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Finatics
Vision
By 2015 airtel will be the most loved
brand, enriching the lives of millions.
Performance Highlights
2013
271,227
259,844
3,283
8,100
2014
295,948
283,580
3,356
9,012
769,045
232,579
195,643
857,461
277,770
241,813
47,853
22,757
78,643
27,727
503,217
583,567
1,086,784
597,560
605,416
1,202,976
69.12
45.43
30.24
10.98
4.51
5.68
2.51
6.77
132.51
1.16
6.00
72.91
45.20
32.39
14.14
5.04
6.65
2.20
7.56
149.49
1.01
7.02
141,513
213,324
Performance Highlights
CUSTOMER BASE
251,646
271,22
7
2011-12
2012-13
(NOS. 000)
295,948
683,267
2013-14
(` MILLIONS)
EBITDA
222,025
232,579
2011-12
2012-13
193,899
195,643
2011-12
2012-13
2011-12
769,045
857,461
2012-13
2013-14
EBITDA MARGIN
277,770
32.49
2013-14
2011-12
(` MILLIONS)
CASH PROFIT
(` MILLIONS)
REVENUE
(%)
30.24
32.39
2012-13
2013-14
CAPITAL EMPLOYED
241,813
1,124,55
5
1,086,784
2013-14
2011-12
2012-13
(` MILLIONS)
1,202,976
2013-14
Board of
Directors
Ajay Lal
Ben Verwaayen
Craig Ehrlich
D. K. Mittal
Manish Kejriwal
Obiageli Ezekwesili
Tan Yong
Choo
Tsun-yan Hsieh
V. K. Viswanathan
Manoj
Kohli
Gopal Vittal
Stockholder Analysis
a) Who is the average investor in this stock?( Individual or PPF,Small, large, Domestic Firm)
There are basically two types of investors they are active and passive investors . Average investors are the one who do not fully
depends on the market for their bread and butter rather they seek advice through broking agency or individuals to enter the market
and invest part of their income
No such record found from analyzing the detail of the company
To qualify as the marginal investor who decides the trading price , he needs to satisfy two criteria
1. He should own significant portion of the equity
2. He should trade on that equity.
Marginal Investor is a representative investor whose actions reflect the beliefs of those people who are currently trading a stock.
It is the marginal investor who determines a stock's price here they are the Institutional Investors
Stockholder Analysis
Name of the Shareholder
Number
As a % of grand
total
1,747,545,460
43.72
Pastel Limited
Indian
Continent
Limited
591,319,300
14.79
265,860,986
6.65
Viridan Limited
8,493,000
0.21
Total
2,613,218,746
65.37
Company has in
Moneycontrol.com)
total
260508
Share
holders.
Investment
24.9%
No
(www.
No. Of Shares
% Holding
PROMOTER'S HOLDING
Foreign Promoters
865673286.00 21.66
Indian Promoters
1747545460
43.72
0.00
Sub Total
NON
HOLDING
2613218746
65.37
PROMOTER'S
Institutional Investors
1.82
129957146
3.25
207361126
0
0
0
8814232
346132504
5.19
0.00
0.00
0.00
0.22
8.66
General Public
42547939
3997400102
1.06
GRAND TOTAL
5.35
17.74
24.90
100
10
Insider Holdings
a) Who are the insiders in the company? Besides the mangers and directors, anyone with more than 5%is treated as
an insider)
There are no insiders in the company
b) What role the insiders play in the company
Insider trading based on inside information is illegal. This is because it is seen as unfair to other investors
who do not have access to the information. In India it is Ban through SEBI Act of 1992.
They play a vital role as their illegal information can drive the price up ward or downward of a company
c) What percent is held by the employee overall( Including employees pension plan)
Total shares hold under ESOP scheme 2980128 which is 0.075% of total shares
d) Have insiders been buying or selling stock in this company in the most recent year?
No such bulk buying / selling deals data found (Information from SEBI)
11
12
Dividend Policy
13
For Year
2014
Dividend / share
Dividend payout
%age
Dividend Yield
%age
Bharti
Idea
Reliance TATA
Airtel Cellular Comm
Comm
1.8
0.4
4.5
26%
6.70%
126.5
Dividend as a % of Profit
2014
2013
(Airtel)
Net Profit in Rs Cr
Equity Dividends in Rs Cr
Dividend/Profit(%)
0.60%
0.30%
6,600.20 5,096.30
2012
2011
2010
9,426.1
5
379.8 379.79
5,730.00 7,716.90
719.5
379.8
379.8
11%
7%
7%
5%
4%
14
15
From the Previous slide we see that the Point to Point return doesn't have any trends for Airtel as compared to BSE.
The investors would have gained by investing in Airtel by around 30% in the last year based on our calculations. Whereas BSE
index would have given a Return of 48%.
Total Risk for a year is 1.84% out of which 1.02% is Systematic Risk driven by Market Factors and the rest 0.83% is Business
Risk. Hence 45% of Total Risk is Business Driven.
The Companys equity has fluctuated in all the years under consideration. This is quite evident from the Total Risk as Airtel's
Stock is generally twice as risky compared to Index
Cost of Equity---18.58%
Companies Current Cost of Capital Long term WACC 18.49%. Short Term
WACC 18.27%
16
Intercept 0.00052 based on daily annual data for the period under consideration. This tells us that the Stock prices of the company
have fluctuated a lot during the year.
Slope of the regression is 1.06. The Stock price changes by 1.06 for every 1 unit change in Index. The company has 2% weight of
BSE Sensex.
Estimate of Risk has low accuracy since market factors cover more than 50% of the risk in the Stock price.
Risk -1.02% Market Factors, 0.83% Firm Specific. It is important since major fluctuations are attributable to the Market Factors
which are uncontrollable and the controllable risk is attributed to Companys internal decisions which can be easily mitigated.
Comparison of risk
The Figure on the right:
shows how the total risk has
moved for the
company over the period .
After a patch of high volatility it
appears to
be stabilizing
Airtel
2.10%
BSE Sensex
2.24%
1.84%
1.76%
1.17%
0.96%
1.20%
0.96%
31/08/10 to 31/08/11
1/9/11-30/08/12
31/8/12-29/08/13
28/8/13-28/8/14
17
18
19
in Rs. Cr.
Mar '14
12 mths
8377.4
Mar '13
12 mths
6454.8
Mar '12
12 mths
6956.2
Mar '11
12 mths
8725.8
Mar '10
12 mths
10699.25
16022
13884.7
11437.8
13293.2
12692.63
-17086.3
-10725.9
-12611.8
-19102.1
-10601.7
1182.2
-3185.7
1400.8
5594.8
-2539.32
117.9
-26.9
226.8
-214.1
-448.35
327.9
445.8
354.8
327.9
128
354.8
342.1
128
789.88
341.53
20
Sources of Funds
Debt ratio
Particulars
1
2
3
4
amount ( millions)
67,956.00
8,005.00
1,771.00
69,914.00
Total
147,646.00
1.25
market
0.83
Fig in Crs
FY 13-14
FY 12-13
Intangible Assets
240682
264362
Tangible Assets
Other Assets
Total Assets
Net Debt
Debt ratio
158100
583259
982041
605416
0.62
167464
447006
878832
583567
0.66
21
200.0%
100.0%
0.0%
Mar '14
-100.0%
Mar '13
Mar '12
Mar '11
-200.0%
-300.0%
-400.0%
Airtel
Idea Cellular
Reliance Comm.
Tata Comm.
Mar '14
Mar '13
Mar '12
Mar '11
Airtel
0.2%
3.4%
6.1%
0.6%
Idea Cellular
-1.3%
3.4%
25.9%
-3.3%
4.9%
0.6%
-6.9%
-369.7% 294.5%
44.4%
-47.2%
22
Except in the case of variable rate loans, principal and interest obligations are known
amounts which can be forecasted and planned for.
Interest on the debt can be deducted on the company's tax return, lowering the actual
cost of the loan to the company.
Raising debt capital is less complicated because the company is not required to comply
with state and federal securities laws and regulations.
The company is not required to send periodic mailings to large numbers of investors,
hold periodic meetings of shareholders, and seek the vote of shareholders before taking
certain actions.
The larger a company's debt-equity ratio, the more risky the company is considered by lenders
and investors. Accordingly, a business is limited as to the amount of debt it can carry.
The company is usually required to pledge assets of the company to the lender as collateral,
and owners of the company are in some cases required to personally guarantee repayment of
the loan.
Recent Rating
As on 31st August 2014, the long term rating is AA+ Interest rate is 9.55%, Default Spread is +- 1.96%
Companys Marginal Tax Rate is 12.2% & Effective Tax Rate is 16.62%
1.
2.
Market Value of Debt book value of debt (since debts are not traded in the market) Rs. 9,113 crores Long Term
and Rs. 1,251 crores Short Term Debt- as per Mar14 Balance Sheet
3.
We- 99.28% & Wd 0.72% Long Term and 99.90% and 0.10% respectively for short Term
23
Is there a typical project for this firm? If yes what would it look like in terms of life ( long term or short term), investment
needs and cash flows patterns ?
There are four segments namely
Telecom-Tele media 86%
Consultancy 6%
DTH 2%
Tower Business 5% ( Co. had recently sold its African Tower Business this has not been considered in our report
and calculations)
All are long term
The company has positive operative and financial cash flows . According to last year data company had +16022 crs
cash flow and -17086.3 crs Investing activity and +1182 crs from financing activities ( March 14 data)
Investment needs- The Company is Capital Intensive
24
How good are the projects that the company has on its books currently?
Currently the company has gone for the restructuring and it has sold of its tower business in Africa and have exited form
certain projects ( Not considered in the our calculation ). The company operates in all major circles in India and is currently
the leading telecom service provider with approx. 205 million subscriber.
Are the projects in the future likely to look like the projects in the past? Why or why not?
Yes as the company is consolidating its core strength of Telecom-Tele Media services and currently expanding its 3G network
to all circles as well as 4G network in major cities to attract the internet savvy crowd.
Accounting Returns on Projects- ROE-9.89%. V/s Ke- 18.58%, the Company is not picking up good projects.
ROCE 13.18%, WACC is 18.49%. The firm is not performing well in terms of long term projects.
25
EVA Calculation
EVA shows the not so rosy picture here as there has been no value creation for Either Equity Share holders or the
company over the years except for year ended 2010.
This is despite the Companys Net Worth has exhibited an increasing trend.
For a firm to create Value, the ROE and ROCE should be higher than WACC which is not the case in here.
26
30.00%
30.00%
25.00%
25.00%
Bharti Airtel
20.00%
Idea Cellular
20.00%
15.00%
Idea Cellular
Reliance
Communication
s
15.00%
10.00%
10.00%
0.00%
0.00%
March'11
Marc h'12
March'13
Reliance
Communication
s
5.00%
5.00%
March'10
Bharti Airtel
March'10
March'14
-5.00%
March'11
March'12
March'13
March'14
-5.00%
Source: Livemint.com
Source: Livemint.com
From the above charts we see that though ROE & ROCE of Airtel has been highest till date but Idea Cellular is catching up
pretty fast. This trend should ring the bells for Airtels Managers and performance should be improved.
27
CONCLUSION
28
Challenges
Inadequate infrastructure in Indian and African rural
regions pushing cost of operations
Continuously innovating and investing in greater
reach
Integration in operations across continents
Combining common platforms across
countries
all 20
Opportunities
threats
Untapped telecom market in Africa and rural India
Newer, more meaningful products targeted to
specific customer segments
Th nk you
Thanking Prof.A. Kanagaraj for his valuable time and support in our learning process
29