Study and Analysis of Financial Ratios of Bharti Airtel .pptx

Study and Analysis of Financial Ratios of Bharti Airtel
Presented by : Vikash Kumar Jha
Seat No : 26870
Poona Institute of Management Science & Entrepreneurship
Project Guide: Dr. Payal Samdariya

Objectives of the study
This study is undertaken in order to evaluate the
following below through ratio analysis of financial
statements of Bharati Airtel.
 To study the financial health of Bharati Airtel using ratio
analysis.
 To study the liquidity and profitability position of the
company using ratio analysis.

Organizational Profile
 Indian mobile telephony market is increasing day by
day and there is more to happen with technological up
gradations occurring nearly every day and the ever-
increasing demand for easier and faster connectivity
 Sunil Bharti Mittal launched telecom services in Delhi in
1995.
 Airtel is an Indian multinational telecommunciations
services company based in New Delhi. It operates in 18
countries across South Asia and Africa.
 As of 2020, Airtel has a revenue of Rs 89,473 crore (13
billion USD).
 Market share of Bharti Airtel is 28% in Indian market.

Product Mix
 Airtel provides GSM, 3G, 4G LTE, 4G+ mobile services, fixed
line broadband and voice services depending upon the
country of operation. Below are the product lines of Airtel

Key Leadership and Management
 Sunil Bharti Mittal – Founder and Chairman
 Rakesh Bharti Mittal – Vice Chairman
 Gopal Vittal – Managing Director and Chief Executive
Officer
 Nakul Sehgal – Chief Financial Officer

Research Methodology Used
 Secondary data: The sources of secondary data such
as Annual Reports were collected from comany’s
website and Money Control website.
 Tools Applied: Under accounting tools we used ratio
analysis for comparative and common size analysis.
Graphs and charts were applied to visualize and
interpret the data.

Conceptual Framework
 Financial Statements refers to an organized collection
of data on the basis of accounting principles and
conventions to disclose its financial information. In
assessing the significance of various financial data,
experts engage in ratio analyses, the processes of
determining and evaluating financial ratios.
 The analysis of the financial statements and
interpretations of financial results of a particular period
of operations with the help of ratios is termed as ratio
analysis. Ratio analysis used to determine the financial
soundness of a business concern.

 Financial ratio analysis is the calculation and
comparison of ratios which are derived from the
information in a company’s financial statements. The
level and historical trends of this ratios can be used to
make inferences about a company’s financial condition,
its operations and attractiveness as an investment.
Financial ratio are useful for several parties -
 Investors, both present as well as potential investors
 Financial analyst
 Company’s management
 Creditors and suppliers
 Lending institutions
 Financial manager

Financial Ratios are analysed for the following aspects-
 Solvency
 Stability
 Profitability
 Operational efficiency
 Credit standing
 Effective utilization of resources
 Leverage or external financing.

Classification of Financial Ratios: Financial ratios are
classified
on the basis of the different parties interested in making
use of
the ratios. This classification can be grouped as below:
 Liquidity ratios
 Profitability ratios
 Solvency ratios
 Turnover ratios/ Activity Ratios
 Market ratios.

Ratio Analysis and Interpretations (Bharati
Airtel)
1. Current Ratio: It measures the ability of a firm to meet its
current obligation.
current ratio = (current assets/ current liabilities)
Year 2020 2019 2018 2017 2016
Current asset
58,781.3
0 19,514.90 21,495.90 15,310.10 11,421.00
Current liabilities
93,211.2
0 60,701.20 43,640.40 35,816.40 27,846.80
Current Ratio 0.63 0.32 0.49 0.43 0.41

Airtel) continued....
2. Quick Ratio: Also known as Acid test ratio is a more severe and
stringent test of a firm’s ability to pay its short term obligations.
Quick ratio = (Quick Asset/ Current Liabilities)
Year 2020 2019 2018 2017 2016
Quick Asset
58,775.1
0
19,512.9
0
21,483.3
0
15,302.3
0
11,410.4
0
Current Liabilities 93,211.20 60,701.20 43,640.40 35,816.40 27,846.80
Quick Ratio 0.63 0.32 0.49 0.43 0.41

3. Interest Coverage Ratio: The interest coverage ratio tells us how
easily a company is able to pay interest expenses associated to
the debt they currently have.
Interest Coverage = (Earnings Before Interest and Taxes, EBIT
/ Interest Expense)
Year 2020 2019 2018 2017 2016
EBIT -39,557 2,603 4,387 -5,597 12,228
Interest Expense 9,533.80 5,473.30 5,069.00 3,144.90 2,076.40
Interest Coverage Ratio -4.15 0.48 0.87 -1.78 5.89

4. Debt Ratio: It measures the extent of a company's leverage. A debt
ratio greater than 1 tells us that a company has more debt than
assets.
Debt Ratio = (Total Debt/ Total Assets)
Year 2020 2019 2018 2017 2016
Total Debt 198943.6 124601.6 102076.4 90430.3 73298.9
Total Assets
3,00,372.
80
2,22,907.
50
2,04,937.
30
1,91,637.
60
1,85,028.
00
Debt Ratio 0.66 0.56 0.50 0.47 0.40

5. Debt to Equity Ratio: It is used to evaluate a company's financial
leverage. It reflects the ability of shareholder equity to cover all
outstanding debts in the event of a business downturn.
Debt to Equity Ratio = (Total Liabilities/ Shareholders Equity)
Year 2020 2019 2018 2017 2016
Total Debt 198943.6 124601.6 102076.4 90430.3 73298.9
Shareholder's Equity 101075
98,305.9
0
1,02,860.
90
1,01,207.
30
1,11,729.
10
Debt to Equity Ratio 1.97 1.27 0.99 0.89 0.66

6. Operating Profit Ratio: It indicates the operational efficiency of the firm
and is a measure of the firms ability to cover the total operating
expenses. Basically, the operating profit margin ratio indicates how
much profit a company makes after paying for variable costs of
production such as wages, raw materials, etc.
Operating Profit Ratio = (Operating Profit/Net Sales) * 100
Year 2020 2019 2018 2017 2016
Operating Profit
20,133.6
0
12,286.4
0
17,804.9
0 23,692.90
22,311.2
0
Sales
54,317.1
0
49,606.0
0
53,663.0
0 62,276.30
60,300.3
0
Operating Profit Ratio 37.07% 24.77% 33.18% 38.04% 37.00%

7. Net Profit Ratio: This ratio reveals the firms overall efficiency in
operating the business. It helps to measure overall operational
efficiency of the business. Net Profit Ratio is very useful tool for
investment evaluation.
Net Profit Ratio = ( Net Profit/ Sales) * 100
Year 2020 2019 2018 2017 2016
Net Profit -36,088.20 -1,869.20 79.2 -9,925.60 7,780.30
Sales 54,317.10 49,606.00 53,663.00 62,276.30 60,300.30
Net Profit Ratio -66.44% -3.77% 0.15% -15.94% 12.90%

8. Return on Assets: It is an indicator of how profitable a company is
relative to its total assets. Return on assets gives a manager, investor,
or analyst an idea as to how efficient a company's management is
at using its assets to generate earnings.
Return on Assets = (Net Income/ Total Assets)
Year 2020 2019 2018 2017 2016
Net Profit -36,088.20 -1,869.20 79.2 -9,925.60 7,780.30
Total Assets 3,00,372.80
2,22,907.
50
2,04,937.
30
1,91,637.
60
1,85,028.
00
Return on Assets -12.01% -0.84% 0.04% -5.18% 4.20%

9. Asset Turnover Ratio: It measures the value of a company's sales
or revenues relative to the value of its assets. It can be used as an
indicator of the efficiency with which a company is using its assets to
generate revenue.
Asset Turnover = (Total Sales/ Total Assets)
Year 2020 2019 2018 2017 2016
Total Sales 54,317.10 49,606.00 53,663.00 62,276.30 60,300.30
Total Assets
3,00,372.
80
2,22,907.
50
2,04,937.
30
1,91,637.
60
1,85,028.
00
Asset Turnover Ratio 18.08% 22.25% 26.19% 32.50% 32.59%

Learnings
 The main learning from the study was how to analyse and
interpret financial statements of any company.
 From the study, it was learned that the liquidity position of
Bharti Airtel is unsatisfactory. Current Ratio, Quick Ratio and
Working Capital, all points out that the Margin of safety i.e,
cushion of protection against current creditors is poor. However,
it has also been found out that it is improving in 2020. Also the
increase in current assets indicates growth.
 Analyzing Coverage Ratios such as Interest Coverage Ratio,
Debt Ratio, Debt to Equity Ratio shed light on the long term
slovency position of Bharti Airtel. It was found out that even
though the coverage ratios were below advisable figures, the
total asset of Bharti Airtel is more than its total debt.
 The Profitability Ratios indicated how Bharti Airtel are reporting
losses after 2017. However, the positive increasing trend of
Operating Profit Ratio shows how efficiently Bharti Airtel has
been in controlling cost and expenses with the business
operations.

Recommendations
 The Financial Ratios indicated the losses incurred by Bharti
Airtel. Currently, the Market Share of Bharti Airtel in India is
28%, inorder not to further lose its consumers, affordable 5G
services should be launched, which will help to generate sales.
 Excessive marketing of Airtel Money and Airtel TV should be
done to boost sales. OTT platforms are on the rise all over the
world.
 In order to boost sales in rural areas more Airtel store should be
established.

Conclusion
 This study of financial analysis of statements with the help of financial
ratios gives a brief knowledge and experience on how to analyse
financial positions of any enterprise. The financial ratios indicates the
performances of liquidity, profitability and solvency position of a firm.
These financial ratios can be utilized if any potential investor wants to
invest in the firm.
 Bharti Airtel ranks third as the market leader among
telecommunications in the world. Even though for the past three years,
Airtel has been reporting losses as indiacated in the study, it has
potential to emerge profitable.
 Bharti Airtel has invested heavily in innovation. One web, a Low Earth
Orbit (LEO) satellite, in order to cover the remotest area, Airtel along
with UK government has planned to launch 648 satellites that will
deliver high speed internet to remotest area globally.
 All this indicates that in future too Bharti Airtel will remain one of the
leaders globally in telecom sector.

Bibliography
 Financial Cost and Management Accounting, Dr. P. Periasamy
 Financial Management, Shashi K. Gupta and R K Sharma
 Fundamentals of Financial Management, A. P Rao
 www.moneycontrol.com
 www.wikipedia.org
 www.airtel.in
 www.financialexpress.com

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