1

A

PROJECT REPORT

ON

“FINANCIAL ANALYSIS OF AIRCEL”

For Partial Fulfillment of the Diploma in Post Graduate Diploma in

Management

(Session 2011-13)

SUBMITTED TO: SUBMITTED BY:

MS. PARUL PURI SAPNA KUMARI

(INTERNAL GUIDE) PGD11091

IV TRIM – SEC-B

2

INSTITUTE OF MANAGEMENT STUDIES, NOIDA

A UGC Recognized Institute

A-8B, Plot –C, Sector-62, Noida

DECLARATION

I SAPNA KUMARI bearing Roll No PGD11091 Class PGDM-IV-TRIMESTER the Institute

of Management Studies, Noida hereby declare that I have completed my Summer training in

Finance on the Project entitled “FINANCIAL ANALYSIS OF ARICEL” is an original work

and the same has not been submitted to any other Institute for the award of any other diploma.

The suggestions as approved by the faculty were duly incorporated.

SIGNATURE OF FACULTY GUIDE SIGNATURE OF STUDENT

MS. PARUL SAPNA KUMARI

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4

INSTITUTE OF MANAGEMENT STUDIES, NOIDA

A UGC Recognized Institute

A-8B, Plot –C, Sector-62, Noida

ACKNOWLEDGEMENT

The success of any project study depends upon a number of factors among which the proper

guidance from the experts in the industry and a faculty plays an important role. I take this

opportunity to convey my sincere thanks and gratitude to all those who have directly or

indirectly helped and contributed towards the completion of this project. I take here a great

opportunity to express my sincere and deep sense of gratitude to Lecturer Ms. PARUL PURI ,

for giving me an opportunity to work on this project. The support & guidance from madam, was

of great help & it was extremely valuable. I would like to express my gratitude to madam for her

constant support and encouragement.

I take this platform to convey my gratitude to the officials of AIRCEL for their prompt response

and guidance. I would like to express my gratitude to Mr. SANATANU SEN (Finance

Department) for his constant support and encouragement. Without his outright support and

prompt response, it would not be possible to do any justice as well as bring authenticity to the

project.

SAPNA KUMARI

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INDEX:

SR NO. TOPIC PAGE NO.

1. EXECUTIVE SUMMSRY

2. OBJECTIVE OF THE STUDY

3. OVERVIEW OF THE INDUSTRY

4. ABOUT THE COMPANY

5. HISTORY

6. VISSION AND MISSION

7. CODE OF CONDUCT

8. SBUs

9. CSR

10. KEY MANAGEMENT PERSONEEL

11. PRODUCT

12. COMPETETIORS

13. RESEARCH METHODOLOGY

14. RESEARCH DESIGN

15. CONCEPTUAL FRAMEWORK

16. RATIO ANALYSIS

17. CASH FLOW STATEMENT

18. DATA ANALYSIS AND INTERPRETAION

19. CONCLUSION

20. SUGGESTIONS

21. LIMITATIONS

22. BIBLIOGRAPHY

23 ANEXURE

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1. EXECUTIVE SUMMARY

This is a brief report of eight weeks Summer Internship project titled “Financial Analysis of

Aircel” conducted in Patna. This report examines the analysis of the statement like Balance

sheets and Profit and Loss A/c to know the performance of the company. Data of Aircel is

collected from the company‟s annual reports and websites. Then data of the company are

arranged in the uniform manner so that financial factors can be drawn out easily With the help of

theoretical knowledge on the part of ratios and cash flow, all the Relevant ratios of the company

have been founded. After a thorough study and discussion with the company‟s professional,

comments were taken so that interpretation of these ratios became easy and accurate.

The whole summer internship period with Aircel has been full of learning and sense of

contribution towards the organization.

Aircel is a telecom network providing company. The main objective of this company is to

provide the best services to their customer in low cost as compared to their competitor. They

offer more value added service in marginal cost.

AIRCEL, Patna will recognize this as well as take more references from this project report.

Finance department has been given more emphasis for the study of the project because it is

totally analysis of the financial position of the company.

The main objective of this project is to know the analyze the financial position with ratio as

tools and give the proper suggestions .This project will provide me the better platform to

understand the History, Growth and various other aspects of telecom companies.

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2. OBJECTIVE OF THE STUDY:

The basic objective of doing the project is to:

1. Analyze the financial statements Of Aircel.

2. Know the Financial Position: The basic objective of studying the Financial Statements of the

company is to know the financial position of the company.

3. Help in planning: Financial Analysis helps in planning and forecasting. Over a period of time,

a firm or industry develops certain norms that indicate future success & failure.

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3. OVERVIEW OF THE INDUSTRY

India has become one of the fastest-growing mobile markets in the world. The mobile services

were commercially launched in August 1995 in India. In the initial 5-6 years the average

monthly subscribers additions were around 0.05 to 0.1 million only and the total mobile

subscribers base in December 2002 stood at 10.5 millions. However, after the number of

proactive initiatives taken by regulator and licensor, the monthly mobile subscriber additions

increased to around 2 million per month in the year 2003-04 and 2004-05.

Although mobile telephones followed the New Telecom Policy 1994, growth was tardy in the

early years because of the high price of handsets as well as the high tariff structure of mobile

telephones. The New Telecom Policy in 1999, the industry heralded several pro consumer

initiatives. Mobile subscriber additions started picking up. The number of mobile phones

added throughout the country in 2003 was 16 million, followed by 22 million in 2004, 32

million in 2005 and 65 million in 2006. The only country with more mobile phones than India

with 246 million mobile phones is China – 408 million.

India has opted for the use of both the GSM (global system for mobile communications) and

CDMA (code-division multiple access) technologies in the mobile sector. In addition to

landline and mobile phones, some of the companies also provide the WLL service.

The mobile tariffs in India have also become lowest in the world. A new mobile connection

can be activated with a monthly commitment of US$0.15 only. In 2005 alone 32 million

handsets were sold in India. The data reveals the real potential for growth of the Indian mobile

market.

In March 2008 the total GSM and CDMA mobile subscriber base in the country was 375

million, which represented a nearly 50% growth when compared with previous year.

In April 2008 the Indian Department of Telecom (DoT) has directed all mobile phone service

users to disconnect the usage of unbranded Chinese mobile phones that do not have

International Mobile Equipment Identity (IMEI) numbers, because they pose a serious

security risk to the country. Mobile network operators therefore planned to suspend the usage

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of around 30 million mobile phones (about 8 % of all mobiles in the country) by April 30.

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4.ABOUT THE COMPANY

Type Joint Venture

Industry Telecommunications

Founded 1999

Headquarters Chennai, India

Key people Sandip Das, CEO

Gurdeep Singh, COO

Products Mobile telephony, Internet services,

Parent Maxis Communications (74%)

[1]

Website aircel.com

aircelbusinesssolutions.com

Aircel group is a mobile phone service provider in India. It offers both prepaid and postpaid

GSM cellular phone coverage throughout India. The Aircel group is a joint venture between

Maxis Communications Berhad of Malaysia and Sindya Securities & Investments Private

Limited, whose current shareholders are the Reddy family of Apollo Hospitals Group of India,

with Maxis Communications holding a majority stake of 74% Aircel commenced operations in

1999 and is today the leading mobile operator in Tamil Nadu, Assam, North- East and Chennai.

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It is India‟s fifth largest GSM mobile service provider & seventh largest mobile service provider

(both GSM and CDMA) with a subscriber base of over 51.83 million, as of January 31, 2011 It

has a market share of 6.72% among the GSM operators in the country.

Additionally, Aircel has also obtained permission from Department of Telecommunications

(DoT) to provide International Long Distance (ILD) and National Long Distance (NLD)

telephony services. It also has the largest service in Tamil Nadu.

3G&BWA

On 19 May 2010, the 3G spectrum auction in India ended. Aircel paid 6499.46 crores for

spectrum in 13 circles - the least cost per circle compared to other operators. The circles it will

provide 3G in are Andhra Pradesh, Assam, Bihar, Jammu & Kashmir, Karnataka, Kerala,

Kolkata, Madhya Pradesh & Chhattisgarh, North East, Orissa Punjab, Tamil Nadu, Uttar Pradesh

(East) & Uttarakhand and West Bengal.

On 11 June 2010, the broadband wireless access (BWA) spectrum auction in India ended. Aircel

paid 3438.01 crores for spectrum in 8 circles, the second highest wins overall - after Reliance

Communications. The circles it has won spectrum are Andhra Pradesh, Assam, Bihar, Jammu &

Kashmir, North East, Orissa, Tamil Nadu and West Bengal. It also has 3G spectrum in all these

circles.

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5. HISTORY

The Aircel group is a joint venture between Maxis Communications Berhad of Malaysia and

Sindya Securities & Investments Private Limited, whose current shareholders are the Reddy

family of Apollo Hospitals Group of India, with Maxis Communications holding a majority stake

of 74%.

Aircel commenced operations in 1999 and became the leading mobile operator in Tamil Nadu

within 18 months. In December 2003, it launched commercially in Chennai and quickly

established itself as a market leader – a position it has held since.

Aircel began its outward expansion in 2005 and met with unprecedented success in the Eastern

frontier circles. It emerged a market leader in Assam and in the North

Eastern provinces within 18 months of operations. Till today, the company gained a foothold in

18 circles including Chennai, Tamil Nadu, Assam, North East, Orissa, Bihar, Jammu & Kashmir,

Himachal Pradesh, West Bengal, Kolkata, Kerala, Andhra Pradesh, Karnataka, Delhi, UP(West),

UP(East), Maharashtra & Goa and Mumbai.

The Company has currently gained a momentum in the space of telecom in India post the

allocation of additional spectrum by the Department of Telecom, Govt. of India for 13 new

circles across India. These include Delhi (Metro), Mumbai (Metro), Andhra Pradesh, Gujarat,

Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra & Goa, Rajasthan, Punjab, UP

(West) and UP (East).

Aircel has won many awards and recognitions. Voice and Data gave Aircel the highest rating for

overall customer satisfaction and network quality in 2006. Aircel emerged as the top mid-size

utility company in Businessworld‟s „List of Best Mid-Size Companies‟ in 2007. Additionally,

Tele.net recognised Aircel as the best regional operator in 2008.

With over 20 million happy customers in the country, Aircel the fast growing telecom company

in India has revved up plans to become a full-fledged national operator by end of 2009.

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6. VISION AND MISSION

The Aircel Group is a result of alliance between Maxis Communications Berhad of Malaysia

(74% equity) and Sindya Securities & Investments Private Limited (26% equity).

The Aircel Group, formed in 1994, offers affordable and outstanding mobile services to a vast

subscriber base in India. Aircel has a vision of delighting its customers by giving them the

respect they deserve. Our goal is to provide our customers with exemplary service and

persistently look for new ways to surpass their expectations.

Aircel commenced operations in 1999. In our first decade of operations, we concentrated on

building our foundations in the southern part of the country, and soon emerged as the regional

market leaders. We worked hard and achieved that success by remaining focused on growth

opportunities. Soon after our company began with its expansion in 2005 and has now set its sight

on becoming a pan India operator. Our project pipeline is robust, allowing for sustainable long-

term growth.

In addition to our leadership position in Tamil Nadu, Aircel met with extraordinary success in

the Eastern frontier circles. We pride ourselves on customer satisfaction and managed to emerge

as the market leaders in Assam and North Eastern states within 18 months of operations. During

this period, our company gained a strong foothold in 10 circles, to provide better access to our

customers. Today, Aircel operates in 18 telecommunication circles and the company is ready to

embark on a dynamic expansion plan, swiftly rolling out in new circles in the near future.

Aircel recognizes the tremendous growth in its customer base. We have also got an authorization

from the Department of Telecommunications for ILD and NLD telephony services and are now

on track to realize our dream of becoming a nationwide player by the year 2010.

Aircel offers its customers, services and products that are easy to understand and use. All

offerings are stimulating and at the same time extremely unique as Aircel continues to re-invent

itself constantly to deliver the best and most up-to-date services. The brand instils a felling of

pride, confidence and reliance among all stakeholders by anticipating their desires and fulfilling

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the same efficiently.

With our foundations deeply set on our brand vales of simplicity, creativity, trust and excitement,

we will continue to deliver superior services to our customers and will do our best to live up to

their high expectations.

About Maxis Communications Berhad

Maxis Communications Berhad is a leading mobile communications service provider in

Malaysia that started operations in the year 1995. Maxis' vision is to bring superior

communication services to enhance its customers' lives and businesses, in a manner that is

simple and personalized, by efficiently and creatively harnessing leading edge technology, and

delivering a brand of service experience that is reliable and enchanting.

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7. CODE OF CONDUCT

Simplicity:

Simplicity with Aircel signifies freedom from hardship, effort or confusion. Our products are

elegant yet easy to understand and our services imply purity and clarity for our valued

subscribers.

Creativity:

Creativity in Aircel refers to the discovery of new ideas or concepts to find innovative solutions

to your problems. Here at Aircel we encourage original thoughts, imagination, novelty required

to bring fresh ideas to life.

Trustworthiness:

Aircel strives to be worthy of your confidence and deserving of your trust. We endeavour to

achieve the same by being dependable, reliable and by keeping the promises we have made.

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8. SBUS

Aircel Business Solutions

Internet industry

Aircel Business Solutions (ABS), a part of Aircel, is headquartered in New Delhi. ABS is a

Strategic Business Unit (SBU) of Aircel, which addresses the Enterprise segment. Currently,

ABS offers ILL, MPLS VPN, NPLC, VoIP and host of services across 36 top business cities. It

has secured spectrum in 3.3 GHz in 60 cities across country.

Operating National ISP in India

1st ISP to launch WiMAX and deploy it commercially in India

Over 2,500 high Value Enterprise Customers using the last mile on WiMAX & through other

BSO‟s.

Licensed to operate National & International Long Distance services.

ABS Domestic Network

Own fiber in Chennai/ROTN and rolled out Mini and Micro POPs across country

MAN capacity contracted at Mumbai, Delhi, Pune, Bangalore and Hyderabad.

NLD PoPs in 36 cities

Secured spectrum in 3.3 GHz in 60 cities across country

PAN City WiMAX network in over ten cities with coverage in the commercial areas

ABS – Value Proposition

ABS offers a suite of services ranging from the standard to carefully customized solutions.

ABS‟s service promises you a high degree of reliability, efficiency and security in managing

your operations supported by 24 x 7 customer care staff of highly trained professionals.

Premium Internet Leased Line:

ABS offers premium Internet leased Line connectivity to the Enterprise segment customers using

the last mile on WiMAX. ABS has the capacity to provide premium Internet connectivity to the

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customers in less than 48 hours. The impact of WiMAX in fixed wireless networks is more

immediate, and is already providing Businesses with tangible benefits over other broadband

solutions. The benefit of adopting WiMAX as Last mile using ABS network is because it

provides:

1. Quick Deployment

2. Competitive in terms of costs.

3. Wider Coverage even in remote locations

4. High Capacity

5. Quality of service

6. Increased scalability

7. SLA for service uptime of 99%.

Technology related business solutions are an indispensable part of trade and commerce in

today‟s marketplace. These business solutions aim at generating value for consumers by

effectively utilizing technology to advance their day to day processes.

Today every company needs unique technology related solutions specific to their individual

environment. Keeping the same in mind, Aircel offers a comprehensive range of business related

applications to empower every aspect of your business. Our business enhancement solutions are

aimed at generating profitable results for your enterprise. Our products ranging from premium

internet services, E-Conferencing, MPLS VPN and Smart Stream provide a gamut of services

that will support your needs.

Let us assist you in implementing innovative business solutions customized to your needs and

make your day to day business processes more efficient by simplifying your busy world.

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9. CSR

Corporate Responsibility Policy

At Aircel, we continually pursue healthy corporate citizenship. Our aim is not to merely

discharge social responsibility, but conduct business in a manner which reinstates respect for

people, communities and the environment.

We emphasize on an inclusive work culture to appreciate differences and believe engagement

with our employees is quintessential for an effective CSR plan. We share adequate information

on the organization‟s vision and CSR initiatives, because it promises healthy operations and

subsequently adds to the overall quality of life. This motivates the employees and their family

members to contribute to society.

Aircel maintains integrity and respect in its interactions with its stakeholders, customers,

retailers, investors, NGO partners and the government. We are careful in not partnering with any

PR / communication that induces distrust in the sincerity of our efforts. Our stringent belief in

delighting customers with good products and services helps build a strong relationship.

Aircel is always proactive in supporting NGOs and NPOs. We extend all possible assistance to

their projects for a minimum of 3 to 5 years and thereafter support new projects. Besides, we aim

at continual involvement with our business partners and the government for economic and social

development of the underprivileged.

Aircel engages external audit agencies to guarantee authenticity, and maintains and monitors an

external profile of the CSR activities which are shared with the stakeholders in the annual reports

and websites.

We incorporate the CSR policies in our core business to ensure ethical business practices in all

the functions to harness a healthy society.

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10. KEY MANAGEMENT PERSONNEL

Sandip Das, CEO- Sandip Das (born 11 January 1958) is the Executive Director and Chief

Executive Officer of Maxis Communications Berhad, the largest telecommunications company

in Malaysia with overseas operations in India and Indonesia.

A well-known figure in the telecoms space Sandip Das joined Maxis in January 2007 after an

impressive track record with Hutchison Essar Limited (now known as Vodafone Essar Limited),

one of India‟s largest mobile operators in India, where he started its operations from scratch in

1994 and left the company as its Deputy Managing Director.

Gurdeep Singh, COO- Gurdeep Singh is a Sikh artist and actor from India who lives in the

United States.

Sharad Mehrotra: Sharad Mehrotra is the Sr. Vice President, heading the sales, Marketing &

Customer Care function for the Telecom Operations in North and East Circles

Vikram Chona: Vikram Chona is the Associate Vice President, heading the Business

development function for the Telecom Operation in the North East Circles.

Ganapathi Srinivasan: Ganapathi Srinivasan is the Group Commercial Head, heading the

Business Strategy & Planning function for the Telecom Operations in Aircel

Komandur P Rangaraj: Komandur P Rangaraj is the Group Financial controller.

Mr. Rangaraj was associated with Sundaram & SrinivasanChartered Accountants and was

heading teams conducting statutory and operational reviews for Public Limited Companies.

Sushil Kumar Agarwal: Sushil Kumar Agarwal is the Associate Vice President – Projects and

Chief Technology Office (North) for the Telecom Operations in the North and EastCircles

Atul Dikshit: Atul Dikshit is the National Head – Sales for the Telecom Operations in the North

and East Circles.

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Nikhil Gupta: Nikhil Gupta is Head – People and Culture for the telecom Operations in the

North and East Circles.

Pritpal Singh Lakkha: Pritpal Singh Lakkha is the National Head – Marketing for the Telecom

Operations in the North and east Circles.

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11. PRODUCT

AIRCEL SIM Cards

AIRCEL VOUCHERS

AIRCEL E-Recharge

AIRCEL INQ Mobile

AIRCEL Pocket Internet

AIRCEL SERVICES

SERVICES

POST-PAID PRE-PAID

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Any mobile service provider companies provide two types of facility for the usages

1. PRE-PAID

2. POST-PAID

PRE-PAID:

PRE-PAID Define as a pre paid and then use. In this type customer purchases the recharge

coupons and other value added services card from retail shops and then that can use. In the PRE-

PAID if we have no sufficient balance then we cannot make a call.

POST-PAID:

POST-PAID Define as a post means first use and then paid. In this type of facility we can make a

call unlimited till the credit limit. There are many types of facility who divert my opinion to use

the Post-paid Facility.

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12. COMPETITORS

1. Idea

2.Vodafone

3.Reliance

4.Airtel

5.Tata Docomo

6.MTNL

7.BSNL

8.Uninor

9.Tata Indicom

10.Virgin

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13. RESEARCH METHODOLOGY:

Methodology is the basic framework and the approach that has to be followed to carry

out the approach used to collect the data, the sources of primary data, i.e., from where

and how it has been collected.

Research is a diligent and systematic inquiry or investigation into a subject in order to

discover or revise facts, theories, applications etc.

Methodology is system of methods followed by particular discipline.

Thus, Research Methodology is the way how we conduct our research.

In the present project report type of research conducted is Quantitative research.

Descriptive research is undertaken which involves extensive scanning of secondary data.

For my project most of the finance related books have been considered . The best websites are

considered which gives all the efficient and effective information.

References for the project are from the websites and books and the company‟s annual reports.

It is assured that the project has been completed with full dedication, sincerity and

required intensity of hard work.

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14. RESEARCH DESIGN:

It helps to tackle the problem of bringing various phases of research under control.

The research design helps to design the decision with respect to:

• What type of data is needed?

• From where data can be found?

• What period of time study includes?

• How much material will be needed?

• What technique of gathering data will be adopted?

• How will data be analyzed?

Generally three types of research are included in research design. These are as follows:

_ Exploratory research

_ Descriptive and diagnostic research

_ Experimental research

In the present project report both primary and secondary data is taken so exploratory

research is done.

This research focuses on discovery of insights and relationships among various financial factors.

DATA COLLECTION:

Sources of secondary data are:

Authenticated company‟s website on Internet.

Annual reports provided by AIRCEL.

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15. CONCEPTUAL FRAMEWORK:

Analysis of Financial Statements/Financial Analysis/Financial Statements Analysis:

Financial Statements are the summarized statements of accounting data produced at the end of

the accounting process by an enterprise through which it communicates accounting information

to the external users. The external users can be investors, lenders, suppliers and trade creditors,

customers, government and their agencies, public at large and employees. Analysis of Financial

Statements is a systematic process of the critical examination of the financial information

contained in the financial statements in order to understand and make decisions regarding the

operations of the firm.

Customarily, a set of financial statements include:

(i) Balance Sheet

(ii) Profit and Loss Account

(iii) Schedules and notes forming part of the Balance Sheet and Profit & Loss Account

Essentials of Financial Statements

1. Accurate information

2. Understandability

3. Comparable

4. Verifiable

5. Relevant

6. Timeliness

Parties interested in Financial Statements or Users of Financial

Statements

1. Investors and Potential Investors

2. Creditors

3. Customers

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4. Employees and Trade Unions

5. Government and its Agencies

6. Stock Exchange

Tools of Analysis of Financial Statements

_ Ratio Analysis

_ Cash Flow Statements

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16. RATIO ANALYSIS:

A Ratio gives the mathematical relationship between one variable and another. Ratio analysis

helps in valuing the firm in quantitative terms. Ratios are classified as follows:

1. Liquidity Ratios

2. Turnover Ratios

3. Profitability Ratios

4. Ownership Ratios

1. Liquidity Ratios

Liquidity implies firm‟s ability to pay its debts in short run. This ability can be

measured by Liquidity Ratios. Current Ratio and Quick Ratio are the two ratios which directly

measure Liquidity. Receivables turnover Ratio and Inventory Turnover Ratio are the two ratios

which in directly measure Liquidity.

A. Current ratio = Current Assets/Current Liabilities

Current assets which are converted into cash within one year.

Current liabilities are liabilities which are to be repaid within a period of 1 year.

IDEAL RATIO = 2:1

B. Quick ratio or Liquid ratio or Acid Test ratio = Quick Assets/Liquid Assets

Current Liabilities

Quick Assets = Current Assets – Inventories- Prepaid expenses

Ratio of quick assets to quick liabilities.

Quick assets which can be converted into cash very quickly. Quick liabilities are liabilities which

have to be necessarily paid within 1 year.

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IDEAL RATIO = 1:1

2. Turnover Ratios (Activity Ratios)

A. Accounts Receivable Turnover ratio or Debtors Turnover Ratio

= Net Credit Sales

Average Accounts Receivables

Average Accounts Receivables = Opening receivables + Closing receivables

It shows the Relationship between debtors and sales

B. Inventory Turnover Ratio = Cost of goods Sold

Average Inventory

It indicates no. of times stock has been turned into sales in a year

Ideal Ratio = 8

Cost of goods sold = Sales – gross profit

Average Inventory = Opening Stock + Closing Stock

Stock Conversion Period = Cost of goods Sold * No of days in a

Year/Average Inventory

C. Creditors Turnover ratio = Net Credit Purchases

Average Creditors

Average Creditors = Opening Creditors + Closing Creditors

Relationship between Creditors and Purchases

3. Profitability or Efficiency Ratios

These Ratios measure the efficiency of forms activities and its ability to generate profits.

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(i) Gross Profit Margin Ratio

(ii) Net Profit Margin Ratio

(iii) Return On Equity

(i) Gross Profit Margin Ratio = Gross Profit

Net Sales

Gross Profit = Sales – Cost of goods sold

Net Sales = Sales – Sales Return - Excise Duty

There is no Ideal Ratio. Higher the ratio better will be the performance of The business.

(ii) Net Profit Margin Ratio = Net Profit

Net Sales

It measures the overall efficiency of production, administration, selling, financing, pricing and

tax management. It shows the result of overall operation of the firm.

4. Ownership Ratios

Capital Structure Ratios

a) Debt Equity Ratio = Debt

Equity

= Long Term Liabilities + Current Liabilities

Share Holders Funds

Ratio 2 or Less – Exposes Its Creditors Lesser Risk

Ratio >2 – Exposes Its Creditors Higher Risk

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17. CASH FLOW STATEMENT:

Introduction of Cash

Cash, the most liquid asset, and also referred to as the life blood of a business enterprise is of

vital importance to the daily operation of business firms. Its efficient management is crucial to

the solvency of business because cash is the focal point of the fund flow in a business. „Cash‟

refers to the cash as well as bank balance of the company to the end of the accounting period, as

reflected in the balance sheet of the company. While the profits reflects the earning capacity of

the company and cash reflects its liquidity position.

Introduction of Cash Flow

CASH FLOW is the movement of cash and its equivalents. It includes the inflow and the outflow

of cash during a particular period. All transactions which lead to increase in cash and cash

equivalents are classified as inflows of cash and all those transactions which lead to decrease in

cash and cash equivalents are classified as outflows of cash. Cash Flow Statement is prepared

with an objective to highlight the sources and uses of cash and cash equivalents for a period.

Cash Flow Statement is classified under operating activities, investing activities and financing

activities.

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18. DATA ANALYSIS AND INTERPRETATION:

RATIO ANALYSIS

CURRENT RATIO

Projected

2007-08 2008-09 2009-10 2010-11 2011-12

1 AIRCEL 1.75 1.98 2.46 2.47 2.25

IDEAL RATIO = 2:1

Figure 1.1

Interpretation of figure 1.1

The two basic components of this ratio are current assets and current liabilities. Current assets

include cash and those assets which can be easily converted into cash within a short period of

time, generally, one year, such as marketable securities or readily realizable investments, bills

receivables, sundry debtors, (excluding bad debts or provisions), inventories, work in progress,

etc. Prepaid expenses should also be included in current assets because they represent payments

made in advance which will not have to be paid in near future.

0

0.5

1

1.5

2

2.5

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

CURRENT RATIO

CURRENT RATIO

33

Current liabilities are those obligations which are payable within a short period of tie generally

one year and include outstanding expenses, bills payable, sundry creditors, bank overdraft,

accrued expenses, short term advances, income tax payable, dividend payable, etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its

current obligations in time and when they become due. On the other hand, a relatively low

current ratio represents that the liquidity position of the firm is not good and the firm shall not be

able to pay its current liabilities in time without facing difficulties. An increase in the current

ratio represents improvement in the liquidity position of the firm while a decrease in the current

ratio represents that there has been a deterioration in the liquidity position of the firm. A ratio

equal to or near 2 : 1 is considered as a standard or normal or satisfactory. The idea of having

double the current assets as compared to current liabilities is to provide for the delays and losses

in the realization of current assets.

However, the rule of 2 :1 should not be blindly used while making interpretation of the ratio.

Firms having less than 2 : 1 ratio may be having a

better liquidity than even firms having more than 2 : 1 ratio. This is because of the reason that

current ratio measures the quantity of the current assets and not the quality of the current assets.

If a firm's current assets include debtors which are not recoverable or stocks which are slow-

moving or obsolete, the current ratio may be high but it does not

represent a good liquidity position. Current Ratio of AIRCEL is increasing for each subsequent

year.

This indicates that the company can successfully pay off its debt while at the same time still have

cash left over to continue operating. This is also because of slow nature of Debt collection which

makes company less liquid than what it

looks like in the trend.

34

Earnings Per Share

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 15.65 15.28 14.03 4.44 1.15

Figure 1.2

Interpretation of Figure 1.2

EPS ratio calculated for a number of years indicates whether or not the earning power of the

company has increased.

Earning Per Share of AIRCEL have been reduced .This may be mainly because of decrease in

income of services over the period of time. Decrease in income from services can be attributed to

increase in competitive rivalry as various international players like Vodafone and Reliance came

into the Indian

Market with improved technology and made tariff wars to attract the customers.

0

2

4

6

8

10

12

14

16

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Earning Per Share

Earning Per Share

35

DEBT TURNOVER RATIO:

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 5.03 5.73 6.2 5.92 6.41

Figure 1.3

Interpretation of Figure 1.3

Figure 5.3 represents the Debtor Turnover Ratio

Debtor Turnover Ratio of AIRCEL is 6.41 for the year 2011-2012. So the debtor velocity is

365/6.41 which comes out as 56.94 days i.e. AIRCEL takes on an average 57 days to collect its

money back from the debtors, which is again higher than the industry standards.

0

1

2

3

4

5

6

7

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

DEBT TURNOVER RATIO

DEBT TURNOVER RATIO

36

Debt Equity Ratio

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 0.31 0.29 0.26 0.24 0.27

Figure 1.4

Interpretation of Figure 1.4

Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the

firm‟s assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation

of the firm. However, the interpretation of the ratio depends upon the financial and business

policy of the company.

Debt-to-Equity Ratio of AIRCEL is 0.27 for the year 2011-12 which means that company is

using very less debt instruments while it is relying more on the shareholders capital.

This also indicates the company‟s assets are primarily supplied with equity.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Debt Equity Ratio

Debt Equity Ratio

37

RETURN ON CAPITAL EMPLOYED

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 9.94 9.05 4.97 1.46 0.433

Figure 1.5

Interpretation of Figure 1.5

Return on capital employed ratio is considered to be the best measure of profitability in order to

assess the overall performance of the business. It indicates how well the management has used

the investment made by owners and creditors into the business. It is commonly used as a basis

for various managerial decisions. As the primary objective of business is to earn profit, higher

the return on capital employed, the more efficient the

firm is in using its funds.

Return on Capital Employed Ratio of AIRCEL is 1.46 for the year 2010-2011, which indicate

that the company is earning 1.46 percent return on the net capital employed by company that

consists of fixed assets, investments and net working capital. ROCE of the company is

deteriorating with each succeeding year because increase in number of competitor with each year

which lead to decrease in market share in due to which income from services have been

declining. Further more investments are required by the co. to acquire new technology like 3g

which will provide return in coming years. As the trend

says the Return on capital will fall in the coming years and will be around .433 percent.

0

1

2

3

4

5

6

7

8

9

10

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

RETURN ON CAPITAL EMPLOYED

RETURN ON CAPITALEMPLOYED

38

Price Earnings Ratio

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL --------- 59% 34% 8% 2% 1%

Figure 1.6

Interpretation of Figure 1.6

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

In general, a high P/E suggests that investors are expecting higher earnings growth in the future

compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story

by itself. It's usually more useful to compare the P/E ratios of one company to other companies

in the same industry, to the market in general or against the company's own historical P/E. It

would not be useful for investors using the P/E ratio as a basis for their investment to compare

the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has

much different growth prospects.

0

10

20

30

40

50

60

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Price Earning Ratio

Price Earning Ratio

39

NET PROFIT MARGIN RATIO

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 30.4 24.7 22.5 9.3 2 -3.88

Figure 1.7

Interpretation of Figure 1.7

This ratio also indicates the firm's capacity to face adverse economic conditions such as price

competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while

interpreting the ratio it should be kept in minds that the performance of profits also be seen in

relation to investments or capital of the firm and not only in relation to sales.

Net Profit Ratio of AIRCEL is 2 for the year 2010-2011, which is lower in comparison with the

industry ratio. This shows that AIRCEL had to pay other indirect expenses which led to fall in

the net profit. Through fig 4.8 we can also see that there is continuously negative trend.

-5

0

5

10

15

20

25

30

35

NET PROFIT MARGIN RATIO

NET PROFIT MARGIN RATIO

40

1.8 ANALYSIS OF CASH FLOWS

Interpretation

Cash from operations represents the inflow of cash from primary activities of business. From the

above figure it is clearly stated that Cash from operations is highest of AIRCEL 17496.6 cr in

2007-08 but gradually it have been decreased to 6843.81cr which represents the loss of revenue

by the company in its primary activities

So, AIRCEL have to take cost cutting measures as adopted by Bharti and Idea to gain the

revenues from its business.

1.8.2 Cash Used in Investing Activities

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 6,478.17 6,500.83 3,266.88 3,724.85 7,438.14

Interpretation

Cash used in financing activities represents the outflow of cash for the purpose of procurement

of funds for business. From the above figure it is clearly stated that Cash used by the AIRCEL in

financing activities is highest in 2007-06 and it have been increasing in each subsequent years

0

1000

2000

3000

4000

5000

6000

7000

8000

Cash Used in Investing Activities

Cash Used in Investing Activities

41

which represent that aAIRCEL is continuously engaged in payment of dividends and interest for

the borrowed funds and they are not raising funds from market. On the other hand Companies

like Bharti and Idea have decreased their cash used in financing activities in each subsequent

year which means that they have raised equity and debt in the subsequent years to fund their

assets due to which cash from financing activities is increased in each year , which is good

indicator for the company.

Cash Used in Financing Activities

2007-08 2008-09 2009-10 2010-11 2011-12

AIRCEL 612 3,560 4,000 4,158 3736.835(CR)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Cash Used in Financing Activities

Cash Used in FinancingActivities

42

19. CONCLUSION:

From the above finding and analysis various inferences can be drawn out which are as follows :

• AIRCEL is having highest current ratio which represents that AIRCEL is having very good

liquidity position and can pay off their short term liability very easily as they are maintaining

huge cash reserves.

• AIRCEL is having tough time because its market share as well as profit margins has been

reduced over the period of time which leads to significant reduction in the earning power of the

companies.

• P/E of AIRCEL was the highest in 2008-2009 but as the time passes expectation of the

investors has been declined and now it is only 2 %

• In case of net profit Aircel has to work hard to break the negative trends.

• Cash from operations is decreasing which shows decrease in revenue from primary activities.

• Cash used in investing activities is highest of aircel 6478 cr in 2007-08 but

Gradually it have been decreased which represents the lack of investments in long term assets by

the company.

• Cash used in financing activities is highest in 2007-08 and it have been increasing in each

subsequent years which represent that AIRCEL is continuously engaged in payment of

dividends and interest for the borrowed funds and they are not raising funds from market.

43

20. SUGGESTIONS:

From the personal observations and the above analysis various subjective Recommendations

which can be given to the company as follows:

• Use better & high tech methods of advertising, so that more & more subscriber

Attract towards AIRCEL.

• Should increase the service quality as well as better customer care service.

• Should work towards 3 G phones, means high speed streaming video, gaming,

Video messaging and even mobile TV.

• There are several global players keen to enter India. Like Telenor, China mobile, Telephonic,

SK telecom, NTT Docomo, Orson. Their entry will make the market even more competitive. So,

should be ready for new competition.

• Provide better customer care service and provide them maximum satisfaction.

44

21. LIMITATIONS:

Though the project is completed with proper planning and guidance with full dedication but still

various limitations that have to be faced in the process of research are as follows:

Limited Time: - Although the staff at AIRCEL was highly cooperative and devoted their

valuable time but because of time constraint they were not able to devote much time with

us.

Lack of enthusiasm on the part of officials to provide the required data.

Difficult to obtain the data of 2007-08 and 2008-09 as companies only maintains data of

3 years in their operating systems and rest at some other place.

Uniformity of Content and Mode of preparation of financial statements was not therein

the company. So it became difficult to compare among each other.

45

22 .BIBLIOGRAPHY:

Information has been sourced from namely, books, newspapers, journals, industry portals,

government agencies, industry news and developments and through access to database.

_ http://www.Google.com

_ http://www.capitaline.com/

_ http://www.wikipedia.org/

_ http://www.oecd.org/

_ http://www.legalserviceindia.com/

_ http://www.dot.gov.in/

_ http://www.economictimes.indiatimes.com/

_ http://www.ibef.org/

_ http://www.domain-b.com/

_ http://www.trai.gov.in/

_ http://www.perry4law.wordpress.com/

_ http://www.indianembassy.org/

_ http://www.financialexpress.com

_ http://www.pib.nic.in/

Annual Reports of AIRCEL of the years: 2007-08 2008-09 2009-10 2010-11 2011-

12

Sharma Seema and Lokesh Singla (2009), “Telecom equipment Industry:

Challenges and Prospects”

R.P. Rustagi, Financial Management, Edition 2007-08

S.N. Maheshwari, Financial Management, Edition 2006-07

T.S Grewal, Analysis of Financial Statements, Edition 2007-08

46

23. ANEXXURE:

P/L ACCOUNAT

BALANCESHEET

CASH FLOW STATEMENT

ALL ABOVE ARE ATTACHED IN PDF FORMAT