Professional Documents
Culture Documents
1. Balance Sheet:
The balance sheet is helpful to quantify the overall health of a company by showing the
assets and liabilities of the enterprise. Moreover, it displays the solvency of a business by
disclosing how much assets are available for payment of liabilities. The proprietary
interest can be found out from the balance sheet. Several ratios like the liquidity ratio and
current ratio can be found out from the assessment of balance sheet of the company, and
that helps people to determine the long term and short term outlook of the company.
These numbers are of particular interest to people who are concerned about the
sustainability and wishes to buy or invest in the company.
2. Cash Flow Statement
The Cash Flow statement keeps a track of the outflow and inflow of cash for a given
business over a period. It critically looks at a company's ability to generate cash as
because without cash company cannot survive. Investors and analysts use the cash flow
information to identify trends over time. The patterns are helpful to ascertain the
sustainability of the business despite what other financial statements and performance
results have suggested. It also provides context for other financial ratios to help lenders
and business leaders to make informed decisions.
3. Income Statement
The primary advantage of Income Statement is the information it gives on revenues. It is
thorough with the normal costs associated with managing operations and additional costs
including taxes, applied to gross income earned. If the investors have access to the income
statement of the company, it is very for them to see earnings per share. A higher earnings per
share gives a notion of the well-being of the enterprise.
Reliance Communications:
Reliance Communications
4
3.5
3
2.5
2
1.5
1
0.5
0
41699
41334
40969
The curve between total reserves and operating income Curve shows that there is a huge gap
between total reserves and the operating income of the Reliance Communications. Even if
having a significant difference between the above two cash items, the thing which needs to be
pondered upon is that the company didnt pay any dividend to the Shareholders during the year
2014.
Reliance Communications
4
3.5
3
2.5
2
1.5
1
0.5
0
41699
41334
40969
As per the graph shown between earnings per share and dividend paid per share, it can be seen
that with increasing or maintained earnings per share, Reliance Communications didnt pay the
divided for the year 2014.
Bharti Airtel
70000.00
60000.00
50000.00
Total Reserves
40000.00
Operating Income
30000.00
20000.00
10000.00
0.00
41699
41334
40969
40603
For Bharti Airtel, the gap between the total reserves and the operating income is constant and
maintained. From the graph it can be inferred that the company believes in maintaining the above
mentioned figures and also the it has paid handsome dividends in all these years unlike Reliance
Communications.
Bharti Airtel
18
16
14
12
10
8
6
4
2
0
41699
41334
40969
From the graph, it can be inferred that with the increase in the earning per share, the company
has also increased the dividend paid per share. This positive trend in dividend payments is a
positive sign for the company
its sales, and use the funds to pay off secured and unsecured long
term loans (secured loans and unsecured loans decreased by around
50% and 10% respectively during the year 2012-2014) as compared
to the year 2011 & 2013.
2. Solvency ratios:
For Reliance
Communications the
ratios were not that
low after 2011 because
it was able to generate
huge revenue against
3G services, which
was launched in 2011.
Also, as the liquidity
The
ratios
ratiossolvency
figures were
show
the capability
consistent
from 2012of
the
company
to pay
to 2014,
it shows
thatoff
the
the non-current
company believes
liabilities.
The debt
in maintaining
equity
ratio
is to
sufficient
funds
important
for investors
meet its short-term
as
this relates the longneeds.
term
liability
to of
Liquidity
ratios
Shareholders
funds in
Bharti Airtel indicate
the
company.
This
that the company is
ratio
shows
how
unable
to pay
offmuch
ashort-term
company liabilities.
is using its
debt
to buy assets
But looking
at the in
comparison
Reserves andwith
Surplus
Shareholders
in the Balance funds.
Sheet of
Neither
too
high
ratio
the company, it seems
nor
ratio isis
that too
the low
company
good
forathe
earning
lot through
companys reputation.
If the ratio is too high,
it shows that the
company is unable to
The Operating
generate good profits
Efficiency ratios tells
from debts. Too low
us the degree of the
ratio puts the company
efficiency in
into constant pressure
management as well as
of maximizing profits,
its operating activities.
For Reliance
Communications the
inventory turnover
ratio decreased during
the year 11-12, which
indicates that the
companys
performance slowed
The Inventory turnover ratio shows the number of times the inventory was sold over the financial
period. The days in the period can then be divided by the inventory turnover formula to calculate
the days it takes to sell the inventory on hand or inventory turnover days. For Reliance
Communications as well as for Bharti Airtel the inventory turnover ratio decreased in 2011-12
and increased from 2012-14 which shows that the performance of the company has decreased
initially for a year and then increased from 2012 to 2014.This is also evident from the stock
market performance of the company which first decreased from 2011 to 2012 and then increased
from 2012 to 2014.
As
Reliance Communication
Bharti Airtel
The working capital ratio tells us how effectively the working capital to generate sales or
revenue. According to the graph a negative working capital shows that the liabilities are greator
than the assets or the amount which the company is liable to pay to its creditors.
Ordinarily, having negative anything is not a good thing, but with operating working capital it
can be. Mulford says companies with negative operating working capital (expressed as a
percentage of revenue) tend to be more adept at raising cash than companies with positive
operating working capital. If a company has positive working capital, his thinking goes, it tends
to use a portion of its growth and revenue to pay for the increase it will have in inventories and
receivables. But a company with a negative operating working capital can effectively borrow
from its vendors or customers as they grow, since it is being financed with customer funds, says
Mulford.
4. Profitability analysis
The operating profit margin is the part of the companys revenue which is left after paying off all
the operating production expenses such as raw material, administrative salaries and costs.
The operating profit margin for Bharti Airtel is greator than that for Reliance Communications as
the
Operating profit margin is a measurement of the proportion of a companys revenue that is left
over after paying for production costs such as raw materials, salaries and administrative costs.
Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance
costs and taxes out of operating profit and shows what is left for the shareholders as a percentage
of net sales. Together these ratios help in understanding the cost and profit structure of the firm
and analysing business inefficiencies.
Return on Capital Employed (ROCE) measures a companys profitability from its overall
operations by calculating the return generated on the total capital invested in the business (i.e.
equity + debt). Return on Equity (ROE) or Return on Net worth (RONW) measures the amount
of profit which the company generates on money invested by the equity shareholders. In short,
ROE draws attention to the return generated by the shareholders on their investment in the
business. Together these ratios can be used in comparing the profitability of the company with
other companies in the same industry.
In real business, earnings never stay constant. If a company can grow its earnings, it takes fewer
years for the company to earn back the price you pay for the stock. If a companys earnings
decline it takes more years. As a shareholder, you want the company to earn back the price you
pay as soon as possible. Therefore, lower-P/E stocks are more attractive than higher P/E stocks
so long as the P/E ratio is positive. Also for stocks with the same P/E ratio, the one with faster
growth business is more attractive.
For airtel P/E ratio is higher for airtel bharti as compaired to reliance communications.
The DPS decreased from 09-14 for reliance communication due to the fact that the company is
struggling hard to reduce its debt by pushing the revenue generated throughout the year by QIP
route to increase its equity ratio. Also as most of the funding for airtel is through shareholder,
therefore for the profit earned, it has to pay handsome amounts of dividends so as to maintain the
shareholders interest.
Dupont Analysis:
Scams:
http://www.dnaindia.com/money/report-rcom-acs-on-rs1126-crore-expenses-unusual1550087
increase in equity during 2013-2014http://www.rcom.co.in/Rcom/aboutus/ir/pdf/Abridged-Annual-Report-2013-14.pdf
FundraisedDuringthecurrentfinancialyear201415,theCompanyhasreceivedoverwhelmingresponseinthe
QualifiedInstitutionalPlacement(QIP)Programme.BeingthelargesteverprivatesectorQIPinthehistoryof
corporateIndia,theCompanyhasraised`4,808croreinthemaidenQIPissue.Itshowstheconfidenceofthe
Investors,whichwillstrengthenthefinancialpositionofourCompany.ThePromotershavesubscribedtothe
securitiesoftheCompanyfor`1,300croreunderpreferentialissue.
Also Duringthefinancialyear201314,thebusinessoftheCompanyhasbeenreorganisedintotwostrategic
customerfacinggeographicalbusinessunits:IndiaandGlobalOperations.Thissimplifiedsegmentreportingwill
leadtoenhancedtransparencyanddisclosuresofthefinancialperformanceoftheCompany.Thisisinlinewiththe
Companysendeavourforamoretransparentandrobustreportingstructurewhichwillbenefitallthestakeholders.
DividendDuringtheyearunderreview,theBoardofDirectorshasnotrecommendedanydividendontheequity
sharesoftheCompany
In 2013 RCom diverges into rcom and r properties so its debt is redistributed, what happened
http://www.moneycontrol.com/news/cnbc-tv18-comments/reliance-communications-to-demergereal-estate-business-_913055.html
RCom to demerge realty assets as Reliance Properties aims to monetise assets worth $2B
Read more at:
http://www.vccircle.com/news/real-estate/2013/07/08/rcom-demerge-realty-assets-reliance-properties-aims-monetise-assets
Reliance Communications (RCOM) has informed BSE (pdf) that its company board has
decided in-principle to demerge its real estate business into a separate company
called Reliance Properties Ltd.
The company informed this proposed demerger is part of the companys strategic plan
to divest non-core assets, and focus on its core wireless and enterprise business. It also
noted that this demerger will have no impact on RCOMs profitability since real estate
was not being used in its telecom business.
The new entity will be listed separately and all RCOM shareholders will receive pro-rate
shareholding in Reliance Properties free of cost, based on their existing shareholding in
RCOM.
Over the past few months, RCOM has inked quite a few deals to reduce its debts and is
reportedly in the process of signing few more deals for the same.
http://www.medianama.com/2013/07/223-reliance-communications-real-estatedemerger/
Key PlayerReliance
Communications
Rcom faces to strengthen its BS.
Sharing Tower
RelianceCommunications(RCOM)andRelianceJIOInfocommhavesignedanagreementforsharingtower
infrastructurewithanaggregatevalueofINR120b.ThedealwillenableRelianceJIOtoutilizeupto45,000sites
fromRCOM'sexistingnetwork.Weestimateincrementalrevenueof~INR8bperyearandincrementalEBITDA
ofINR7b7.5bperyearforRCOM,assumingthatRelianceJIOrampsupto45,000sites.Weareupgrading
FY14/FY15EEBITDAby12%andtargetpriceby14%toINR111.ThestocktradesatanEVof7.5xFY14E
and6xFY15EEBITDA.MaintainNeutral.
http://www.moneycontrol.com/news_html_files/news_attachment/2013/
RCOM_Motilal_110613.pdf
reliancecommunicationsVoice