UNDER THE SUPERVISION OF-MR. NAVNEET MODI

SR. MANAGER(FINANCE)TATA TELESERVICES NOIDA

Presented by-KHALIL AHMAD

14MBAK-03GE6313

“Financial analysis of TATA tele services ltd.”

TABLE OF CONTENTSINTRODUCTIONCONCEPTUAL FRAMEWORK ABOUT

TRAINING/PROBLEM ANALYSISRESAERCH METHODOLOGYFINANCIAL SATATEMENTS OF TATA TELESERVICESDATA ANALYSIS CONCLUSIONSUGGESTIONSBIBLIOGRAPHY

INTRODUCTIONCommunications is among the Tata Group's larger investments, with over $7.5 billion already committed.  The Group's objective is to provide end-to-end telecommunications solutions for business and residential customers across the nation and internationally. The Group's communications activities are currently spread primarily over four companies-Tata Teleservices Limited, its associate Tata Teleservices (Maharashtra) Limited, Tata Communications (erstwhile VSNL) and Tata Sky. Together, these companies cover the full range of communications services, including: Telephony Services: Fixed and Mobile Media & Entertainment Services: Satellite TV Data Services: Leased Lines, Managed Data Networks, IP/MPLS VPN, Dial-up Internet, Wi-Fi and

Broadband Value-added Services: Mobile and Broadband Content/Applications, Calling Cards, Net Telephony

and Managed Services Infrastructure Services: Submarine Cable Bandwidth, Terrestrial Fiber Network and Satellite

Earth Stations and VSAT Connectivity

OVERVIEWTata Teleservices Limited TYPE: Public Industry:Telecommunication Founded: 1996 Headquarters: Mumbai, Maharashtra, India Key people: Cyrus Mistry (Chairman) Srinath Narsimhan (MD&CEO) Products: Fixed-line and Mobile telephony, broadband and fixed-line internet services, digital television and network services Revenue: 31.91 billion (US$480 million) (2011) Parent: Tata group Divisions: Tata DoCoMo (CDMA/GSM)

Conceptual Framework About Training

o Objective of Ratio Analysiso What is Ratio Analysis?o Meaning of Ratioo Meaning of Ratio Analysis

OBJECTIVE OF RATIOS Ratio is work out to analyze the following aspects of business organization- A) Solvency- 1) Long term

2) Short term

3) Immediate

B) Stability C) Profitability D) Operational efficiency E) Credit standing F) Structural analysis G) Effective utilization of resources H) Leverage or external financing

FORMS OF RATIO:

Since a ratio is a mathematical relationship between to or more variables / accounting figures, such relationship can be expressed in different ways as follows – As a pure ratio, As a rate of times, and As a percentage

STEPS IN RATIO ANALYSIS

The ratio analysis requires two steps as follows: Calculation of ratio Comparing the ratio with some

predetermined standards.

TYPES OF COMPARISONS The ratio can be compared in three different ways – Cross section analysis, Time series analysis, and Combined analysis

CLASSIFICATION OF RATIO

BASED ON FINANCIAL STATEMENT BALANCE SHEET RATIO REVENUE STATEMENT RATIO COMPOSITE RATIO

BASED ON FUNCTION

LIQUIDITY RATIO LEVERAGE RATIO ACTIVITY RATIO PROFITABILITY RATIO COVERAGE RATIO

BASED ON USER

Ratios for short-term creditors: Current ratios, liquid ratios, stock working capital ratios

Ratios for the shareholders: Return on proprietors fund, return on equity capital Ratios for management: Return on capital employed, turnover ratios, operating ratios, expenses ratios

Ratios for long-term creditors: Debt equity ratios, return on capital employed, proprietor ratios.

IMPORTANCE OF RATIO ANALYSIS:

Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: Liquidity position, Long-term solvency, Operating efficiency, Overall profitability, Inter firm comparison Trend analysis.

ADVANTAGES OF RATIO ANALYSIS

Ratios facilitate conducting trend analysis, which is important for decision making and forecasting.

Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability and solvency of a firm.

Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons.

The comparison of actual ratios with base year ratios or standard ratios helps the management analyze the financial performance of the firm.

PURPOSE OF RATIO ANLYSIS: Liquidity – the ability of the firm to pay its way Investment/shareholders – information to enable decisions to be

made on the extent of the risk and the earning potential of a business investment

Gearing – information on the relationship between the exposure of the business to loans as opposed to share capital

Profitability – how effective the firm is at generating profits given sales and or its capital assets

Financial – the rate at which the company sells its stock and the efficiency with which it uses its assets

RESEARCH METHODOLOGYSecondary data have been used in the study.It is an archival study so it must proceed with the following steps : Study of financial system of Tata Tele services. Collection of data pertaining to Financial Analysis. Tabulation of the data. Graphical representation of data. Analyzing the ratio on the basis of data. Graphical representation of the various ratio. Study & results (Interpreting the data)

FINANCIAL STATEMENTS OF TATA Tele services

FINANCIAL STATEMENT OF 31 MARCH 2010 TO 31 MARCH 2014

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10 

Investment Valuation RatiosFace Value 10.00 10.00 10.00 10.00 10.00Dividend Per Share -- -- -- -- --Operating Profit Per Share (Rs) 2.69 2.37 2.70 1.33 2.50Net Operating Profit Per Share (Rs) 13.97 13.89 13.02 11.89 11.65Free Reserves Per Share (Rs) -- -- -- -13.25 -13.51Bonus in Equity Capital -- -- -- -- --Profitability Ratios  

Operating Profit Margin (%) 19.28 17.06 20.71 11.15 21.42Profit Before Interest And Tax Margin (%) -2.92 -5.41 -1.26 -21.99 -2.13Gross Profit Margin (%) -3.02 -5.52 -1.28 -22.13 -2.13Cash Profit Margin (%) 1.74 -2.37 1.03 -3.05 7.54Adjusted Cash Margin (%) 1.74 -2.37 1.03 -3.05 7.54Net Profit Margin (%) -19.87 -24.53 -20.65 2.19 -13.44Adjusted Net Profit Margin (%) -19.87 -24.53 -20.65 2.19 -13.44Return On Capital Employed (%) 0.13 -2.26 0.08 -12.01 -1.37Return On Net Worth (%) 23.80 36.74 45.64 -8.09 44.72Adjusted Return on Net Worth (%) -- -- -- -- --

Return on Assets Excluding Revaluations -12.04 -9.45 -5.98 -3.25 -3.51

Return on Assets Including Revaluations -12.04 -9.45 -5.98 -3.25 -3.51

Return on Long Term Funds (%) 0.21 -3.04 0.10 -33.44 -4.54Liquidity And Solvency Ratios  

Current Ratio 0.26 0.33 0.35 0.18 0.14Quick Ratio 0.59 0.62 0.57 0.49 0.40Debt Equity Ratio -- -- -- -- --Long Term Debt Equity Ratio -- -- -- -- --Debt Coverage Ratios  

Interest Cover 0.01 -0.17 0.01 -1.55 -0.14Total Debt to Owners Fund -- -- -- -- --

Financial Charges Coverage Ratio 1.09 0.89 1.05 0.79 1.53

Financial Charges Coverage Ratio Post Tax 1.09 0.89 1.05 3.39 1.71

Management Efficiency Ratios  

Inventory Turnover Ratio 615.13 825.87 648.36 596.72 345.37Debtors Turnover Ratio 9.93 8.75 8.24 8.07 8.76Investments Turnover Ratio 615.13 825.87 648.36 596.72 345.37Fixed Assets Turnover Ratio 0.43 0.41 0.41 0.43 0.49Total Assets Turnover Ratio 1.14 1.00 0.97 1.33 1.16Asset Turnover Ratio 0.69 0.63 0.60 0.65 0.78

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- 0.48 1.03

Number of Days In Working Capital -119.68 -123.77 -145.49 -148.81 -142.94

Profit & Loss Account Ratios  

Material Cost Composition -- -- -- 0.86 1.23

Imported Composition of Raw Materials Consumed -- -- -- -- --

Selling Distribution Cost Composition -- -- -- 13.29 15.78

Selling Distribution Cost Composition -- -- -- 13.29 15.78

Expenses as Composition of Total Sales 0.22 -- -- -- --

Cash Flow Indicator Ratios  

Dividend Payout Ratio Net Profit -- -- -- -- --

Dividend Payout Ratio Cash Profit -- -- -- -- --

Earning Retention Ratio -- -- -- 100.00 --

Cash Earning Retention Ratio 100.00 -- 100.00 -- 100.00

Adjusted Cash Flow Times 124.59 -- 207.81 -- 21.58

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Earnings Per Share -2.86 -3.47 -2.73 0.26 -1.57Book Value -12.04 -9.45 -5.98 -3.25 -3.51

BALANCE SHEET OF TATA TELESERVICES OF 31 MARCH 2010 TO 31 MARCH 2014

Balance Sheet of Tata Teleservices ) ------------------- in Rs. Cr. -------------------

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10  

 

12 mths 12 mths 12 mths 12 mths 12 mths  

 

Sources Of Funds

Total Share Capital 1,954.93 1,897.20 1,897.20 1,897.20 1,897.20  

Equity Share Capital 1,954.93 1,897.20 1,897.20 1,897.20 1,897.20  

Share Application Money 0.00 0.00 0.00 0.00 0.00  

Preference Share Capital 0.00 0.00 0.00 0.00 0.00  

Reserves -4,307.76 -3,689.95 -3,031.18 -2,513.63 -2,563.53  

Networth -2,352.83 -1,792.75 -1,133.98 -616.43 -666.33  

Secured Loans 5,711.22 5,513.91 5,046.94 2,669.78 2,300.43  

Unsecured Loans 425.00 455.00 325.00 1,982.82 1,309.00  

Total Debt 6,136.22 5,968.91 5,371.94 4,652.60 3,609.43  

Total Liabilities 3,783.39 4,176.16 4,237.96 4,036.17 2,943.10  

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10  

 

12 mths 12 mths 12 mths 12 mths 12 mths  

 

Application Of Funds

Gross Block 7,810.87 7,910.65 7,673.36 7,621.16 5,574.14  

Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00  

Less: Accum. Depreciation 3,292.98 3,120.92 2,687.11 2,818.33 2,070.32  

Net Block 4,517.89 4,789.73 4,986.25 4,802.83 3,503.82  

                    

Capital Work in Progress 37.62 26.72 64.39 153.05 196.91Investments 0.00 50.35 0.00 0.00 120.00Inventories 4.44 3.19 3.81 3.78 6.40Sundry Debtors 252.31 297.67 304.81 294.98 264.12Cash and Bank Balance 21.65 86.31 137.96 24.38 22.98Total Current Assets 278.40 387.17 446.58 323.14 293.50Loans and Advances 827.11 766.41 632.57 517.46 301.05Fixed Deposits 0.00 0.00 0.00 50.30 0.00Total CA, Loans & Advances 1,105.51 1,153.58 1,079.15 890.90 594.55Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 1,398.69 1,615.87 1,686.62 1,619.05 1,466.05

Provisions 478.94 228.35 205.21 191.56 6.13

Total CL & Provisions 1,877.63 1,844.22 1,891.83 1,810.61 1,472.18

Net Current Assetshgvvv -772.12 -690.64 -812.68 -919.71 -877.63Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 3,783.39 4,176.16 4,237.96 4,036.17 2,943.10 

Contingent Liabilities 1,069.90 1,206.53 1,023.97 546.19 632.11Book Value (Rs) -12.04 -9.45 -5.98 -3.25 -3.51

Source : Dion Global Solutions Limited

DATA ANALYSIS

Calculations and interpretation of ratios

Formula: Current Ratio = Current assets Current Liabilities

(All figures in Rs.’000)

Years Current assets Current liabilities Ratios

2012-2013 8,575,727 6,251,168 1.372013-2014 9,643,629 9,029,038 1.07

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

Current assets Current liabilities Ratios

2012-2013

2013-2014

CURRENT RATIO:

ANALYSIS

In TATA TELESERVICES Company the current ratio is 1.07:1 in 2013-2014. It means that for one rupee of current liabilities, the current assets are 1.07 rupees are available to them.

The current ratio throws light on the company’s ability to pay its current liabilities out of its current assets.

LIQUID RATIO: Formula: Liquid Ratio = Quick assets Current Liabilities

Years Liquid Assets Current liabilities Ratios2012-2013 8,575,727 6,251,168 1.372013-2014 9,643,629 9,029,038 1.07

(Current Assets-Inventories = Liquid Assets)

ANALYSIS: The liquid or quick ratio indicates the liquid financial position of an enterprise.

Almost in both years the liquid ratio is same, which is better for the company to meet the urgency. The liquid ratio has decreased from 1.37 to 1.07 in 2013-2014. Day to day solvency is more sound for company in 2012-2013 over the year 2013-2014.

This indicates that the dependence on the short-term liabilities & creditors are

more & the company is following an aggressive working capital policy.

Liquid ratio of Company is favorable because the quick assets of the company are more than the quick liabilities. The liquid ratio shows the company's ability to meet its immediate obligations promptly

PROPRIETORY RATIO:Formula: Proprietary Ratio = Proprietary fund Total FundOR

Proprietary Ratio = Shareholders fund

Fixed assets + current liabilities YEAR 2012-2013 2013-2014

Proprietary fund 13,263,132 18,433,462

Total fund 7582968 10476744

Proprietary ratio 175 176

ANALYSIS: The Proprietary ratio of the company is 176% in the year 2013-2014. This shows that the contribution by outside to total assets is more than the owners fund. This Proprietary ratio of the Company shows an upward trend for the last 2 years. As the Proprietary ratio is favorable the Company's long-term solvency position is sound.

EARNING PER SHARE: Formula: Earning per share = NPAT* Number of equity share

*Note: less: pref. dividend including tax

ANALYSIS: Earning per share is calculated to find out overall

profitability of the company. Earning per share represents the earning of the company whether dividends are declared or not.

The Earning per share is (2.42) means shareholder losses Rs. 2.42 for each share of Rs. 10/-.

The net profit after tax of the company is decreasing. Therefore the shareholders earning per share is decreased from 2012-2013 to 2013-2014 by (2.42) to (3.28). This shows it is continuous capital reduction per unit share by (2.42) to (3.28). This is not very beneficial for the investors to invest in the company.

CASH RATIO: Formula:

Cash + Bank + Marketable securities Cash ratio =

Total current liabilities

ANALYSIS:

This ratio is called as super quick ratio or absolute liquidity ratio. In the year 2012-2013 the cash ratio is 0.72 & then it is decreased to 0.46 in the year 2013-2014.

This shows that the company has insufficiency of cash, bank balance, & marketable securities to meet any contingency.

Creditor’s Equity to Total Assets Formula:

Creditor’s Equity to Total Assets = Total Liabilities Total Assets

Analysis

Creditor's Equity to total assets ratio is more than 1 for both years (i.e. 1.91 & 1.55)

it shows a good financial position of the company. In other words, we can state that for every unit of assets more than one unit of equity is available.

Net Retention ratio

Net Retention ratio = Net premium Gross premium

Analysis

Net Retention ratio is approximately same for both year which is good for the income prospective of TATA TELESERVICES & provides financial strength to the company

Management Expenses Ratio Management expenses

M.E Ratio = Total Gross Premium

Analysis

As management expense ratio has been increased from 28.2% to 39.19%, so net income of the firm get affected

Commission Ratio Cash + Bank + Marketable securities

Commission ratio = Total current liabilities

Analysis

As gross commission has increased from 7.23% to 7.64% and as we all know TATA TELESERVICES has a progressive commission plan so it indicates that the overall business of the company has been increased which helps to increase the gross income of it.

Ratio of policy holder’s liabilities to shareholders funds Policyholders liability

= Shareholders funds

Analysis

As ratio indicates that policyholder's liability has been decreased, it shows that company needs fewer funds to pay out the liabilities of policyholders

Growth rate of shareholders funds

Analysis: As shareholders funds is growing year by year it shows good financial position of the firm

Change in net worth

Analysis:

As change in net worth is positive, it shows an increase in net worth of the company

FINDINGS OF FINANCIAL POSITION OF TATA TELESERVICES After going through the various ratios, I would like to state that: The Working Capital of the company is satisfactory. As the Proprietary ratio is favorable the Company's long-

term solvency position is sound. The cash ratio shows the lack of cash for company. Creditor's Equity to Total Assets Ratio shows the fair

equity position of the company

The gross net premium is constant which shows financial stability in the market

The operating, administrative, management expense ratio has been increased

The EPS shows it is continuous capital reduction. The cash ratio shows that the company has sufficient cash, bank

balance, & marketable securities to meet any contingency. Commission ratio has been increased ,which shows the increase in

gross income Shareholder's fund is growing year by year The company does not have any profit after tax Net worth of the company is increasing

CONCLUSION Financial ratios are useful product of financial statement and

provide standardized measures of firm’s financial position, profitability and riskiness.

By calculating one or other ratio or group of ratios we can analyze the performance of a firm from the different point of view.

The ratio analysis can help in understanding the various long term and short-term decisions & position of the of firm.

SUGGESTIONS The analysis shows TATA TELESERVICES has

invested higher amount in administrative, management expenses then it is required. So they should care about their expense decisions to have higher returns and to stop losing out opportunity.

TATA TELESERVICES should launch some more innovative and financially strong insurance product

BIBLIOGRAPHY REFERENCE BOOK:

FINANCIAL MANAGEMENT (M.Y. KHAN AND P. K. JAIN )

ANAUAL REPORTS OF TATA TELESERVICES:

2012-2013 2013-2014

Websites: www.tatateleservices.com www.tata.comwww.wikipedia.com