053,7
Provisions 4,152,48 2,098,762 18 -
0
2,053, 24,707,9
Total (B) 98,446,71 121,100,901 718 08
1
(53,991,94 (58,590,79 22,884,2 27,483,
Grand total ( A+B) 5) 1) 77 123
(Increase) / Decrease in 4,598,8
Working Cpaital 4,598,846 46
(53,991,94 (53,991,94 27,483,1 27,483,
5) 5) 23 123

36
Interpretation :

The Current Asset has increased compared to the previous year. However, the
Current Liability is substantially higher than the current year’s Current Asset.
This resulted in considerable amount of decrease in working capital. This is
due to strategic partnership with Ericsson. This could be one of the main
reasons why the working capital reflects adverse.

RATIO ANALYSIS
37
Introduction

Ratio analysis is the powerful tool of financial statements analysis. A ratio is

define as the indicated quotient of two mathematical expressions and as the
relationship between two or more things. The absolute figures reported in the
financial statement do not provide meaningful understanding of the
performance and financial position of the firm. Ratio helps to summaries
largequantities of financial data and to make qualitative judgment of the firms
financial performance

Role of ratio analysis

Ratio analysis helps to appraise the firms in the term of there profitability
andefficiency of performance, either individually or in relation to other firms
insame industry. Ratio analysis is one of the best possible techniques available
tomanagement to impart the basic functions like planning and control. As
futureis closely related to the immediately past, ratio calculated on the basis
historicalfinancial data may be of good assistance to predict the future. E.g. On
the basisof inventory turnover ratio or debtor s turnover ratio in the past, the
level ofinventory and debtors can be easily ascertained for any given amount
of sales.Similarly, the ratio analysis may be able to locate the point out the
various ariaswhich need the management attention in order to improve the
situation. E.g.Current ratio which shows a constant decline trend may be
indicate the need forfurther introduction of long term finance in order to
increase the liquidityposition. As the ratio analysis is concerned with all the
aspect of the firmsfinancial analysis liquidity, solvency, activity, profitability
and overallperformance, it enables the interested persons to know the financial
andoperational characteristics of an organization and take suitable decision

Current Ratio :
38
Current Ratio is the indicator of the firm’s commitment to meet its short-term
liability. Current Assets mean assets that will either be used up or converted
into cash within a year’s time. Current liabilities mean liabilities payable
within a year or during the operating cycle, which ever is longer.

Year Ratio (Times)

2008 0. 57

2009 0. 69

2010 0. 72

Interpretation :

There is no hard or fast rule, conventionally, a current ratio of 2:1 (current

assets twice the current liabilities) is considered satisfactory. The logic
underlying the convention rule is that even with a dropout of 50% in value of
current assets a firm can meet its obligations, i.e., 50% margin of safety is
assumed to be sufficient to ward off the worst situation.

39
Generally the levels of current ratio vary from industry to industry depending
on specific industry characteristics. Also firm differs from the industry ratio
because of its policy.

In Bharti Airtel Limited, the current ratio is 0. 72 times i.e,, the current asset is
less than current liabilities. The current liability is high because of sundry
creditors. This is due to strategic partner.

Chart showing the Current Ratio of Bharti Airtel Limited for the year
ended 2008 – 20010

Current Ratio

1.00
0.95
0.90
0.85
Ratio (Times)

0.80
0.75 0.69
0.72
0.70
0.65
0.60
0.57
0.55
0.50
2008 2009 2010
Years

40
Quick Ratio :

The Quick ratio is also termed as “Acid-Test Ratio”. This ratio is ascertained
by comparing the liquid assets (i.e., assets which are immediately convertible
in to cash without much loss) to current liabilities. Prepaid expenses and stock
are not taken as liquid assets. This may be expressed as:

Liquid Assets
Quick Ratio = ---------------------------------
Current Liabilities

Year Ratio (Times)

2008 0. 55

2009 0. 65

2010 0. 72

Interpretation :
Generally Quick Ratio of 1:1 is considered satisfactory as a firm can easily
meet all current claims. It vary from industry to industry depending on
specific industry characteristics. Also differ from the industry ratio because of
its policy.In Bharti Airtel Limited, the Quick Ratio is below the standard no of
1:1 in all the years during the period of study (2008 – 2010). It is because of
strategic partnership with Ericsson.

41
Chart showing the Quick Ratio of Bharti Airtel Limited for the year
ended 2008 – 2010

Quick Ratio
0.80

0.75
0.72
0.70
0.65
Ratio (Times)

0.65

0.60

0.55 0.55

0.50

0.45

0.40
2008 2009 2010
Years

42
Gross Profit Ratio :

These ratios express the relationship between gross profit and net sales.

Gross Profit = Sales – Cost of goods sold (Including Operating Expenses) –

Depreciation – Amortization

Gross Profit
Gross Profit Ratio = ----------------------------- X 100
Net Sales

Year 2008 2009 2010

Percentage
29.08 29.33 27.97
( %)

Interpretation :

43
In interpreting the gross profit ratio at is important to observe any trend, but in
making comparison between companies at is vital to appreciate that the gross
profit ratio varies considerably from industry to industry. In telecom Gross
profit is very high considering Low operating cost and high depreciation on
capex led by them. Gross profit of 45-50% is highest among all the industries.

In Bharti Airtel, the Gross Profit Ratio is high during the year 2008 and low
during the year 2010. As major expense is towards depreciation which is fixed
cost. Company will loss more with decrease in business. It is visible from
above trend. Gross Profit ratio will increase with increase in business due to
benefit of scale.

In interpreting the gross profit ratio at is important to observe any trend, but in
making comparison between companies at is vital to appreciate that the gross
profit ratio varies considerably from industry to industry. In telecom Gross
profit is very high considering Low operating cost and high depreciation on
capex led by them. Gross profit of 45-50% is highest among all the industries.

In Bharti Airtel, the Gross Profit Ratio is high during the year 2008 and low
during the year 2010. As major expense is towards depreciation which is fixed
cost. Company will loss more with decrease in business. It is visible from
above trend. Gross Profit ratio will increase with increase in business due to
benefit of scale.

44
Chart showing the Gross Profit Ratio of Bharti Airtel Limited for the year
ended 2008– 2010

Gross Profit Ratio

35
2008 2009 2010
34

33

32
Percentage ( % )

31

30 29.33
29.08
29

28 27.97
27

26

25
Years

45
Net Profit Ratio :

This ratio helps in determining the efficiency with which affairs of the business
are being managed. An increase in ratio over previous period indicates
improvement in the operational efficiency of the business provided the gross
profit ratio is constant.

Net Profit after tax

Net Profit Ratio = ----------------------------- X 100
Net Sales

Year 2008 2009 2010

Percentage
23.99 22.58 26.40
( %)

Interpretation :

In interpreting the Net Profit Ratio at is important to bear in mind that such
ratio varies from firm to firm. When we compare the gross and the net profit
margins we can gain a good impression of their non-production and non-direct
costs such as administration, marketing and finance costs. The Net Profit

46
Ratio provides clear picture of how efficiently the firm maintains control over
its total expenses.

The Net Profit Ratio of Bharti Airtel Limited is high during the year 2010 &
low during the year 2008. The net profit ratio has gone up to 26.40% in 2010
compared to 2008 & 2009, respectively. It indicates the efficiency of the
management in increasing the profit. As mentioned above the benfit is for
increase in scale of business. Fixed cost will get observed over more revenue
hence there will be increase in Net profit ration with increase in revenue

47
Chart showing the Net Profit Ratio of Bharti Airtel Limited for the year
ended 2008 – 2010

Net Profit Ratio

30

27 26.40

23.99
Percentage ( % )

24
22.58

21

18

15
2008 2009 2010
Years

48
Operating Ratio :

This ratio is complementary of Net Profit Ratio. In case Net Profit is 20 %, it

means Operating Ratio is 80 %.

Cost of goods sold + Operating Expenses

Operating Ratio = --------------------------------------------------------------------- X 100
Net Sales

Year 2008 2009 2010

Percentage
41.37 38.74 38.89
( %)

Interpretation :

Operating Ratio monitor the various expenses incurred related to sales. A high
operating ratio would indicate low profitability, while a low ratio is a

49
indication for high profitability. The Operating Ratio should be low to leave a
portion of sales to give fair return to the investors.

Note: The smaller the ratio, the greater the organization's ability to generate
profit if revenues decrease. When using this ratio, however, investors should
be aware that it doesn't take into account debt repayment or expansion

Bharti Airtel Limited has 60 % margin on operating expenses. The Operating

Ratio is 41.37 % in 2008 which is less than the margin. This shows the Airtel
has well managed the operating cost.

50
 Chart showing the Operating Ratio of Bharti Airtel Limited for the year
ended 2008– 2010

Operating Ratio

49

47

45
Percentage ( % )

43
41.37

41 38.74

39 38.89

37

35
2008 2009 2010
Years

51
Debtor Turnover Ratio :

Debtors constitute an important constituent of current assets and therefore the

quality of debtors to a great extent determines a firm’s liquidity. Debt
collection period indicates the extent to which the debts have been collected in
time. It gives the average debt collection period.

Sales
Debtor Turnover Ratio = --------------------------------------
Closing Debtors

Year 2008 2009 2010

Ratio ( Times ) 12.28 12. 78 15.73

Interpretation :

Receivable Turnover Ratio which indicates the number of times that the
average outstanding net receivables is turned over, or converted into cash
through collections during the year. Receivables turnover is the period
required for one complete cycle; from the time receivables are recorded
through collection, to the time new receivables are recorded. On the other
hand, a longer credit period granted to creditors would adversely effect the
firm’s liquidity position.

52
The debtor turnover ratio has increased in all the years during the period under
study. Though it has increased, still with the growth in the business &
receivables, it indicates that the company’s strength in debtor management.
The operation of debtors is through channel partners in postpaid. The debtor is
zero in prepaid operation because they are paid through demand draft. The
operation of prepaid is through Distributors – Retailers – Customers.

Chart showing the Debtors Turnover Ratio of Bharti Airtel Limited for the year
ended 2008 – 20010

Debtors Turnover Ratio

18

16 15.73
Ratio ( Times )

14
12.78
12.28
12

10

8
2008 2009 2010
Years

53
Inventory Turnover Ratio :

This ratio is also known as stock turnover ratio establishes the relation between
the cost of goods sold during the year and average inventory held during the
year. It calculates as follows :

Cost of goods sold

Inventory Turnover Ratio = ---------------------------------------

Year 2008 2009 2010

Ratio ( Times ) 453.06 547.83 1307.05

Average Inventory

Interpretation :

The liquidity of inventories is measured by the number of times per year that
inventory is converted into cost of goods sold. Hence it is a device to measure
the efficiency of the inventory management. Inventory turnover ratio rates
vary tremendously by the nature of the business.

54
In Bharti Airtel Limited, average inventory holding period is one day. In
telecom inventory will only include sim inventory wich will be nominal in
comparision to revenue. . Capex inventory will be grouped under fixed assets.
Inventory analysis clearly indicates the trend

Chart showing the Inventory Turnover Ratio of Bharti Airtel Limited for the year
ended 2008 – 2010

Inventory Turnover Ratio

1400
1307.05
1200
Ratio ( Times )

1000

800

600 547.83
453.06

400
2008 2009 2010
Years

55
Fixed Assets Turnover Ratio :

A high fixed assets turnover ratio indicates efficient utilization of fixed assets
in generating sales. A firm whose plant and machinery are old may show
higher fixed assets turnover ratio than the firm which has purchased them
recently.

Sales
Fixed Assets Turnover Ratio = ---------------------------
Net Fixed Asset

Year 2008 2009 2010

Ratio ( Times ) 1.03 1.00 0.81

Interpretation :
This ratio measures the efficiency in utilization of fixed assets. The ratio of
sales to fixed assets measures the turnover of plant and machinery. A high
fixed assets turnover ratio indicates efficient utilization of fixed assets in
generating sales.
There has been constant decrease in fixed assets turnover ratio of Bharti Airtel
Limited though absolute figure of sales have down up. There is an decrease
year after year. In 2010, it has increased by 19 %. The sales include the capital
work in not progress. It means decrease in the investment in fixed assets has
brought about commensurate loss.

56
Chart showing the Fixed Assets Turnover Ratio of Bharti Airtel Limited for the year
ended 2008 – 2010

Fixed Assets Turnover Ratio

1.40

1.30

1.20
Ratio ( Times )

1.10
1.03
1.00
1.00

0.90

0.81
0.80
2008 2009 2010
Years

57
Debt Equity Ratio :

The Debt Equity Ratio is determined to ascertain the soundness of the long term financial policies of the
company. It is also known as “External – Internal” Equity Ratio. It may be calculated as follows :

External Equity
Debt Equity Ratio = ------------------------------------
Shareholders Fund

Year 2008 2009 2010

Ratio ( Times ) 0.33 0.28 0.14

Interpretation :

Either too high or too low a ratio may be disadvantageous. Too high suggests
that management is not taking advantages of opportunities to maximize its
profit through borrowings. Too low suggests undue exposure to risks of
bankruptcy and to a fixed burden of interest expenses in the event of period of
relatively low profit. As a rule of thumb, debt equity ratio of less than 1 is
taken as acceptable, but this is not based on any scientific analysis.

58
In Bharti Airtel Limited, the Debt Equity Ratio is almost close to 1 which is
good for company. The debt is 0.92 times in total equity. The management
has taken advantage of the opportunities to maximize profit through
borrowings.

59
Chart showing the Debt Equity Ratio of Bharti Airtel Limited for the year
ended 2008 – 2010

Debt Equity Ratio

0.50

0.45

0.40
Ratio (Times)

0.35
0.33

0.30
0.28
2008 2009 2010
0.25

0.20

0.15 0.14

0.10
Years

60
Earnings Per Share :

The profitability of the firm from the point of view of ordinary shareholders
can be measured in terms of number of equity shares. This is known as
Earnings Per Share. It is calculated as follows :

Net Profit after Tax

Earnings Per Share = -----------------------------------------------
No. of Equity Shares outstanding

Year 2008 2009 2010

Earnings Per Share

32.90 40.79 24.82
(Amount in Rs.)

Interpretation :

This is well known and widely used indicator of profitability because it can
easily be compared to the previous EPS figure. The earnings per share
represent average amount of net income earned by single equity share.
Earnings per share are generally considered to be the single most important

61
variable in determining a share's price. It is also a major component of the
price-to-earnings valuation ratio.

The Earnings Per Share of Bharti Airtel Limited is has been consistently
increasing in 2009and it decreased in 2010. This shows the equity share
capital is being effectively used in 2009 but not in 2010. This is also getting
impacted with No-dividend policy of Bharti. Bharti has never declared
dividend so share holder is npt getting benefited with the decresation in EPS.

62
Chart showing the Earnings Per Share of Bharti Airtel Limited for the year
ended 2008 – 20010

Earnings Per Share

45

40.79
40
Amount (In Rs)

35
32.90

30

25 24.82

20
2008 2009 2010
Years

63
 Chapter – 6
Findings & Recommendation

64
Findings :-
 Gross Working Capital of the company shows increasing trend during
the period of study.

 Net Working Capital of the company shows in negatively increasing

trend. This is because the Working capital is funded from Long-Term
Fund. This is because of the strategic partnership policy with Ericsson.
Atleast 98% of the Current Liability is from Ericsson as most of the
funds are utilized for Network Expansion (Capex) which involves
Installations of MSC, BTS, cables & various connectivity related
expenses. And the Partner is paid accordingly as per the business
agreement.

 Working Capital Turnover Ratio of the company shows the decreasing

trend, because the sundry creditors in current liabilities are high. This is
due to commitment or strategic partnership with Ericsson.

 It was observed from the analysis that the largest average share in
working capital was sundry debtors. Due to credit given to subscribers
for 1 month.

 The share of loans and advances in working capital was 67. 14% in 2008
and it is responsible for variations in working capital of different years
under the period of study.

65
  The overall performance of the company regarding inventory
management is progressive in terms of utilization of inventories during
the period of study.

Findings in Ratios :-
 the current ratio is 0. 72 times i.e,, the current asset is less than current
liabilities. The current liability is high because of sundry creditors.

 Quick Ratio of 1:1 is considered satisfactory as a firm can easily meet all
current claims. It vary from industry to industry depending on specific
industry characteristics. Also differ from the industry ratio because of its
policy.In Bharti Airtel Limited, the Quick Ratio is below the standard no
of 1:1 in all the years during the period of study (2008 – 2010).

 The Net Profit Ratio of Bharti Airtel Limited is high during the year
2010 & low during the year 2008. The net profit ratio has gone up to
26.40% in 2010 compared to 2008 & 2009, respectively. It indicates the
efficiency of the management in increasing the profit. As mentioned
above the benfit is for increase in scale of business.

 The debtor turnover ratio has increased in all the years during the period
under study. Though it has increased, still with the growth in the
business & receivables, it indicates that the company’s strength in debtor
management. The operation of debtors is through channel partners in
postpaid.
66
  There has been constant decrease in fixed assets turnover ratio of Bharti
Airtel Limited though absolute figure of sales have down up. There is an
decrease year after year. In 2010, it has increased by 19 %. The sales
include the capital work in not progress. It means decrease in the
investment in fixed assets has brought about commensurate loss.

 the Debt Equity Ratio is almost close to 1 which is good for company.
The debt is 0.92 times in total equity. The management has taken
advantage of the opportunities to maximize profit through borrowings.

 The Earnings Per Share of Bharti Airtel Limited is has been consistently
increasing in 2009and it decreased in 2010. This shows the equity share
capital is being effectively used in 2009 but not in 2010.

67
Recommendations :

 Since most of the working capital is sourced through Long-Term Fund,

especially in most of the scenario the credit being extended from
Strategic Partner, Ericsson, the resources & utilization of them needs to
be met optimistically to increase Gross Profit margin.

 Company is working with negative working capital. This is very risky. In

the persent secenario as business is increasing at very fast pace there is
no problem in metting the short term liabilities. But this will be riskier in
case where company will not be able to increase revenue significately. It
also shows risk taking ability of company.

 Cash and Bank balance of the company is low and it is advisable for the
company that it should maintain a minimum balance to meet their day to
day capex and opex needs.

 The company has collected the debt promptly. However, more credit &
collection measures need to be taken to improve the average collection
period which is reflecting in 2008.

 The company has not given any dividend to share holder since listing
over stock exchange. Till the time company is able to provide good
increase in EPS and revenue its viable.

68
  Company should raise funds through short term sources for short
termrequirement of funds, which comparatively economical as compare
tolong term funds.

Company should take control on debtors collection period which is

major part of current assets.

 Company has to take control on cash balance because cash is non

earning assets and increasing cost of funds.
 Company should reduce the inventory holding period with use of zero
inventory concepts.
Over all company has good liquidity position and sufficient funds to
repaymentof liabilities. Company has accepted conservative financial policy
and thus maintaining more current assets balance. Company is increasing sales
volume per year which supported to company for sustain 2nd position in th

69
70
 Chapter - 7
Conclusion & Suggestions

71
Working capital is a capital required to manage day to day operations of the
business. Management of adequate working capital is essential as it has direct
impact on profitability and liquidity.

The entire Working Capital structure in this study has different dimension.
That is, as studied in this topic, the Net working capital is increasing in the
negative trend though there is enough of profit generated & capital employed.
This is because of the partnership with Strategic Partner (Ericsson/Nokia).
Payment to strategic partner is based on revenue generated and 98% of current
liability is pertains to them. So there is no major threat visible on day to day
operation of company.

The performance of the company during the period under study was
encouraging. Sundry debtors are the major components of current assets in
determining the size of working capital. The company was managing its
receivables satisfactorily as there was no heavy locking of funds in receivables.
Company is utilizing fund flow to meet its capex need and day to day
deployement of network. As this is directly linked to generation of revenue so
its good to have negative working capital till the time business is growing at
very high pace. In case of economy/idutrial slowdown company has to
improve on there working capital management.

72
On the basis of this assignment’s data we can say that there will be benefit to
investors to invest their money in telecom industry because telecom industry is
growing industry.And Indian government is also providing various facilities in
the development oftelecom industry. In india BHARTI AIRTEL is growing
company. On the basis of its various ratios like Current ratio, Quick ratio , Net
profit margin ratio, Inventory turnoverratios, Account receivable ratio ,
Earning per share we can say that company has good profitability condition,
good liquidity position, good market condition because earning per share is
increasing every year.

73
 Chapter - 8
Appendices

7
References

 Management Accounting Principles and Practices, Vikas

Publishing House, M.A.Sahaf

 Principles of Management accounting, Sultan Chand &

Sons, Dr. S. Maheshwari.

 Financial Management, ICAI, New Delhi

 www.google.com

 www.airtel.in