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8/3/2019 Fundamental Analysis -Airtel
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INTRODUCTION
Fundamental analysis is the examination of the underlying forces that affect the well
being of the company, industry groups and companies. As with most analysis the goal is
to develop a forecast of future price movement and profit from it. At the company level,
fundamental analysis may involve examination of financial data, management , business
concept and competition. At the industry level their might be an examination of supply
and demand forces of the products. For the national economy fundamental analysis might
focus on economic data to asses the present and future growth of the economy.
Fundamental analysis is a method of evaluating a security by attempting to
measure its intrinsic value by examining related economy, financial and other qualitativeand quantitative factors. Fundamental analysis attempt to study every thing that can effect
the securities value including macro economic factors and individual specific factors.
Three phase of the fundamental analysis
A. Understanding of the Macro Economic environment and developments
(Economy analysis)
B. Analyzing the prospectus of the industry to which the firm belongs(Industry
analysis)
C. Assessing the projected performance of the company( Companyanalysis)
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ECONOMY ANALYSIS
The purpose of analyze economic condition of the country in fundamental analysis to
asses the general economic situation both within the country and inter nationally.
The economy is like the tide and the various industry groups and individual
companies are like boats. When economy expands most industry groups and companies
benefits and grows. When the economy decline, most sectors and companies usually
suffer. The stock market does not operate in a vacuum it is an integral part of the whole
economy of a country, more so in a free economy that of United States and to some
extent in mixed economy like ours.
To gain an insight into the complexities of stock market. One needs to develop a
sound economic understanding and be able to interpret the impact of important economic
indicators on stock markets.
The following are some important factors which should be taken into account while
doing fundamental analysis:
Economic Growth
Per capita income
Industrial Production
Inflation
Interest Rates
Foreign Exchange Reserves
Budgetary Deficit
Domestic Savings and Investment
Tax Rates
Infrastructure
Political Situation
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INDIAN ECONOMY ANALYSIS
India GDP Growth Rate
India Gross Domestic Product (GDP) expanded 6.10% over the last 4 quarters.
The India Gross Domestic Product is worth 1217 billion dollars or 1.96% of the
world economy, according to the World Bank.
India's diverse economy encompasses traditional village farming, modern
agriculture, handicrafts, a wide range of modern industries, and a multitude of
services. Services are the major source of economic growth, accounting for more
than half of India's output with less than one third of its labor force.
India GDP Growth Rate chart
Year Mar Jun Sep Dec Average GDP
2010 8.6 8.8 8.7
2009 5.80 6.10 8.6 6.5 6.75
2008 8.60 7.80 7.70 5.80 7.48
2007 9.70 9.20 9.00 9.30 9.30
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.
INTERPETATION:-
As we can see that Indias GDP growth is increasing as compared to the last two years
which shows good prospects for investors in future and the investor can get benefits by
investing in Indian company.
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INDUSTRY ANALYSIS
Thepurpose of industry analysis is to review prevailing conditions within specific
industry and its segments. The company's industry obviously influences the outlook for
the company. Even the best stocks can post mediocre returns if they are in an industry
that is struggling.
It is often said that a weak stock in a strong industry is preferable to a strong stock in
a weak industry.
To assess the industry group potential, an investor would want to consider the overall
growth rate, market size, and its importance to economy. While the individual companyis still important, its industry group is likely to exert as much as, or more, influence on
the stock price. When stock move the usually move as groups; there are very few lone
guns out there. An understanding of the industry sector involved, including the maturity
of the sector and any cyclical effects that the overall economies have on it, is also
necessary.
The followings are some important factors which should be considered in
fundamental Analysis
Growth: A growing industry gives room for profitability.
Profitability: Average profitability of the industry should be attractive.
Demand-Supply: the wider demand supply gap, the better is the industrys
fortune in the future
Entry barrier
Competition and Market share:
Technology trends
Government Policy
Capacity Utilization
Bargaining power of buyers
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INDIAN TELECOMMUNICATION INDUSTRY
Indian Telecommunication industry, with about 464.82 million mobile phone
connections (June 2009) , is the third largest telecommunication network in the world
and the second largest in terms of number of wireless connections. For the past decade or
so, telecommunication activities have gained momentum in India. Efforts have been
made from both governmental and non-governmental platforms to enhance the
infrastructure. The idea is to help modern telecommunication technologies to serve all
segments of Indias culturally diverse society, and to transform it into a country of
technologically aware people.
Telecom Industry in India is regulated by 'Telecom Regulatory Authority of India'
(TRAI). It has earned good reputation for transparency and competence.
Two types of players exist in ' Telecom Industry India ' community
State owned companies like - BSNL and MTNL. Private companies like - Reliance Infocomm and Tata
Teleservices, Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea
Cellular, BPL Mobile, Spice Communications etc.
Telecom industry in India has a big market potentiality and is a fast growing sector.
Government of India is eager to reconstitute this telecom industry by enacting effective
policies for more investments from foreign companies, which results in a very
competitive and deregulated market in the world.
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POLICIES OF TELECOM INDUSTRY IN INDIA
Government of India implemented the unified access licensing regime, which
enables basic and cellular mobile service to use any modern technology. In
1997, Telecom Regulatory Authority of India (TRAI) was formed to
facilitate the growth of the telecom sector in India.
MAJOR SERVICES AND MARKET POTENTIALITYOF TELECOM INDUSTRY IN INDIA
Telecommunication sector in India is primarily subdivided into two segments, which are
Fixed Service Provider (FSPs) and
Cellular Services
Telecom industry in India constitutes some essential telecom services like
Telephone
Radio
Television
Internet
Telecom industry in India is specifically emphasizing on latest technologies like
GSM( Global System for Mobile Communications)
CDMA(Code Division Multiple Access)
Fixed Line and WLL (Wireless Local Loop)
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GROWTH OF TELECOM INDUSTRY IN INDIA
Indian telecom industry continued to registersignificant growth in 2008-09.
Indian telecom network,with about 414 million connections in February 2009,is
the third largest in the world, while it is creditedwith the second largest wireless
network in the world.
At the current pace, the target of 500 million connections by 2010 is well within
reach .The Government of India has reiterated its commitment to reach out to the
remote and uncovered areas and to augment the broadband facilities in rural areas.
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Economic Survey 2009-10Growth
Growth of telephones over the years(in million)
March07
March08
March09
Feb.10
Fixed lines 40.23 40.77 39.41 37.73
CDMA 32.67 44.62 68.38 92.14
GSM 69.19 120.47 192.70 283.98
Wireless(CDMA & GSM) 101.86 165.09 261.08 376.12
Gross Total 142.09 205.86 300.49 413.85
Source : Department of Telecommunicationspoint to point
050
100150200250300350400450
31/3/200
7
31/3/200
8
31/3/200
9
31/3/201
0
Fixed line
CDMA
GSM
Wireless(CDMA
&GSMA
Gross Total
INTERPRETATION:-
Graph shows that India telecom industry is growing in CDMA, GSMA and
wireless (CDMA & GSMA) sectors. It shows overall upward trend of growth rate
in these sectors. It will beneficial for investors to invest in telecom industry
because it is growing industry.
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Future prospects are good in this industry.
COMPANY ANALYSIS
The purpose of company analysis to analyze the financial and non-financial aspects of a
company to determine whether to buy, sells, or holds onto the shares of a particular
company
After determining the economic and industry conditions, the company itself is analyzed
to determine its financial health. This is usually done by studying the company's financial
statements. From these statements a number of useful ratios can be calculated. The ratios
fall under five main categories: profitability, price, liquidity, leverage, and efficiency.When performing ratio analysis on a company, the ratios should be compared to other
companies within the same or similar industry to get a feel for what is considered
"normal." These are quantitative factors of company analysis; there are also some
qualitative factors which should be considered also.
Following are some more important aspects about company
Shareholding pattern
Growth
Technology
Expansion Plan
Profitability
Capital History
Marketing Capabilities
Most important its financial statement
So fundamental analysts use different tools and ratios to compare all sorts of
companies no matter what business they are in or what they do.
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FINANCIAL RATIOS
A financial ratio is an expression of the relationship between two selected items from the
income statement or the balance sheet. Ratio analysis helps you to evaluate the weak and
strong points in your financial and managerial performance. Financial ratio analysis is
calculation and comparison of ratio which are derived from the information in a
companys financial statements. The level and historical trends of these ratios can be used
to make inferences about a companys financial condition its operations and
attractiveness as an investment.
1.Balance sheet ratio analysis
Current ratio
Quick ratio
2.Income statement ratio analysis
Gross margin ratio
Net profit margin ratio
3.Management/efficiency ratios
Inventory turnover ratios
Account receivable ratio
4.Overall profitability analysis
Return on assets ratio
Return on investment ratio
5. Market test or valuation ratios
Earning per share
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COMPANY ANALYSIS OF BHARTI AIRTEL
With this, Bharti is now the world's third-largest, single-country mobile operator
and sixth-largest integrated telecom operator.
It also offers fixed line services and broadband services.
It offers its telecom services under the Airtel brand and is headed by Sunil Bharti
Mittal.
The company also provides telephone services and Internet access over DSL in 14
circles.
It also acts as a carrier for national and international long distance communication
services.
The company has a submarine cable landing station at Chennai, which connects
the submarine cable connectingChennai and Singapore.
The businesses at Bharti Airtel have always been structured into three individual
strategic business units (SBU's)
The mobile business provides mobile & fixed wireless services using GSM
technology across 23 telecom circles.
The Airtel Telemedia Services business offers broadband & telephone services
in 95 cities and has recently launched a Direct-to-Home (DTH) service, Airtel
digital TV. The company provides end-to-end data. Enterprise services to the corporate customers through its nationwide fiber optic
backbone, last mile connectivity in fixed-line and mobile circles, VSATs, ISP and
international bandwidth access through the gateways and landing station.
Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber
base, behind China Mobile and China Unicom
http://en.wikipedia.org/wiki/Sunil_Bharti_Mittalhttp://en.wikipedia.org/wiki/Sunil_Bharti_Mittalhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Sunil_Bharti_Mittalhttp://en.wikipedia.org/wiki/Sunil_Bharti_Mittalhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Singapore8/3/2019 Fundamental Analysis -Airtel
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MARKET SHARE OF DIFFERENT TELECOMINDUSTRIES IN INDIA
In India, the company has a 24.6% share of the wireless services market, followed by
17.7% for Reliance Communications and 17.4% for Vodafone Essar.
24.6
17.7
17.4
40.3
Bharti Airtel
RelianceCommunicationa
Vodafone Essar
Others
Slice 5
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COMPANY ANALYSIS OF BHARTI AIRTEL BY
USING DIFFERENT RATIOS
1. BALANCE SHEET RATIO ANALYSIS
YEAR
RATIOS
March 06 March 07 March 08 March 09 March 10
LIQUIDITYRATIOSCurrent Ratio 0.44 0.47 0.57 0.69 0.72
Quick Ratio 0.45 0.47 0.55 0.65 0.72
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
CURRENT
RATIOS
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Quick ratios
INTERPRETATION:-
Bharti airtels both current and quick ratios are moving upward means shows increasing
trends. These shows company has good liquidity position and Company is able to pay
day to obligations of company.
2. INCOME STATEMENT RATIO ANALYSIS
YEAR
RATIOS
March 06 March 07 March 08 March 09 March 10
IncomestatementRatios
Gross profitRatio
23.14 27.47 29.08 29.3327.97
Net profit Ratio 17.80 22.46 23.99 22.58 26.40
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0
5
10
15
20
25
30
35
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Gross Profit
Ratio
0
5
10
15
20
25
30
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Net profit
ratio
INTERPRETATION:-
High income ratio shows company is at good profitability condition. As we see that net
profit ratio in 2009 decline. But this is minor decline. This is due to high inflation rate
and global meltdown. But company did not affected very much.
3. MANAGEMENT/EFFICIENCY RATIOS
YEAR
RATIOS
March 06 March 07 March 08 March 09 March 10
Management/efficiency
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Ratios
Inventory Ratio 634.52 373.35 453.06 547.83 1307.05
Accountreceivable ratio
12.57 14.31 12.28 12.7815.30
0
200
400
600
800
1000
1200
1400
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Inventory
turnover ratio
02468
1012141618
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Account
receivable artio
INTERPRETATION:-
High inventory turnover ratio and high debtor turnover ration shows the managements
efficiency in using inventory and collecting debts respectively. Bharti airtels both ratios
are high in 2009 as compare to previous years. Company is efficient in using inventory
properly and company able to collecting cash from debtors on time. In this way it shows
good prospectus for investors to invest in this company in future.
4. OVERALL PROFITABILITY ANALYSIS
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YEAR
RATIOS
March 06 March 07 March 08 March 09 March 10
Overallprofitabilityanalysis
Return on assetRatio
634.52 373.35 453.06 547.831307.05
Return oninvestment ratio
0.72 0.75 1.03 1.000.81
0
200
400
600
800
1000
1200
1400
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Return on
assets ratio
0
0.2
0.4
0.6
0.8
1
1.2
Mra-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Return on
investment
ratio
INTERPRETATION:-
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High return on asset ratio shows that companys overall profitability is goods. Bharti
airtels this ratios is high in 2009 as compare to previous years. So its overall profitability
is good whether its return on inventment ratio has reduced by .03 point. It may be due to
inflation and global meltdown reason.
5. MARKET TEST OR VALUATION RATIOS
YEAR
RATIOS
March 06 March 07 March 08 March 09 March 10
Market test orvaluation ratio
Earning pershare ratio
10.62 21.27 32.90 40.79 42.82
05
1015202530354045
Mar-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Earning per
share ratio
INTERPRETATION:-
High earning per share is considered good from investors point of view. Bharti airtels
this ratio is increasing year by year. It shows that investors has good prospectus in Bharti
airtel if they will purchase is share.
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CALCULATION OF INTRINSIC VALUE FOR MARCH FY2010
o EXPECTED EPS = 26.52
o EXPECTED PE RATIO= 14.28
o INTRINSIC VALUE FOR MARCH 2010= 26.52*14.28=378.70
Market Price 299.70
Intrinsic value is greater than market price therefore investor are suggested to buy
bharti airtels share at current level on 299.70.
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CONCLUSION
On the basis of this assignments 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 of telecom 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 turnover ratios,
Account receivable ratio, Return on assets ratio,
Return on investment 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 and on the basis of intrinsic value we
can say that investor can take benefit in future by
purchasing bharti airtels share.
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REFRENCES:
WEBSITES:
en.wikipedia.org/wiki/Fundamental_analysiswww.investopedia.com stocks.about.com/od/evaluatingstocks/a/Fundanatools1.htmwww.finpipe.com/equity/fundanl.htmwww.airtel.in/www.bharti.com/www.moneycontrol.com/financials/bhartiairtel/ratios/BA08