project on rcom

8/3/2019 Project on RCOM

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Reliance Communication Ltd.

Company Analysis of Reliance Communication Ltd.

A Review of the literature

Jitendra Pareek

PGPM-PA1012

Professor B.V.Krishnamurthy

October 31, 2011


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Financial analysis

Balance sheet

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07Sources of funds

Owner's fund

Equity share capital 1,032.01 1,032.01 1,032.01 1,032.01 1,022.31

Share application money - - - - -

Preference share capital - - - - -

Reserves & surplus 47,112.47 49,466.88 50,658.31 23,808.02 19,503.23

Loan funds

Secured loans 15,226.02 3,000.00 3,000.00 950.00 5,113.57

Unsecured loans 16,226.72 21,478.28 27,903.61 19,336.43 9,454.27

Total 79,597.22 74,977.17 82,593.93 45,126.46 35,093.38

Uses of funds

Fixed assets

Gross block 40,904.17 39,838.17 37,941.15 21,576.32 20,625.82

Less : revaluation reserve - - - - -

Less : accumulated depreciation 12,063.27 9,225.69 6,533.38 4,688.69 2,527.37

Net block 28,840.90 30,612.48 31,407.77 16,887.63 18,098.45

Capital work-in-progress 9,907.66 1,683.52 3,643.86 7,117.56 2,185.60

Investments 32,102.13 31,898.60 31,364.75 13,844.14 5,434.43

Net current assets

Current assets, loans & advances 19,153.82 20,005.94 25,543.01 18,515.29 20,107.04

Less : current liabilities &

provisions

10,407.29 9,223.37 9,365.46 11,238.16 10,732.14

Total net current assets 8,746.53 10,782.57 16,177.55 7,277.13 9,374.90

Miscellaneous expenses not written - - - - -

Total 79,597.22 74,977.17 82,593.93 45,126.46 35,093.38

Notes:


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Book value of unquoted

investments

32,101.85 31,898.31 31,364.63 13,844.14 5,434.43

Market value of quoted investments 0.28 0.29 0.12 - -

Contingent liabilities 1,958.61 3,274.83 6,555.82 4,392.73 3,781.30

Number of equity shares

outstanding (Lacs)

20640.27 20640.27 20640.27 20640.27 20446.15

Annual results in brief

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sales 12,129.77 12,290.61 13,610.58 13,416.19 11,725.26

Operating profit 421.89 869.57 4,337.16 4,882.46 4,476.60

Interest 178.12 -1,058.38 85.58 445.17 232.38

Gross profit 728.02 2,149.06 4,335.67 4,447.75 4,280.87

EPS (Rs) -3.67 2.32 11.40 12.53 11.78

During the year under review, RCOM Company has earned income of Rs.12, 129.77crore

against k 12,290.61 crore in the previous year. The Company has incurred loss ofRs. 160.84

crore compared to profit after tax of Rs. 478.93 crore in the previous year. The financial year

2011 witnessed hyper competitive environment in the telecom industry resulting in substantial

decrease in tariff rates. Despite this, RCOM was able to achieve reasonable top -line growth

during the year. The key financial highlights on a consolidated basis are: Total income of Rs.

23,108 crore (US$ 5,182 million), as against Rs. 22,132 crore (US$ 4,903 million) in last

financial year Net profit of Rs.1, 346 crore (US$ 302 million), as against Rs. 4,655 crore (US$

1,031 million) in previous financial year. Cash Earnings per Share (Cash EPS) of Rs. 38.81 (US$

0.87) as against Rs. 41.30 (US$ 0.91) in the previous year and Basic Earnings per Share (EPS) of

Rs. 6.52 (US$ 0.15), as against Rs. 22.55 (US$ 0.50) in the previous financial year. Net worth of

Rs. 35,752 crore (US$ 8,017 million) puts its among the top Indian private sector companies.


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Ratio analysis:

Key Financial Ratios ------------------- in Rs. Cr. -------------------

Key financial

ratio

March2011 March 2010 March 2009 March

2008

March 2007

Current Ratio 1.84 1.37 1.45 0.95 1.77

Quick Ratio 1.81 2.14 2.70 1.63 1.86

Debt Equity

Ratio

0.65 0.48 0.60 0.82 0.71

Operating

Profit Margin

(%)

12.85 16.18 34.66 41.73 43.21

Profit Before

Interest And

Tax Margin

(%)

0.82 4.75 20.91 29.21 28.44

Net Profit

Margin (%)

-6.00 3.33 30.47 17.45 18.63

Return on

total(ROA)

233.26 244.66 250.43 120.35 100.39

ROE

Dividend Per

Share

0.50 0.85 0.80 0.75 0.50

Earnings Per

Share

-3.67 2.32 23.27 12.53 11.78

Source: Dion Global Solutions Limited

1. Current ratio: it gives indication about companys asset and liabilities. RCOM is havinghighest current ratio in 2011 over the last consecutive four years. Means in this company

has more liabilities because of loan of Rs. 79,597.22.


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2. Quick ratio: it gives indication about current asset minus inventory/current liabilities.The difference is that it explains the extent to which a firm can meet its short term

obligation without meet relying upon the sale of its inventories. Here in 2011 the quick

ratio is 1.81. and in 20010 it was 2.14 means inventory was more in 2010 compare with

2011

3. Debt Equity Ratio: total debt/ total stockholder equity, it describe about the percentageof total funds provided by creditors versus by owners. Here in 2011 debt equity ratio is

0.65, 0.48, 0.60, 0.82, 0.71 respectively 2011 to 2007 means RCOM had more debt over

the equity in 2008.

4. Operating Profit Margin ratio: earnings before interest and taxes (EBIT)/sales. Thisratio basically measure profitability without concern for taxes and interest. generally it

uses only for companies internal matter, the shareholder are not included, it measure the

companys overall performance with total sales .in 2011 its declining decline in profit

numbers for the mobile operator, which offers services on both the CDMA and GSM

platforms, largely driven by a hyper competitive Indian mobile market along with the

burden of servicing a huge loan on account of acquiring third generation (3G) licenses.

5. Dividend Per Share:- dividend per share ratio is less in 2011(0.50) compare with2010(0.85) .in other words the company is paying less as dividend and retention of

earning is high which used to expand the market and could have been used in other

options .but still the shareholders are willing to pay more to RCOM..It indicates RCOM

is using retain earning for further business operation.

6. Earnings per share:-it measure availability of earning to the owner of common stock.As per above datas the EPS is very low in 2011(-3.67), 2011 revenues at Reliance

Communications Ltd. totaled 231.1B, while annual losses equaled 3.67 per share.


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Market analysis

Reliance Communications (formerly Reliance Communications Ventures) is one of India's

largest providers of integrated communications services. The company has more than 20 million

customers and serves individual consumers, enterprises, and carriers, providing wireless, wire

line, long distance, voice, data, and internet communications services through a number of

operating subsidiaries.

The company sells communications and digital entertainment products and services through its

chain of Reliance Web World retail outlets. The company's Reliance Infocomm subsidiary

provides wireless communications services throughout India. Reliance Communications is part

of the Reliance - Anil Dhirubhai Ambani Group. The current network expansion undertaken by

Reliance is the largest wireless network expansion undertaken by any operator across the world.

Reliance Communications offers a diverse range of services under three business segments

namely wireless, global and broadband. The company through its wireless business segment

offers mobile and fixed wireless services. Its services include mobile (CDMA & GSM), VAS,

wireless data, fixed wireless and PCO. Reliance Communications under its global segment offers

services through the following divisions - voice, data, WiMAX, and national long distance with a

subscriber base of 86 mn (as of Sept 09).

The company operates in 22 telecom circles and 48,000 telecommunication towers. In FY09, the

company launched DTH services through its subsidiary under the brand Reliance BIG TV.

During FY09, it launched GSM services in 14 service areas. The company has registered

revenues of Rs. 570 bn (US $ 11.85 bn) for the second quarter ended Sept 09. During the same

period, the company formed a joint venture along with Alcatel Lucent to manage its GSM and

CDMA networks. In FY09, the company launched wireless internet service under the brand

name - Reliance Net connects Broadband Plus with its network base in 35 cities. During FY09,

the company merged its wholly owned subsidiary Reliance Gateway Net Ltd with itself. The

company entered into a partnership with Microsoft in Nov 07 offering Windows Mobile

Solutions on its wireless networks and with UTV in Jan 2010 for offering gaming services

through its DTH services.


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Wireless segment: With over 150 million subscribers across India, Reliance Mobile is Indias

largest mobile service brand. Reliance Mobile services now cover over 24,000 towns, 6 lakh

villages, and still counting. It offer CDMA and GSM based wireless services on a nationwide

basis, including mobile and fixed wireless voice, data, and value added services for individual

consumers and enterprises. Following the recent roll-out of our GSM network RCOM now the

only player in the country offering both GSM and CDMA (dual technology) services on a

nationwide basis. RCOM not only provide telecom connectivity to the mass market consumer

segment but also, as an Integrated Telecom Service Provider, RCOM portfolio of products

includes mobile handsets, fixed wireless phones/terminals, high-speed internet data cards and

Blackberry services. Primary brands are Reliance Mobile for the mobile portfolio of services,

Reliance Hello for the fixed wireless portfolio of services and Reliance Net connect for wireless

data services. RCOM offer a unique wireless multimedia experience under the brand Reliance

Mobile World.

Rcom has wireless subscriber base of over 102.4 million as of March 31, 2010 representing a

market share of 17.7%. Also the second largest seller of mobile handsets/devices in the country,

and the largest service provider engaged in this activity. Due to its unique strength in high speed

wireless data transmission, it has nearly 60% market share of the data card and USB modem

market for laptops and PCs.

Reliance GSM based 3G Data Services available in 350 towns across 13 Telecom Circles of

India. Already have 1.7 mn customers on this platform.

RCom has now reported 5 consecutive quarters of ARPM at 44 paisa. Vodafones ARPM

declined 1.5 paisa Q/Q, and Bhartis 1paisa. RCOM continues to focus on ARPM vs. minutes

and removing free minutes will take another 2 quarters.

Reliance Mobile has been rated as "India's Most Trusted Service Brand" amongst all service

brand categories in the most reputed pan-India consumer survey conducted by "The EconomicTimes".


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internet data centre (IDC) services. It also offers unique, value-added products and services to

large, medium and small enterprises for their communications, networking, and IT infrastructure

needs across the country.

RCOM started enterprise broadband services in the first half of 2005. It is leveraging existing

metro fibre optic networks to establish direct building connectivity on-net. Currently RCOM is

broadband service operating in 44 cities in India with close to 1,029,300 buildings connected

directly to network serving close to 1.45 million access lines.

It has established an enterprise customer base that includes over 850 of the Top 1,000 Indian

enterprises and MNCs and also expanding enterprise subscriber base rapidly in the SME

segment.

BCG matrix analysis of Reliance Communication ltd

The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-

known portfolio management tool used in product life cycle theory. BCG matrix is often used to

prioritize which products within company product mix get more funding and attention.

BCG matrix results in 4 categories in a portfolio of a company are following, by using these

following four categories can analysis of any company product mix

BCG STARS (high growth, high market share):

Stars are defined by having high market share in a growing market.

Stars are the leaders in the business but still need a lot of support for promotion a placement.

If market share is kept, Stars are likely to grow into cash cows.

BCG QUESTION MARKS (high growth, low market share)

- These products are in growing markets but have low market share.

- Question marks are essentially new products where buyers have yet to discover them.


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- The marketing strategy is to get markets to adopt these products.

- Question marks have high demands and low returns due to low market share.

- These products need to increase their market share quickly or they become dogs.

- The best way to handle Question marks is to either invest heavily in them to gain market share

or to sell them.

BCG CASH COWS (low growth, high market share)

- Cash cows are in a position of high market share in a mature market.

- If competitive advantage has been achieved, cash cows have high profit margins and generate a

lot of cash flow.

- Because of the low growth, promotion and placement investments are low.

- Investments into supporting infrastructure can improve efficiency and increase cash flow more.

- Cash cows are the products that businesses strive for.

BCG DOGS (low growth, low market share)

- Dogs are in low growth markets and have low market share.

- Dogs should be avoided and minimized.

- Expensive turn-around plans usually do not help.

To measure the strength, Relative Market Share and Market Growth Rate calculated

according to following formulas

Relative market share = SBU sales of this year /leading rivals sales this year

Market growth rate = industry sakes this year - industry sales last year/leading rivals sales this

year.


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Market share of mobile service provider

Service Provider Subscriber (Mn) Market Share (%) Relative

Market Share

Bharti Airtel 130.61 21.73 1.243

Reliance Com +

RTL

105.15 17.49 0.805

Vodafone Essar 103.75 17.26 0.794

BSNL 70.62 11.75 0.541

Tata Teleservices 67.88 11.29 0.520

IDEA 65.28 10.86 0.500

Aircel 38.46 6.40 0.295

MTNL 5.12 0.85 0.039

Uninor 5.02 0.84 0.039

Sistema Shyam 4.21 0.70 0.032

Loop Mobile 2.89 0.48 0.022

STel 1.11 0.19 0.009

Videocon 0.65 0.11 0.005

HFCL Infotel 0.327 0.06 0.003

Etisalat/Allianz 0.004

0.00 0.000


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Market share of mobile service provider in Indian market is according to the above table in 2010

.RCOM has 105.15 Mn subscribers in 2010 with market share of 17.49 % and relative market share

is 0.805. Here Bharti Airtel is main rival of RCOM so its share will be use for calculation of

relative market share and groth rate .of RCOM Company.

Relative market share of RCOM in mobile service unit is=

RCOM share / Bharti Aitrel mobile service share in 2010

17.49/21.73=0.805

So here RCOM has 0.805 market share in Indian mobile servile market

Top CDMA operators in India

So here the relative market share for CDMA will be calculated on the basis of Tata Teleservices

because it is main rival of RCOM in this business.

Telecom Operator Market

Share (in %)

Relative Market

Share

MTS (SSTL) 1.0% 0.017

RCOM 56.0% 1.514

MTNL 0.0% 0.000

BSNL 6.0% 0.107

HFCL 0.0% 0.000

Tata Teleservices 37.0% 0.661


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Relative market share =56.0/37.0=1.51

Market share of wireless telecom operator

Telecom Operator Market Share Relative Market Share

Bharti Airtel 32.0% 2.735

RCOM 11.7% 0.366

Vodafone 20.8% 0.650

BSNL 9.3% 0.291

IDEA Cellular 12.7% 0.397

Tata Teleservices 8.5% 0.266

Aircel 4.0% 0.125


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Here among the main seven wireless telecom operator RCOM is having rivalry with Bharti

Airtel so for relative market share calculation Bharti Airtel market will be use.

Relative market share of RCOM in wireless segment is =Bharti Airtel market share /RCOM

market share= 0.366

Here in the above matrix CDMA is in CASH COW (low growth, high market share), GSM and

WBB is comes in QUESTION MARKS (high growth, low market share).

CDMA business is having highest market share (1.514) among three businesses but growth is

relative less. And GSM (0.805) and WBB (0.366) market share is comparatively less but growth

rate is high compare then GSM. Market demand is high but returns are lees due to low market

share.


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HR Policies analysis

Our people, our strength

"We bet on people," said Dhirubhai Ambani,. This is at the core of Reliance Communications

business philosophy. Reliance Communications believes in hiring world-class talent and

supporting them with an enabling organizational framework.

PCMM MODEL framework for RCOM:-

The Carnegie Mellon University Software Engineering Institute developed the People Capability

Maturity Model (P-CMM) to help businesses manage knowledge workers across global borders,

as well as between greying and millennial generations. Similar to CMMI, P-CMM has five

maturity levels, but the model is focused on the need to improve the capabilities of a workforce

as a differentiating factor from the competition

In fact, P-CMM was developed to develop workers' competencies according to the needs of

process maturity levels. The People Capability Maturity Model (People CMM) is a framework

that helps organizations successfully address their critical people issues. Based on the best

current practices in fields such as human resources, knowledge management, and organizational

development, the People CMM guides organizations in improving their processes for managingand developing their workforces. The People CMM helps organizations characterize the maturity

of their workforce practices, establish a program of continuous workforce development, set

priorities for improvement actions, integrate workforce development with process improvement,

and establish a culture of excellence.

The key process areas of this the framework address the identification of the organization's

competencies, and align its people management activities to them. P-CMM serves as a

framework for developing employees from mere knowledge workers to knowledge managers.

RCOM also doing same thing if we compare it with PCMM model , RCOM is continuously

improving individual competencies, developing effective teams, motivating improved

performance, and shaping the workforce the organization needs to accomplish its future business

plans RCOM has already invested in 50,000 person training days and state-of-the-art e-learning


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facilities. It is introducing several progressive and employee friendly HR practices in e-HR,

Employee Self Service, Performance Management System, 360 Feedback and Leadership

Development initiatives. RCOM has Vision to develop Global Leaders in India by providing

them opportunities to learn through a comprehensive and contemporary framework of continuing

education. For any business to run one needs four Ms namely Man, Money, Machine and

Material. Managing other three resources other than men, are easy to handle. Men are very

difficult to handle because no two human beings are similar in all way. Human beings can think,

feel and give response. Handling humans is more important for any business because human

being have crucial potential that may be very profitable for the business. And these potential can

be developed to an unlimited extent if they are provided with proper environment. So the

function of managing men is as important as finance or marketing function in any business.

Operational analysis:-

Technology:

Reliances led achievement in manufacturing is, of course, its comment once process technology

since its products do not need cutting edge. Not only has Reliance pushed its production capacity

beyond normal levels, it has develop supervisor processes to increase the utilization and cost

efficiency levels. The company has technical collaborations with Du-Pont Canada, Unipol/sheel

technology Japan, and Sinco technology Japan which name enhanced their capabilities in the

areas of production efficiency and quality improvements - this helping Reliance to supply to its

customers the best of quality at the right price. Communication is the synergy of information and

communication services brought about by the digitalization and convergence. In the fast moving

and competitive knowledge era, Communication is not only a driver of growth but also

competitiveness. Reliance Communication is revolutionizing telecommunication in India by

provisioning services that would match with the leading operators of the most developed


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countries. These services are the outcome of state-of-the-art network technologies that have been

inducted in the Reliance Communication network.

RCOM network consists of the latest switching, transmission and access technologies. The core

of the network consists of fiber deployed throughout the country. Deployed over the fiber media

are the DWDM and SDH transmission technologies in ring topology to provide ultra-high

bandwidth capacity and failure proof backbone. Besides circuit switched technologies, the

backbone also has IP architecture and uses MPLS technology to carry data on an overlay

network. In addition gigabit Ethernet provide broadband services on wire line access.

The switching technology deployed in our network is based on a combination of wire line and

wireless switches. While state-of-the-art digital feature-rich wire line switches meet the growing

needs of Indian corporate, the CDMA 1X based wireless switches are advanced enough to

provision not only quality spectrum efficient voice services but also 144 kbps of data rates

besides SMS and MMS services. CDMA 1X provides an in-built connectivity to internet which

gives users the power of accessing internet and data services anytime. These switching

technologies enable us to provide high quality of voice and data services to give a new

experience to users.

The entire network is seamlessly integrated with the deployment of a range of operations andbusiness support systems (OSS / BSS). These systems help make its operations more efficient

and customer friendly. In addition, the state-of-the-art NOC helps monitors its entire network at

one place. Call center technologies deployed would help give the best customer service.

Finally, the most important aspect of its services is the range of feature-rich CDMA 1X handsets

with wider color display at attractive prices. All handsets are data enabled that permit users to

access its bouquet of services. The technologies help Reliance Communication to provide world

class telecom services in both voice and data at prices affordable by the Indian masses.

Reliance's customer focused R&D efforts comprise a critical part of its competitive arsenal used

for creating customers and enhancing market share.


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R&D:-

Quality initiatives at Reliance are closely integrated with R&D efforts, R&D is aimed at product

quality enhancement, enhancing customer serve, new product developments, process

improvement, and development of more environment friendly processes.

Reliance's customer focused R&D efforts comprise a critical part of its competitive arsenal used

for creating customers and enhancing market share. New product applications developed by the

R&D team continue to be key drivers of incremental demand growth for Reliance's products.

While introducing new products, technical interaction with customers is encouraged for

understanding their requirements to fulfill their quality needs. R&D efforts are thus fine tuned to

deliver solutions. The focus of the R&D and market development efforts is not merely to sell and

service customers but to deliver value.

Reliance's R&D efforts are through ongoing internal efforts as well as joint efforts in

collaboration with the premier research organizations in India such as National Chemicals

Laboratory, University Department of Chemical Technology (UDCT), Indian Institute of

Technology (IIT) and the Bhabha Atomic Research Centre (BARC).

Reliance's Product Applications Research Center (PARC) has been at the forefront of

applications research in India. PARC - the technical wing of Reliance - is active in various

customer awareness initiatives and development of new product applications.


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Conclusion:-Reliance group along with other success business will also get success tremendous

success in telecommunication. RCOM cellular ltd. an Anil Dhiru bhai Ambani Group of cos. is

very fast catching up with the market by providing cheaper calling rates It is a major player in

mobile service provider afterBharti Airtel .RCOM is doing well business by using effective

technology and strategy, quality commitment in market...

Limitation of the study: As every Review of the literature has limitation, so this study is also

totally based on secondary data and previously published research. So lake of primary data it can

be slightly different form original datas .Reliance communication is a vast organization it deals

with in different -different segment so data finding was not easy. Time constrain was main

limitation of this study.


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Reference

Books:-

Marketing management 13th

edition by Philip Kotler

Financial management 9th

edition by I M Pandey

Websites:-

http://www.inewsone.com/2011/05/30/reliance-communications-revenue-rises-4-4-percent-in-

2010-11/54058

http://bonelessresearch.blogspot.com/2011/05/mumbai-wireless-telecom-market-2011.html

http://www.businessweek.com/news/2011-02-15/reliance-communications-profit-falls-net-debt-

soars.html

http://www.projectsmart.co.uk/why-is-people-capability-maturity-model-necessary.html

http://articles.timesofindia.indiatimes.com/2011-05-31/india-business/29603631_1_rcom-q4-

quarter-previous-year-net-profit

http://www.rcom.co.in/Rcom/aboutus/overview/overview_reliancegroup.html

http://en.wikipedia.org/wiki/Reliance_Communications

http://www.rcom.co.in/Rcom/aboutus/ir/pdf/RCOM_FULL_AR_2010-11_Web.pdf

http://www.rcom.co.in/Rcom/aboutus/ir/pdf/RCOM_Investor_ppt_March2011.pdf

http://money.rediff.com/companies/reliance-communications-ltd/15200050/balance-sheet

http://money.rediff.com/companies/reliance-communications-ltd/15200050/results-annual

http://www.managementparadise.com/forums/service-sector-management-s-s-m/203668-current-

market-scenario-reliance-communication.html


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http://www.dnb.co.in/IndianTelecomIndustry/Reliance.asp

http://www.maxi-pedia.com/BCG+matrix+model

http://www.rcom.co.in/Rcom/aboutus/careers/careers_peoplemanagement.html

http://www.moneycontrol.com/stocks/company_info/pricechart.php?sc_did=RC13http://money.rediff.com/companies/reliance-communications-ltd/15200050/results-quarterBlogs:-

http://convergence.in/blog/2011/06/01/reliance-communications-riding-wireless-broadband/

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