SUMMER TRAINING REPORT

ON

“An Analysis of Financial Performance”Completed in

Aircel Ltd

In partial fulfillment for the degree of

Masters of Business Administration

Corporate Mentor: Submitted by:

Ms. Parul Gupta Deeksha Rathee

Assistant General Manager Enrol No: 02061203915

Aircel Ltd. Batch: 2015-17

BanarsidasChandiwala Institute of Professional Studies,Dwarka, New Delhi

(Affiliated to Guru Gobind Singh Indraprastha University)

Declaration

I hereby declare that this Project Report titled “Analysis of Financial Performance”

submitted by me to Banarsidas Chandiwala Institute of Professional Studies,

Dwarka is a bonafide work undertaken during the period from 1st June 2016 to 31st

July 2016 by me and has not been submitted to any other University or Institution

for the award of any degree diploma / certificate or published any time before.

Date: / / 2016

Name:

Enroll. No.:

Bonafide Certificate

This is to certify that as per best of my belief the project entitled “ Analysis of

Financial Performance of Aircel ” is the bonafide research work carried out by

Deeksha Rathee student of MBA, BCIPS, Dwarka,New Delhi during June-July

2016, in partial fulfillment of the requirements for the Summer Training Project of

the Degree of Master of Business Administration.

He/She has worked under my guidance.

--------------------

Mrs.Guara Nautiyal

Project Guide (Internal)

Date:

-------------

Dr.Shamsher Singh

Director

Date:

ACKNOWLEDGEMENT

The joy of ingenuity!!! This is doubtlessly what this project is about. Before

getting to brass tacks of things. I would like to add a heartfelt word for the people

who have helped me in bringing out the creativeness of this project.

To commence with things I would like to take this opportunity to gratefully and

humbly thank to Mrs. Parul Gupta, Project guide, Aircel, Gurgaon, for being

appreciative enough by giving me an opportunity to undertake this project in

Aircel. My parents need special mentions here for their constant support and love

in my life.

I also thank my friends and well wishers, who have provided their whole hearted

support to me in this exercise. I believe that this Endeavor has prepared me for

taking up new challenging opportunities in future.

I would also like to extend my thanks to Mrs. Guara Nautiyal who supported and

guided me for the preparation of the project report.

DeekshaRathee

(02061203915)

MBA 3rd SEM

EXECUTIVE SUMMARY

This project has been undertaken to understand the financial performance of Aircel Ltd using

ratio analyses. The main objective of the report is to analyze the financial performance with the

help of financial ratios. Financial Analysis is the process of identifying the financial strengths

and weaknesses of the firm by properly establishing relationships between the items of the

balance sheet and the profit & loss account and Ratio analyses is the tool to evaluate various

aspects of a company's operating and financial performance such as its efficiency, liquidity,

profitability and solvency. .

This project aimed at to study the growth of aircel ltd in telecommunication industry .For the

research purpose secondary data has been used which is been taken from Company’s annual

reports available at the website. Descriptive research is used in the study. The researcher had to

use fact and information already available through financial statements of earlier years and

analyze these to make critical evaluation of the available material. The financial statements of

last five years are identified, studied and interpreted in light of company’s performance. After the

analyzes on liquidity ratios it has been observed that the company was easily able to meet the

long term obligations as compared to the short term obligation. From the profitability ratios, it

was observed that the company was able to make reasonable profits by keeping the overheads

under control. As per the efficiency is concerned, it was observed that the company was able to

generate the sales from the assets.

So it has been concluded through the study that the company had shown outstanding growth

during the last years with use of technology and professional management has gained a

reasonable position in the telecommunication industry. The company has managed to record

better growth in the past few years as the latter remains burdened with asset quality woes. Year

2015 has seen most profitable year for the company.

INDEX

Serial No. Topic Page no Signature

Executive Summary

1. Introduction

2. Company Profile

3. Literature Review

4. Objective of the study

5. Scope of the study

6. Research Methodology –

Sources of Data

Tools & Techniques of analysis

Statistical instrument used

7. Data collection & Data analysis

8. Findings

9. Conclusion

10. Suggestions

11. Bibliography

CHAPTER - 1

INTRODUCTION:

INTRODUCTION

INDUSTRY OVERVIEW

It is well known that the Indian Telecommunications Industry is the third largest in the world and

second largest in Asia. The sector is growing at a speed of 45% during the recent years. The

growth rate of India Telecommunication Sector is 36.22%. The growth rate of subscribers in

rural areas during 2011 was higher at 40.64% compared to 34.41% in urban areas.

This rapid growth has been possible due to various decisions made by the Government and also

due to the contributions of both the public and the private sectors. The liberal policies of the

Government provide easy market access for telecom equipment. A fair regulatory framework

followed by the Government offers telecom services to the Indian consumers at affordable

prices.

Indian Telecommunication Services can be broadly classified into:

Basic

Mobile

Internet

Basic services are further divided into two:

Fixed wire line

Wireless

In those days, fixed wire lines were used in majority but these days, mobile phones subscribers

have outnumbered the landline subscribers. In fact, it was recently stated by the Rural

Development Minister Jairam that, the number of mobiles phones in India are more than the

number of toilets. Decades back, food, clothing and shelter were the only three basic needs. But

in the current scenario, mobile phones are the fourth basic need.

In the year 2012, the internet subscribers have increased to 19.67 million and the numbers of

broadband connections have increased to 11.89 million.

The three new and important policies of the National Telecom Policy unveiled by the

Government is as given below:

Telecom users will be able to avail free roaming

Telecom users can keep their phone numbers even if they switch service providers

anywhere in the country

The distinction between local and STD calls would vanish, as the policy aims at a 'one-

nation-one-license' regime.

Telecom tower industry consumes around 2 bn liters of diesel in a year which is almost equal to

the consumption of diesel by the Indian railways. Thus, companies need to shell out huge money

on energy. As a result, the idea of solarisation of towers is being considered which would help in

the conservation of energy. It is not an easy task to solarize all towers but the idea might be

implemented sometime in the near future. Telecommunication is the transmission of information

over significant distances to communicate

Financial Analysis

Financial Analysis is responsible for supporting the instruction, research and public service

activities of the university. This objective is accomplished by providing analytical support to the

executive vice president and chief financial officer (EVPCFO) and the associate vice president

for Finance (AVPF). Financial Analysis provides analytical services including annual reports and

surveys, university and EVPCFO budget process, consulting services, capital planning and

recharge rate approvals.

They provide some extremely useful information to the extent that balance Sheet mirrors the

financial position on a particular date in terms of the structure of assets, liabilities and owners

equity, and so on and the Profit and Loss account shows the results of operations during a certain

period of time in terms of the revenues obtained and the cost incurred during the year. Thus the

financial statement provides a summarized view of financial position and operations of a firm

Tools of Financial Statement Analysis

Various tools are used to evaluate the significance of financial statement data. Three commonly

used tools are these:

Ratio Analysis

Funds Flow Analysis

Cash Flow Analysis

Ratio Analysis:

Ratio analysis isn't just comparing different numbers from the balance sheet, income statement,

and cash flow statement. It's comparing the number against previous years, other companies, the

industry, or even the economy in general. Ratios look at the relationships between individual

values and relate them to how a company has performed in the past, and might perform in the

future.

Ratio analysis is the method or process by which the relationship of items or group of items in

the financial statement are computed, determined and presented.

Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial

health and profitability of business enterprises. Ratio analysis can be used both in trend and static

analysis. There are several ratios at the disposal of an analyst but their group of ratio he would

prefer depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus

on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial

ratios of several companies from the same industry. Ratio analysis can provide valuable

information about a company's financial health. A financial ratio measures a company's

performance in a specific area. For example, one could use a ratio of a company's debt to its

equity to measure a company's leverage. By comparing the leverage ratios of two companies, one

can determine which company uses greater debt in the conduct of its business. A company whose

leverage ratio is higher than a competitor's has more debt per equity. You can use this

information to make a judgment as to which company is a better investment risk.

For ratios to be useful and meaningful, they must be:

o Calculated using reliable, accurate financial information.

o Calculated consistently from period to period

o Used in comparison to internal benchmarks and goals.

o Viewed both at a single point in time and as an indication of broad trends and issues over

time.

CLASSIFICATION OF RATIOS

A ratio is a statistical yardstick that provides a measure of the relationship between variables or

figures. This relationship is expressed as a percent or as a quotient.

There are four aspects of operating performance and financial condition we can evaluate from

financial ratios:

1. Liquidity ratios

2. Profitability ratios

3. Turnover ratios

4. Solvency ratios

LIQUIDITY RATIOSLiquidity ratios are the ratios meant for testing short-term financial position of a business. These

are designed to test the ability of the business to meet its short-term obligation promptly. 

The liquidity ratios are a result of dividing cash and other liquid assets by the short term

borrowings and current liabilities. They show the number of times the short term debt obligations

are covered by the cash and liquid assets. If the value is greater than 1, it means the short term

obligations are fully covered. Generally, the higher the liquidity ratios are, the higher the margin

of safety that the company posses to meet its current liabilities.

1. CURRENT RATIO - The current ratio indicates a company's ability to pay its current

liabilities from its current assets. This ratio is one used to quickly measure the liquidity of a

company. The formula for the current ratio is:

Current Ratio= Current AssetsCurrent Liabilities

 This formula considers all current assets and current liabilities. Current assets are those assets

that are expected to turn into cash within one year. Examples of current assets are cash, accounts

receivable, and prepaid expenses. Also included in this category are marketable securities such

as government bonds and certificates of deposit. Current liabilities are those debts that are

expected to be paid or come due within a year. Examples of current liabilities are accounts

payable, payroll liabilities, and short-term notes payable.

2. QUICK RATIO – The quick ratio is a measure of a company's ability to meet its short-term

obligations using its most liquid assets (near cash or quick assets). Quick assets include those

current assets that presumably can be quickly converted to cash at close to their book values. The

formula is:

Quick Ratio=Current Assets−InventoryCurrent Liabilities

Quick ratio is viewed as a sign of a company's financial strength or weakness; it gives information about a company’s short term liquidity. Calculating liquid assets inventories are deducted as less liquid from all current assets (inventories are often difficult to convert to cash). Alternative and more accurate formula for the quick ratio is the following:

PROFITABILITY RATIOS

A profitability ratio is a measure of profitability, which is a way to measure a company's

performance. Profitability is simply the capacity to make a profit, and a profit is what is left over

from income earned after you have deducted all costs and expenses related to earning the

income. Investors and creditors can use profitability ratios to judge a company's return on

investment based on its relative level of resources and assets. In other words, profitability ratios

can be used to judge whether companies are making enough operational profit from their assets.

TYPES OF PROFITABILITY RATIOS

Ratios in relation to sales

1. GROSS PROFIT MARGIN - Gross margin ratio is a ratio that compares the gross margin of

a business to the net sales. This ratio measures how profitable a company sells its inventory or

merchandise. The formula is:

Gross Profit Margin=Gross ProfitSales

2. OPERATING PROFIT MARGIN - Operating margin takes into account the costs of

producing the product or services that are unrelated to the direct production of the product or

services, such as overhead and administrative expenses. The formula is:

Operating Profit Margin=Operating ProfitSales

3. NET PROFIT MARGIN - Net profit ratio is the ratio of net income (a.k.a. net profit) to

sales, and indicates how much of each dollar of sales is left over after all expenses:

Net Profit Margin=Net ProfitSales

Ratios in relation to investment

1. RETURN ON CAPITAL EMPLOYED – Return on capital employed or ROCE is a

profitability ratio that measures how efficiently a company can generate profits from its capital

employed by comparing net operating profit to capital employed. It is calculated as:

Returnon capit al employed=Net Operating profitCapital Employed

2. RETURN ON ASSETS – The return on assets ratio, often called the return on total assets, is a profitability ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets. The formula is:

Returnon Assets= Net incomeAveragetotal Assets

× 100

3. RETURN ON EQUITY – Return on equity establishes the relationship between earnings

after tax and preference dividend and equity shareholder investment or capital employed. It is

calculated as:

Returnon Equity sh are capital= Earnings after tax , Preference dividendEquity sh are capital employed

×100

4. RETURN ON NET WORTH- The net worth ratio states the return that shareholders could

receive on their investment in a company, if all of the profit earned were to be passed through

directly to them. The formula is:

Returnon Sh are h older fund= Net after tax profitsShareholder capital± Retained earnings

5. DIVIDEND PAYOUT RATIO- Dividend payout ratio discloses what portion of the current

earnings the company is paying to its stockholders in the form of dividend and what portion the

company is plugging back in the business for growth in future. It is computed by dividing the

dividend per share by the earnings per share (EPS) for a specific period.

Dividend payout ratio=Dividend per s h areEarning per share

TURNOVER RATIOSTurnover ratios are also known as activity or efficiency ratios. The total funds raised by the

company are invested in acquiring various assets for its operations. The assets are acquired to

generate the sales revenue and the position of profit depends upon the value of sales. Turnover

ratios establish the relationship of sales with various assets. Turnover ratios are expressed in

integers or times rather than as a percentage or proportion. The turnover ratios are mostly

computed to measure the efficiency.

TYPES OF TURNOVER RATIOS

1. FIXED ASSETS TURNOVER RATIO – The fixed asset turnover ratio is an efficiency ratio

that measures a company’s return on their investment in property, plant, and equipment by

comparing net sales with fixed assets.

This ratio is calculated as:

¿assets turnover ratio=Cost of goods soldAverage ¿

assets¿

2. RECEIVABLES TURNOVER RATIO - Accounts receivable turnover is an efficiency

ratio or activity ratio that measures how many times a business can turn its accounts receivable

into cash during a period. The formula to calculate is:

Receivables turnover ratio= Net credit salesAverageaccount receivables

3. TOTAL ASSET TURNOVER RATIO - Total assets turnover ratio shows the relationship

between total assets and sales. Total assets turnover ratio indicates how well the firm's total

assets are being used to generate its sales. The formula is:

Total asset turnover ratio= Net salesTotal assets

4. CREDITORS TURNOVER RATIO - Accounts payable turnover is a ratio that measures the

speed with which a company pays its suppliers. If the turnover ratio declines from one period to

the next, this indicates that the company is paying its suppliers more slowly, and may be an

indicator of worsening financial condition. It is calculated as:

Creditors turnover ratio=Total supplier purchasesAverage stock

SOLVENCY RATIOSSolvency ratios, also called leverage ratios, measure a company's ability to sustain operations

indefinitely by comparing debt levels with equity, assets, and earnings. In other words, solvency

ratios identify going concern issues and a firm's ability to pay its bills in the long term. Solvency

ratios show a company's ability to make payments and pay off its long-term obligations to

creditors, bondholders, and banks. Better solvency ratios indicate a more creditworthy and

financially sound company in the long-term.

TYPES OF SOLVENCY RATIOS

1. DEBT TO EQUITY RATIO – The debt to equity ratio shows the percentage of company

financing that comes from creditors and investors. A higher debt to equity ratio indicates that

more creditor financing (bank loans) is used than investor financing (shareholders). The formula

is:

Debt ¿ Equity ratio=Total longterm DebtShareholder funds

2. FIXED CHARGES COVERAGE RATIO – The fixed charge coverage ratio is a financial

ratio that measures a firm's ability to pay all of its fixed charges or expenses with its income

before interest and income taxes. It is calculated as:

EBIT ± ¿charges before tax ¿¿charges before taxes ± Interest

3. CAPITAL ADEQUACY RATIO – Capital adequacy ratio (CAR) is a specialized ratio used

by banks to determine the adequacy of their capital keeping in view their risk exposures.

Banking regulators require a minimum capital adequacy ratio so as to provide the banks with a

cushion to absorb losses before they become insolvent.

Capital adequacy ratio=Tier 1capital ±Tier 2capitalRisk weigh ted assets

So, there are hundreds of ratios that can be formed using available financial statement data. The

ratios selected for analysis depend on the type of analysis and the type of banks selected.

CHAPTER–2 PROFILE OF

ORGANISATION

About Aircel

Profile

Type Subsidiary

Industry Telecommunication

Founded in 1999

Headquarters Gurgaon, Haryana, India

Key People Kaizad Heerjee,CEO

Products Mobile Telephony, Wireless Broadband services

Revenue US $ 1.159 billion

Member 83.05 million

Parent Maxis Communication (74%), Sindya Securities & Investment

(26%)

Website Aircel.com

The Aircel group is a joint venture between Maxis Communications 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.

In October 2010, Aircel completed its Pan India footprint; presence in all 23 telecom circles (can

be a state or combination of cities and states eg. Delhi-NCR), with the launch of GSM mobile

services in Rajasthan, hence becomming a Class A operator. After winning the 3G and BWA

spectrum, required for high speed data and multimedia services, in 13 and 8 circles respectively,

Aircel became the largest operator in India with spectrum secured for next generation wireless

technologies.

Aircel has also been recognized for its consistent and reliable efforts. Voice and Data gave Aircel

the highest rating for overall customer satisfaction and network quality in 2006 and Aircel

received the same award by IDC in 2007. Aircel is ranked 5th in GSM mobile operators. It needs

license + network to operate, due to govt. Restrictions for network and bandwidth

It has the market lead in Tamil Nadu, Chennai, Assam and North East. It is dedicated to save

tigers as it’s CSR activity. It has won the 2009 NASCOM award. It is into both GSM (Global

System for Mobile communication), and CDMA (Code Division Multiple Access).

Aircel Business Solutions

Aircel as a company was started in 1995, in Chennai, as a GSM operator. In 1999, it became a

mobility GSM operator, operating two wings, Cellular and Business Solutions. It obtained it’s

licence to operate from the Dept. Of Telecommunications, which assigned bands to it? Aircel is a

brand, actually formed by the coming together of two companies, Maxis communication group,

bought 74 % of Aircel’s market share, which was the highest FDI as per govt. Limits in 2005

(Maxis is the no.1 telco in Malasiya, with various other alliance with various stakes in other

operators around the world), and Appollo Hospitals having 26 % stake.

Aircel Business Solutions (ABS) (the Business Unit of Dishnet Wireless Limited) is the

enterprise division of Aircel, which addresses the telecom requirements of International and

Indian markets with an array of industry-leading products and services. As an integrated telecom

service provider, ABS leverages its rich pedigree of best-in-class solutions, partnerships and

domain expertise to address service providers, enterprises, PSUs, and consumers. Its range of

services includes networking, data centers, managed services, collaboration services, SaaS

(Software-as-a-Service) and mobility solutions.

ABS is the pioneer of data connectivity solutions and it has demonstrated the same by being the

first operator in India to launch WiMAX technology. ABS is also a registered member of

WiMAX forum – both in the Indian and International Chapters.With a pan India rollout of over

dual core optical fiber backbone, over 400 IP MPLS PoPs and leveraging integrated wireline and

wireless data solutions, ABS is ideally suited to provide high speed, secure, and reliable

managed networking solutions across India.

The carrier to carrier business is served by Aircel wholesale and carrier Business team.the

enterprise team addresses the B2B segment from all industry verticals ( Telecom,IT,Banking,

Retail and Manufacturing). The SME team caters to the telecom requirements of Small and

Medium Enterprises.Aircel Business solutions provide connectivity solutions on licensed

spectrum to enterprise customers, with a major focus on the data segment. It has around 6.5

Crore or 65 million subscribers currently, accounting to about10 % of the market. It’s network is

powered by CISCO.

The connectivity business runs on media, which can be wireless or wired. Voice (basic call) and

data (SMS, social media, mails, B2B, etc.) are two products of this business. Voice frequency

ranges from 20-20,000 Hz (Humans). Resolution changes requirements of people, hence

resulting in various offerings.

Objectives of Aircel

To grow the business 3 fold

To increase indirect manpower by 3 times

To increase channel partners by 3 times

To grow mobility post paid business 10 times and dongle business 20 times and Internet

Lease Line business 3 times

To retain all executives

To know every company recruiting > than 10 people

To find out prospective candidates

To know which industry vertical will require Leased Line

All IT managers should BE AWARE OF Aircel, and when they have a requirement, they

should call them.

To know channel partners of competitors

To know new venture capitalists and pvt. Equity ventures

Market share and opportunities in tech. Parks

VISION AND MISSION

Vision

Become the Service Provider of Choice for the Enterprise Segment

Mission

Entry into top 1,000 corporates as the most agile service provider

Create well differentiated value offerings for ready adoption by large, medium and small

enterprises

Own service offerings, platform and delivery mechanism that keep us ahead of

competition now and during technology shifts

.

PRODUCT AND SERVICES

National Private Leased Circuit (NPLC)  

International Private Leased Circuit (IPLC)  

Global MPLS Virtual Private Network (Global MPLS VPN)

Aircel offers a suite of world-class Internet Services to enterprises strongly backed by highly

redundant, carrier grade mesh network. ILL services are offered over various last mile options

viz. Wi-MAX, Fiber and P2P radio to ensure cost effective solutions meeting your expectations

of high uptimes and redundancies in network connectivity with minimum latencies. ABS further

ensures high speed interconnected backbones with round the clock proactive monitoring through

centralized NOC. Aircel offers cutting edge connectivity services powered by our State of the

Art & extensively Robust Multi Carrier Meshed Backbone. Our customers get the Fastest & shortest Data Transit Paths around the world, with our Domestic and International IP Transit on

Trans-atlantic & Trans-pacific Networks.

ABS offers following flavours of Internet Services:

Dedicated Internet Services: Platinum 1:1 

Our Flagship Product ensures customers' enjoy dedicated and symmetric Internet connectivity on

Dedicated Access Mediums & Bandwidths.

Shared Internet Services: Gold 1:2 and Silver 1:4 

Gold & Silver Shared Internet bandwidth is specially designed for SMBs to offer cost effective

solution on Shared Access Mediums without compromising performance.

IDC Internet 

Tailor made bandwidth solution crafted to cater the customers needing asymmetric bandwidths

delivering 100% Upload and 25% download of the subscribed port.

Delivery services company Yipes Enterprise Services for a cash amount of Rs. 1200 crore rupees

(equivalent of USD 300 million).

FUTURE GROWTH AND PROSPECTS

Aircel Ltd is likely to launch its 4G service in about six months, according to

K. Sankara Narayanan, Regional Business Head, Aircel Ltd, Chennai.

Sankara Narayanan said that 4G is “definitely a step forward in technology” giving the

customers a “fantastic choice”. It would also give customers “incredible speed that does

not exist in the market today”

The company has identified data services as the future growth engine, even though voice

services continue to account for the largest share of the revenue of the telecom industry.

Being the largest operator in India with spectrum secured for next generation wireless technologies (3G

and BWA)`1, over 100 IP MPLS PoPs, Pan India dual core optical fiber backbone and WiMAX presence

in over 53 cities, Aircel Business Solutions is ideally suited to provide world class, high speed, end-to-end

voice & data solutions.

SWOT ANALYSIS

STRENGTH

5TH largest GSM service provider with subscriber base over 27 mn.

6 to 7% market share.

Weakness

Profitability is low as compare to other companies

Lack of advertising

Low brand visibility

Opportunities

Fast expanding cellular market

Latest and low cost technology

Untapped rural market

Value added services

Threats

Competitors low pricing offering

Saturation point in basic telephony ser\vice

Mobile number portability

COMPETITORS IDEA

VODAFONR

RELIOANCE

AIRTEL

MTNL

BSNL

CHAPTER – 3 LITERATURE REVIEW

Following studies were conducted and these results were witnessed:

Ried Edwardj & et al. (2010)69), “Signaling Firm performance through financial Statement

Presentation”, investigate whether managers’ presentation of special items within the financial

statements reflects the economic performance or opportunism. Specifically, special items

presented as a separate line item on the income statement (income statement presentation) to

those aggregated within another line item with disclosure only in the footnotes (footnote

presentation). The study is motivated by standard-setting interest in performance reporting and

financial statement presentation, as well as prior research investigating managers’ presentation

choices in other contexts. Empirical results reveal that special items receiving income statement

presentation are less persistent, relative to those receiving footnote presentations. These results

are consistent across numerous alternative specifications. Overall, the findings are consistent

with managers using the income statement versus footnote presentation to assist users in

identifying those special items most likely to differ from other components of earnings - that is,

for informational, as opposed to opportunistic and motivations.

Arindham Mukherjee (March, 2006)46 takes out various case studies like Vodafone, Maxis,

Telekopm Malaysia, Tatatele etc. to study the rising interest of foreigners for investment in

Indian telecom industry. Various reasons of stemming growth can be rising subscriber base,

rising teledensity, rising handset requirements, saturated telecom markets of other countries, stiff

competition, requirement of huge capital, high growth curve on telecom, changing regulatory

environment, conducive FDI limits in telecom sector

CHAPTER – 4&5

OBJECTIVE, SCOPE AND RESEARCH

METHODOLOGY

4.1 OBJECTIVE OF THE STUDY

PRIMARY OBJECTIVE:

The primary objective is to analyze the financial performance of Aircel Ltd.

SECONDARY OBJECTIVE:

To study the profitability of aircel.

4.2 SCOPE OF THE STUDY

This study is undertaken to measure the financial performance of Aircel Ltd in India. The study

will provide details about liquidity, solvency, efficiency and profitability analysis of the

company.

Present study is limited to 5 years data which is obtained from company’s annual report.

The study is purely based on secondary data which were taken primarily from published annual

reports of the company for the last five years (2012-2016).

RESEARCH METHODOLOGY

The main aim of Research methodology is to describe and analyze method, throw light on their

limitation and resources, clarify their presupposition and consequences.

5.1 Research Design

Descriptive research design is used in this study as it ensures minimization of bias and

maximization of reliability of data collected. First hand information already available through

financial statements of earlier years has been used to analyze.

5.2 Data Collection

The Data taken for the study is secondary in nature. It has been taken from the Aircel’s financial

reports available on website, newspapers and magazines.

5.3 Tools and Techniques of Analysis

Ratio analysis has been done with the help of profit and loss account and balance sheet of the

Aircel. MS Excel is used to prepare ratio tables and various charts used to show ratios for

performing analyzes.

5.4 Sample

Sample unit: Aircel ltd

Sample size: 5 years data i.e. from 2011-12 to 2015-16.

CHAPTER - 6

DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

LIQUIDITY & SOLVENCY RATIOS

1. Current Ratio=Current asset Current Liabilities

YEAR 2012 2013 2014 2015 2016CURRENT RATIO

1.02 0.65 0.93 0.73 0.65

2012 2013 2014 2015 201600.20.40.60.8

11.2

0.650000000000001

0.730000000000001

0.930.65000000

0000001

1.02

current ratios

current ratiosLinear (current ra-tios)

Interpretation

Current ratio can be used to take a rough measurement of a company’s financial health. The higher the current ratio, the more capable the company is of paying its obligations, as it has a larger proportion of asset value relative to the value of its liabilities.As current ratio is increases from 2012 to 2016, this shows the company ability to pay its obligation.

2. Liquid ratio= quick asset Quick liabilities

years 2012 2013 2014 2015 2016Liquid ratio 1.37 0.75 0.98 0.75 0.66

2012 2013 2014 2015 20160

0.20.40.60.8

11.21.41.6

1.37

0.750000000000001

0.980.7500000000000010.6600000000

00001

liquid ratios

liquid ratiosLinear (liquid ratios)

InterpretationThe higher the quick ratio, the better the position of the company. The commonly acceptable current ratio is 1. A company with a quick ratio of less than 1 cannot currently pay back its current liabilities; it's the bad sign for investors and partners. As the liquid ratios are decreasing from 2012 to 2016 which shows that the company is not able to pay its current liabilities.

3. Long term Debt Equity Ratio= Total liabilities Shareholders fund

years 2012 2013 2014 2015 2016LTDER 0.17 0.18 0.11 0.25 0.49

2012 2013 2014 2015 20160

0.10.20.30.40.50.6

0.17 0.180.11

0.25

0.49

Long Term Debt Equity Ratio

Long Term Debt Equity RatioLinear (Long Term Debt Equity Ratio)

Interpretation

The greater a company's leverage, the higher the ratio. Generally, companies with higher ratios are thought to be more risky. A high ratio usually indicates a higher degree of business risk because the company must meet principal and interest on its obligations.As the ratio is increasing from 2012 to 2016 which shows that the company is becoming risky.

4. Debt Equity Ratio = Total Long Term Debt Shareholder’s Fund

years 2016 2015 2014 2013 2012DER 0.29 0.24 0.13 0.26 0.50

2012 2013 2014 2015 20160%

10%

20%

30%

40%

50%

60%

29%24%

13%

26%

50%

Debt Equity Ratio

Debt Equity RatioLinear (Debt Equity Ratio)

Interpretation

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders’ equity. As this ratio is increasing this shows that the company is using more debt to finance its assets.

MANAGEMENT EFFICIENCY RATOS

5. Inventory Turnover Ratio = COGS Average stock

years 2012 2013 2014 2015 2016ITR 1296 21596 45380 5904 11377

2012 2013 2014 2015 20160

5000100001500020000250003000035000400004500050000

1296

21596

45380

590411377

Inventory Turnover Ratio

Inventory Turnover RatioLinear (Inventory Turnover Ratio)

Interpretation

Inventory turnover measures how fast a company is selling inventory and is generally compared against industry averages. A low turnover implies weak sales and, therefore, excess inventory. A high ratio implies either strong sales and/or large discounts.As this ratio shows that the inventory in 2014 is maximum and minimum in 2012.

6. Debtors Turnover Ratio= Net Sales Average Debtor

Year 2012 2013 2014 2015 2016DTR 23.14 20.70 22.63 20.27 16.98

2012 2013 2014 2015 20160

5

10

15

20

25 23.1420.7

22.6320.27

16.98

Debtors turnover ratio

Debtors turnover ratioLinear (Debtors turnover ratio)

Interpretation

Debtors Turnover Ratio indicates the speed at which the sundry debtors are converted in the form of cash. It indicates the number of times the debtors are turned over a year. It is the reliable measure of receivables from credit sales. The higher the value the more efficient is the management of debtors. Similarly, lower the ratio means inefficient management of debtors.

This graph shows that ratio is decreasing from 2012 to 2016 which shows the inefficient management of debtors.

7. Fixed Asset Turnover Ratio = Sales Fixed Asset

Year 2012 2013 2014 2015 2016FATR 0.84 0.82 0.86 0.85 0.79

2012 2013 2014 2015 20160.74

0.76

0.78

0.8

0.82

0.84

0.86

0.88

0.840000000000001

0.820000000000001

0.8600000000000010.850000000000

001

0.79

Fixed Asset Turnover ratio

Fixed Asset Turnover ratioLinear (Fixed Asset Turnover ratio)

Interpretation

This ratio specifically measures how able a company is to generate net sales from fixed-asset investments, namely property, plant and equipment (PP&E), net of depreciation. In a general sense, a higher fixed-asset turnover ratio indicates that a company has more effectively utilized investment in fixed assets to generate revenue. This ratio shows that the company is inefficient to generate revenue from fixed asset.

8. Asset Turnover ratio= Net sales Average Total Asset

Year 2012 2013 2014 2015 2016ATR .71 .69 .70 .69 .71

2012 2013 2014 2015 20160

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.80.7100000000000010.690000000000

0010.700000000000

0010.640000000000001

0.54

Asset Turnover Ratio

Asset Turnover RatioLinear (Asset Turnover Ratio)

Interpretation

Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue. The higher the asset turnover ratio, the better the company is performing. As the ratio shows that it is decreasing from 2012 to 2016 that implies the inefficiency of company in generating the revenue

PROFITABILITY RATIOS

9. Return on Capital Employed = NPBT Capital Employed

Year 2012 2013 2014 2015 2016ROI 13.14 12.07 13.18 15.32 11.25

2012 2013 2014 2015 201602468

1012141618

13.1412.07

13.1815.32

11.25

Return On Capital Employed

Return On Capital EmployedLinear (Return On Capital Employed)

Interpretation

Investors tend to favor companies with stable and rising ROCE numbers over companies where ROCE is volatile and bounces around from one year to the next. ROCE of this company is stable and profitable.

10. Operating Profit Margin = operating income Net sales

Year 2012 2013 2014 2015 2016OPM 32.79 29.7 32.65 35.01 37.04

2012 2013 2014 2015 20160

5

10

15

20

25

30

35

40

32.7929.7

32.6535.01

37.04

operating profit margin

operating profit marginLinear (operating profit margin)

Interpretation

Operating margin is a margin ratio used to measure a company's pricing strategy and operating efficiency.this shows the company is making profit from their sales.

11. Net Profit Margin = Operating income Net sales

Year 2012 2013 2014 2015 2016NPM 13.79 11.23 13.22 13.78 12.51

2012 2013 2014 2015 20160

2

4

6

8

10

12

14

1613.77

11.23

13.22 13.7812.51

Net profit Margin

Net profit MarginLinear (Net profit Margin)

Interpretation

Net profit margin is one of the most important indicators of a business's financial health. It can give a more accurate view of how profitable a business is than its cash flow, and by tracking increases and decreases in its net profit margin, a business can assess whether or not current practices are working.A business can use its net profit margin to forecast profits based on revenues.This shows that the company is making profit and it is maximum in the year 2015 and minimum in the year 2013.

12. Cash Profit Ratio = Cash+ Cash Equivalent Current Liabilities

Year 2012 2013 2014 2015 2016CPR 22.57 25.46 27.65 34.20 28.75

2012 2013 2014 2015 2016

0

5

10

15

20

25

30

22.5725.46

27.6525.46

27.57

Cash profit Ratio

Cash profit RatioLinear (Cash profit Ratio)

Interpretation

Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It is an extreme liquidity ratio since only cash and cash equivalents are compared with the current liabilities. It measures the ability of a business to repay its current liabilities by only using its cash and cash equivalents and nothing else. This shows that the company can repay its liabilities by using cash.

13. Gross Profit ratio= Gross profit Revenue

Years 2012 2013 2014 2015 2016GPR 14.45 11.66 14.73 16.81 15.19

2012 2013 2014 2015 201602468

1012141618

14.45

11.66

14.7316.81

15.19

Gross Profit Ratio

Gross Profit RatioLinear (Gross Profit Ratio)Linear (Gross Profit Ratio)

Interpretation

Without an adequate gross margin, a company is unable to pay for its operating expenses. In general, a company's gross profit margin should be stable unless there have been changes to the company's business model. This ratio shows that the company’s profit is stable. Maximum in year 2015 and minimum in the year 2013

CASH FLOW INDICATOR RATIOS

14. Dividend Payout ratio= Dividend Net Income

Year 2012 2013 2014 2015 2016DPR 6.62 7.45 10.90 11.65 7.20

2012 2013 2014 2015 20160

2

4

6

8

10

12

14

6.627.45

10.911.65

7.2

Dividend PayoutRatio

Dividend PayoutRatioLinear (Dividend PayoutRatio)

Interpretation

The payout ratio is also useful for assessing a dividend's sustainability. The dividend payout ratio provides an indication of how much money a company is returning to shareholders, versus how much money it is keeping on hand to reinvest in growth, pay off debt or add to cash reserves. This latter portion is known as retained earnings. This shows that the company is having good payout ratio in year 2015 and 2014.

15. Earnings per share = Earnings available to common shareholders No. of outstanding shares

YEAR 2012 2013 2014 2015 2016EPS 11 6 7 13 11

2012 2013 2014 2015 20160

2

4

6

8

10

12

14

11

67

13

11

Earning Per Share

Earning Per ShareLinear (Earning Per Share)

Interpretation

Earnings per share are the portion of a company’s profit allocated to each outstanding share of common stock. It serves as a indicator of a company’s profitability. The above chart shows that the company have the maximum EPS in year 2015 and Minimum in 2013.

16. Earning Retention Ratio= 1- Payout ratio

Year 2012 2013 2014 2015 2016ERR 93.38 92.55 89.44 88.35 93.4

2012 2013 2014 2015 201685868788899091929394 93.38

92.55

89.44

88.35

93.4

Earning Retention Ratio

Earning Retention RatioLinear (Earning Retention Ratio)

Interpretation

The retention ratio is the proportion of earnings kept back in the business as retained earnings. The retention ratio refers to the percentage of net income that is retained to grow the business, rather than being paid out as dividends. It is the opposite of the payout ratio, which measures the percentage of earnings paid out to shareholders as dividends.Ratio is good in the year 2016 and minimum in year2014 and 2015.

CASH FLOW in cr

CASH FLOW 2012 2013 2014 2015 2016NBIT 6956 6455 8377 15655 10040NET CASH FLOWS FROM OPERATING ACTIVITIES

11438 13885 16022 17940 20058

NET CASH USED IN INVESTING ACTIVITIES

-12612 10726 -17086 12801 -22283

NET CASH USED FROM FINANCING ACTIVITIES

1401 -3186 1182 -5196 1889

NET INC/DEC IN CASH AND CASH EQUIVALENT

227 -27 118 -57 -337

CASH AND CASH EQUIVALENT ATTHE BEG OF THE YEAR

128 355 328 446 389

CASH AND CASH EQUIVALENT AT THE END OF THE YEAR

355 328 446 389 52

SOURCE: ANNUAL REPORTS

Interpretation

The cash flow statement shows that the net profit before tax increased continuously from 2011-12 to 2015-16.

The net cash from operating activities continuously increased from the 2011-12 to 2015-16.

The statement shows that net cash from investing activities is negative in all four years. The net cash used in financing activities is maximum in the year 2015-16 in comparison

to other. The cash and cash equivalents of the firm decreased in the year 2014 and 2016 which

shows the low liquidity position of the firm. Increased in the year 2013 and 2015.

CHAPTER – 7&8

Findings and Limitations

FINDINGS

1. The current ratio has shown fluctuation trend as 0.65 to 1.02 during 2011 to 2016.

2. The quick ratio is also fluctuating trend throughout the period from 2011-12 to 2015-16.

3. The debt equity ratio is also increasing from 2011-12 to 2015-16 which shows the

company’s good performance.

4. The inventory turnover ratio is fluctuating.

5. The debtor’s turnover ratio is decreasing from 2012 to 2016.

6. The gross profit ratio is in a slightly fluctuating manner. It decreased in the current year

as compare to previous year.

7. The net profit ratio is in a slightly fluctuating manner. It decreased in the current year as

compare to previous year.

8. The operating ratio is increased in the year 2015 and decreased in year 2013.

9. The return on capital employed is increased in the year 2015 while decreased in 2013.

10. The earnings retention ratio is fluctuating and maximum in year 2015.

11. Dividend payout ratio is maximum in the year 2015 and minimum in the year 2014.

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 fluctuating profit margins has been reduced over the period of time which

leads to significant reduction in the earning power of the companies.

• In case of net profit Aircel has gained a significant hike in the profit in year 2015 due to the

launch of 3G and closing of Deccan circles in 2014.

• Cash from operations is increasing which shows increase in revenue from primary activities.

• Cash used in investing activities is highest of aircel in 2015-16 but gradually it had been

decreased which represents the lack of investments in long term assets by the company.

• Cash used in financing activities is highest in 2015-16 and it had been fluctuating in each

subsequent year 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.

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 and 4G phones, means high speed streaming video, gaming,

Video messaging and even mobile TV.

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

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

should be ready for new competition.

CHAPTER 8

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:

1. Lack of experience: There was no prior experience in the field of study , so it became

difficult to analyze and interpret the financial statements of the companies.

2. To deal with human nature.

3. Limited time

Despite these limitations, the project was completed in a smooth manner and the

interesting nature of the project made all these limitations too small to think of.

BibliographyReference books

M.Y khan -Financial management – chapter 6-Tata McGraw –hill

Education,2007

T.S.Grewal-Analysis of Financial Statements-Chapter 5 and 6-Sultan

Chand Publication,2011

Websites

http://www.moneycontrol.com/stocks/company_info/print_main.php

https://en.wikipedia.org/wiki/Aircel

http://shodhganga.inflibnet.ac.in/bitstream/

10603/37222/4/4.%20chapter_ii.pdf

http://www.aircel.com/AircelWar/appmanager/aircel/delhi?

_nfpb=true&_pageLabel=aboutus_book

http://www.hoovers.com/company-information/cs/revenue-

financial.aircel_limited.3fb8538c51fd9192.html

ANNEXURE

Consolidated Profit and Loss Account in cr   Mar 16 Mar 15 Mar 14 Mar 13 Mar 12  12 mths 12 mths 12 mths 12 mths 12 mthsINCOMERevenue From Operations [Gross]

100,937.30

92,039.40 85,746.10 80,311.20 71,450.80

Revenue From Operations [Net]

100,937.30

92,039.40 85,746.10 80,311.20 71,450.80

Other Operating Revenues

0.00 95.70 117.40 47.80 55.00

Total Operating Revenues

100,937.30

92,135.10 85,863.50 80,359.00 71,505.80

Other Income 1,109.80 2,478.80 0.00 0.00 0.00Total Revenue 102,047.1

094,613.90 85,863.50 80,359.00 71,505.80

EXPENSESOperating And Direct Expenses

21,166.60 20,337.20 19,720.20 36,902.70 31,605.80

Employee Benefit Expenses

5,100.30 4,712.30 4,622.80 4,009.80 3,515.90

Finance Costs 8,701.80 7,325.20 4,838.00 4,384.40 3,818.50Depreciation And Amortisation Expenses

21,367.40 15,531.10 15,649.60 15,496.40 13,368.10

Other Expenses 37,966.90 35,864.20 33,743.50 14,576.10 12,679.20Group Share In Joint Ventures

0.00 -722.30 -521.10 0.00 0.00

Total Expenses 94,303.00 83,047.70 78,053.00 75,369.40 64,987.50Profit/Loss Before Exceptional, ExtraOrdinary Items And Tax

7,744.10 11,566.20 7,810.50 4,989.60 6,518.30

Exceptional Items 2,923.60 -853.20 53.80 0.00 0.00Profit/Loss Before Tax

10,667.70 10,713.00 7,864.30 4,989.60 6,518.30

Tax Expenses-Continued OperationsCurrent Tax 5,090.80 5,743.60 4,206.90 2,938.60 2,644.30Less: MAT Credit Entitlement

1,764.10 0.00 0.00 0.00 0.00

Deferred Tax 1,910.50 -691.00 622.70 -353.70 -101.50Tax For Earlier Years 0.00 352.10 15.30 130.20 -282.60Total Tax Expenses 5,237.20 5,404.70 4,844.90 2,715.10 2,260.20Profit/Loss After Tax And Before ExtraOrdinary Items

5,430.50 5,308.30 3,019.40 2,274.50 4,258.10

Profit/Loss From Continuing Operations

5,430.50 5,308.30 3,019.40 2,274.50 4,258.10

Profit/Loss For The Period

5,430.50 5,308.30 3,019.40 2,274.50 4,258.10

Minority Interest -973.90 0.00 0.00 0.00 0.00Share Of Profit/Loss Of Associates

0.00 0.00 0.00 -7.60 0.00

Consolidated Profit/Loss After MI And Associates

4,456.60 5,308.30 3,019.40 2,266.90 4,258.10

Source: Annual Reports of Aircel Ltd.

CONSOLIDATED BALANCE SHEET

IN CR.Mar 16 Mar 15 Mar 14 Mar 13 Mar 1212 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIESSHAREHOLDER'S FUNDSEquity Share Capital 1,998.70 1,987.30 1,964.50 1,898.80 1,898.80Total Share Capital 1,998.70 1,987.30 1,964.50 1,898.80 1,898.

80Reserves and Surplus 40,298.90 59,969.10 57,791.50 48,422.90 48,712.50Total Reserves and Surplus 40,298.90 59,969.10 57,791.50 48,422.90 48,712.50Total Shareholders Funds 42,297.60 61,956.40 59,756.00 50,321.70 50,611.30Minority Interest 7,446.50 4,852.50 4,210.20 4,088.60 2,769.50NON-CURRENT LIABILITIESLong Term Borrowings 89,774.50 45,228.30 54,991.90 61,548.50 49,715.40Deferred Tax Liabilities [Net] 4,602.80 1,511.00 1,685.00 1,587.30 1,162.10Other Long Term Liabilities 4,534.00 18,165.30 4,724.70 3,680.20 3,192.00Long Term Provisions 1,859.80 624.80 1,004.40 1,054.80 724.00Total Non-Current Liabilities 100,771.10 65,529.40 62,406.00 67,870.80 54,793.50CURRENT LIABILITIESShort Term Borrowings 5,723.80 21,138.90 20,903.90 11,412.30 19,307.80Trade Payables 17,471.70 33,967.00 28,398.10 27,313.40 23,265.00Other Current Liabilities 34,976.60 8,131.50 7,330.50 6,132.90 6,185.50Short Term Provisions 1,256.50 206.10 172.50 183.50 129.00Total Current Liabilities 59,428.60 63,443.50 56,805.00 45,042.10 48,887.30Total Capital And Liabilities 209,943.80 195,781.80 183,177.20 167,323.2

0157,061.60

ASSETSNON-CURRENT ASSETSTangible Assets 73,217.20 57,915.70 59,642.90 68,843.00 67,493.20Intangible Assets 88,778.00 92,228.30 80,971.60 68,080.80 66,088.90Capital Work-In-Progress 4,852.20 0.00 0.00 0.00 0.00Intangible Assets Under Development

972.50 0.00 0.00 0.00 0.00

Assets Held For Sale 0.00 4,564.50 0.00 0.00 0.00Fixed Assets 167,819.90 154,708.50 140,614.50 136,923.8

0133,582.10

Non-Current Investments 2,432.50 7,751.70 9,304.30 24.20 2.40

Deferred Tax Assets [Net] 764.30 5,950.20 6,262.70 5,924.50 5,127.70Long Term Loans And Advances

10,974.50 2,332.10 2,009.10 2,056.50 1,984.20

Other Non-Current Assets 7,146.10 2,838.30 2,600.90 2,103.80 1,556.80Total Non-Current Assets 189,137.30 173,580.80 160,791.50 147,032.8

0142,253.20

CURRENT ASSETSCurrent Investments 1,485.10 9,284.00 6,226.50 6,745.10 1,813.20Inventories 169.10 133.90 142.20 110.90 130.80Trade Receivables 5,868.10 6,725.20 6,244.10 6,643.00 6,373.50Cash And Cash Equivalents 5,138.80 1,171.90 4,980.80 1,729.50 2,030.00Short Term Loans And Advances

6,548.50 3,878.50 3,979.40 1,313.70 4,380.70

OtherCurrentAssets 1,596.90 1,007.50 812.70 3,748.20 80.20Total Current Assets 20,806.50 22,201.00 22,385.70 20,290.40 14,808.40Total Assets 209,943.80 195,781.80 183,177.20 167,323.2

0157,061.60

Source: Annual Reports of Aircel Ltd.