A PROJECT REPORT
“FINANCIAL ANALYSIS OF MTNL”
Submitted in partial fulfillment of the requirement for the Award of Degree of MASTER OF BUSINESS ADMINISTRATION 2014 – 2016 Under the Guidance of: Ms. MONA KWATRA
Submitted by: Priya Handa (0289603914)
DEPARTMENT OF MANAGEMENT MAHARAJA AGRASEN INSTITUTE OF TECHNOLOGY (Affiliated to G.G.S.I.P. University) Sector – 22, Rohini, Delhi -110086 An ISO 9001:2008 Certified Institute AICTE NBA Accredited Institute
STUDENT UNDERTAKING
“Financial Analysis of MTNL” This is to certify that I, Priya Handa had completed the Project titled “Financial Analysis of MTNL” under the guidance of Ms. Mona kwatra in the partial fulfillment of the requirement for the award of degree of MBA from Maharaja Agrasen Institute of Technology (Affiliated to G.G.S.I.P. University), New Delhi. This is an original piece of work and I had neither copied nor submitted it earlier elsewhere.
Priya Handa (028963914) MBA Dated -
2
“Financial Analysis of MTNL”
CERTIFICATE FROM GUIDE This is to certify that the project titled “Financial Analysis of MTNL” is an academic work done by “Priya Handa” submitted in the partial fulfillment of the requirement for the award of the Degree of MBA from Maharaja Agrasen Institute of Technology (Affiliated to G.G.S.I.P. University), New Delhi under my guidance and direction. To the best of my knowledge and belief the data and information presented by him/her in the project has not been submitted earlier.
MONA KWATRA
.
3
“Financial Analysis of MTNL”
ACKNOWLEDGEMENT
I have prepared this study paper for the “Financial Analysis of MTNL” Quite frankly, I have derived the contents and approach of this study paper through discussions with colleagues who are also the students of this course as well as with the help of various Books, Magazines and Newspapers etc.
I would like to give my sincere thanks to a host of friends and the teachers who, through their guidance, enthusiasm and counseling helped me enormously. As I think there will always be a need of improvement. Apart from this, I hope this study paper would stimulate the need of thinking and discussion on the topics like this one.
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“Financial Analysis of MTNL”
EXECUTIVE SUMMARY The project selected by me is Financial Statements Analysis one of the most important aims of this project is to identify the financial strength in weakness of the business by properly establishing relationship between the items of financial statements. The Indian telecom industry underwent a high pace of market liberalization and growth since 1990s and now has become the world's most competitive and one of the fastest growing telecom markets. The Industry has grown over twenty times in just ten years, from under 37 million subscribers in the year 2001 to over 846 million subscribers in the year 2013. India has the world's second-largest mobile phone user base with over 929.37 million users as of May 2014. It has the world's third-largest Internet user-base with over 137 million as of June 2014. In relation to the growth and prosperity of telecom sector the study being conducted to analyze the financial soundness of the companies. A general belief is that a firm’s operating performance depends on certain key financial factors viz., turnover, profit, asset utilization etc and the variables which are found in profit and loss account and balance sheet of a firm have a direct or indirect relation with each other. By establishing a close relationship between the variables, a firm can analyze its financial performance in terms of liquidity, profitability, viability and sustainability. In order to measure the performance, ratios, the indicators, are normally used to identify the financial health of the firm. So the study concentrates on empirical approach towards measuring financial soundness of the companies operating under one of the most dynamic sector in Indian economy to identify key financial attributes of telecom companies and their respective impact. MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, and introduce new services and to raise revenue for telecom development needs of India’s key metros – Delhi, the political capital and Mumbai, the business capital of India. A distinction, being a government undertaking ‘MTNL’ has proved its efficiency over the years. It also ranked as a ‘NAV-RATN’ company by the government of India. The training report is the presentation of my observation at the MAHANAGAR TELEPHONE NIGAM LIMITED. 5
“Financial Analysis of MTNL”
TABLE OF CONTENTS
CHAPTER – 1: INTRODUCTION..............................................................1-8
Introduction of Telecom over all Industry................................3
Statement of the Problem: ........................................................4
Players in the market.................................................................6
Financial Analysis of Telecom Industry of India & China Introduction...............................................................................7
Objectives of the study…………………………………………8
CHAPTER -2: LITERATURE REVIEW...................................................9-12
Comparison..............................................................................12
CHAPTER -3: COMPANY ANALYSIS.....................................................13-35
Company profile about MTNL.................................................13
Corporate objective .................................................................13
Historical background..............................................................16
Corporate governance…………………………………………18
Finance.....................................................................................22
Disinvestment/global depository receipts................................23
Millennium telecom limited.....................................................24
Joint ventures............................................................................24
Mahanagar telephone Mauritius limited (MTML) ..................24
Market share of MTNL in total subscriber base ......................25
Average revenue per user (ARPU)...........................................27
Opex per subscriber..................................................................28
Capital employed cost per subscriber:......................................29 6
“Financial Analysis of MTNL”
Financial statements and Significance.....................................30
Industry screener......................................................................32
Milestone..................................................................................33
CHAPTER -4: RESEARCH METHODOLOGY......................................36-37
Research design........................................................................36
Nature and sources of data.......................................................36
CHAPTER-5: DATA ANALYSIS...............................................................38-55
Ratio Analysis ..........................................................................39 o Liquidity …………………………………………...….39 o Activity…………………………………………...……40 o Profitability………………………………………….....41 o EBIT………………………………………………...….42 o Interpretation………………………………….………...46 o On the basis of capital employed……………………….44 o Interpretation……………………………………………46
Comparative Balance sheet and P&L…………………………..47
Common size Balance Sheet and P&L...................................…49
Trend Lines................................................................................50
CHAPTER-6: CONCLUSION & IMPLICATIONS.................................54-56 CHAPTER-7: LIMITATIONS OF THE STUDY........................................57 BIBLIOGRAPHY......................................................................................................77 APPENDIX...........................................................................78-89
Annual Report, Balance Sheets............................................
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“Financial Analysis of MTNL”
CHAPTER – 1 INTRODUCTION Mahanagar Telephone Nigam Limited (MTNL) is a telecommunication company. The company provides telecommunication services including fixed telephone service, GSM and CDMA based mobile service, internet, broadband, ISDN and leased line services. It also offers value added services, enterprise services and intelligent networking services. MTNL's enterprise services include leased circuits, web hosting, intelligent network, NSDN and EPABX. The company's intelligent networking service comprise toll free service, charges for premium toll free numbers, premium rate service, virtual private network, televoting service, UAN service and virtual card calling service. MTNL is headquartered in New Delhi, India. Global Data’s Mahanagar Telephone Nigam Limited (MTNL) - Financial and Strategic SWOT Analysis Review provides a comprehensive insight into the company’s history, corporate strategy, business structure and operations. The report contains a detailed SWOT analysis, information on the company’s key employees, key competitors and major products and services, as well as detailed financial ratios for the last 5 years. This company report forms part of Global Data’s ‘Profile on Demand’ service, covering world’s leading companies. Once purchased, Global Data’s highly qualified team of company analysts will comprehensively research and author a full financial and strategic analysis profile of Mahanagar Telephone Nigam Limited , including a detailed SWOT analysis. The report will be delivered in PDF format within 48 hours (excluding weekends). The profile will help you formulate strategies that augment your business by enabling you understand your partners, customers and competitors better. Scope Business description – A detailed description of the company’s operations and business divisions. Corporate strategy – GlobalData’s summarization of the company’s business strategy.
1
“Financial Analysis of MTNL” SWOT analysis – A detailed analysis of the company’s strengths, weaknesses, opportunities and threats. Company history – Progression of key events associated with the company. Major products and services – A list of major products, services and brands of the company. Key competitors – A list of key competitors to the company. Key employees – A list of the key executives of the company. Executive biographies – A summary of the executives’ employment history. Important locations and subsidiaries – A list of key operational centers and subsidiaries of the company, including contact details. Detailed financial ratios for the past five years – The latest financial ratios derived from the annual financial statements published by the company with five-year history. Interim ratios for the last five interim periods – The latest financial ratios derived from five quarterly/semi-annual financial statements published by the company during the interim period. Note: Some sections may be missing if the company’s data is unavailable. Reasons To Buy
Gain key insights into the company for academic or business research purposes. Key elements such as SWOT analysis, corporate strategy and financial ratios and charts are incorporated into the profile to assist your academic or business research needs.
Identify potential customers and suppliers based on the analysis of the company’s business structure, operations, major products and services and business strategy.
Understand and respond to your competitors’ business structure and strategies with GlobalData’s detailed SWOT analysis. It analyzes the company’s core strengths, weaknesses, opportunities and threats, providing you with an up-todate objective view of the company.
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“Financial Analysis of MTNL”
Examine potential investment and acquisition targets with this report’s detailed insight into the company’s strategic, financial and operational performance.
Financial ratios presented for major public companies in the report include revenue trends, profitability, growth, margins and returns, liquidity and leverage, financial position and efficiency ratios.
Introduction of Telecom over all Industry The India's telecommunication network is the second largest in the world based on the total number of telephone users (both fixed and mobile phone). It has one of the lowest call tariffs in the world enabled by the mega telephone networks and hyper-competition among them. It has the world's third-largest Internet user-base with over 137 million as of June 2012. Major sectors of the Indian telecommunication industry are telephony, internet and television broadcasting. Telephone Industry in the country which is in an ongoing process of transforming into next generation network, employs an extensive system of modern network elements such as digital telephone exchanges, mobile switching centers, gateways and signaling gateways at the core, interconnected by a wide variety of transmission systems using optical fibre or Microwave radio relay networks. The access network, which connects the subscriber to the core, is highly diversified with different copper-pair, optic-fibre and wireless technologies. DTH, a relatively new broadcasting technology has attained significant popularity in the Television segment. The introduction of private FM has given a fillip to the radio broadcasting in India . Telecommunication in India has greatly been supported by the INSAT system of the country, one of the largest domestic satellite systems in the world. India possesses a diversified communications system, which links all parts of the country by telephone, Internet, radio, television and satellite. The total revenue of the Indian telecom sector grew by 7% to 283,207 crore (US$51.54 billion) for 2010–11 financial year, while revenues from telecom equipment segment stood at 117,039 crore (US$21.3 billion). Telecommunication has supported the socioeconomic development of India and has played a significant role to narrow down the rural-urban digital divide to some extent. It also has helped to increase the transparency of governance with the introduction of egovernance in India. The government has pragmatically used modern telecommunication facilities to deliver mass education programmes for the rural folk of India. In India both public sector and private sector shares substantial stake in telecom sector, generally the 3
“Financial Analysis of MTNL” new private player requires a high degree of asset allocation and heavy working capital and existing ones allocates heavy funds for sustaining and improving their market share. As the industry calls for huge fund allocation which makes necessary for the companies to manage all financial affairs in well structured and organized manner to activate the dormant financial allocations, financing the deficit or disposal of surplus. The major factors have been identified as reason for affecting financial performance of telecom companies are –
Heavy capital investment.
High collection period.
Frequent policies from the side of government which fails forecasting and estimations.
Substantial investment in after sales services
The above are the some key variables along with them high research and development expenditures, continuous innovation expenditures, modification expenditures, etc thrashes the solvency and profitability the companies. Therefore application of adequate financial management is must manage and control the flow of funds efficiently which helps the organizations to improve their solvency, profitability and performance.
Statement of the Problem: The project selected by me is Financial Statements Analysis, one of the most important aims of this project is to identify the financial strength in weakness of the MTNL by properly establishing relationship between the items of financial statements. Finance is the lifeblood and nerve center of a business. As circulation of blood is essential in the human body for maintain life, finances is a very essential to smooth running of the business. Generally in a lot of sectors it is visible that private sectors utilizes funds in better manner as compare to public sector, the study is an effort to draw appropriate conclusion. In India telecom industry represents an integral part of Indian economy. Since the industry faces ups and downs over the period of time, the companies in the industry have reported reduction in profit and in some rare cases even loss. As and when the industry is caught in a vicious down cycle, the firms have rendered operations unviable and they face threats to their viability and sustainability which directly impacts 4
“Financial Analysis of MTNL” their financial health and if the problem didn’t get checked with in the given timeframe by applying adequate financial management tool so it definitely affects the organization from its depth. In relation to the company’s overall valuation, all of this demands a broad outlook on an alert creativity that will influence almost all facts of the enterprise. As the importance of finance is growing up in twenty first century, we cannot afford to ignore it. Telecom is one of the fastest-growing industries in India. Today India stands as the second-largest telecommunications market in the world. The mobile phone industry in India would contribute US$ 400 billion in terms of gross domestic product (GDP) of the country in 2014. This sector which is growing exponentially is expected to generate about 4.1 million additional jobs by 2020, as per Groupe Speciale Mobile Association (GSMA). In the period April 2000 to January 2014, the telecom industry has got in foreign direct investments (FDI) of about US$ 59,796 million, which is an increase of 6 per cent to the total FDI inflows in terms of US$, as per report published by Department of Industrial Policy and Promotion (DIPP). India’s global system for mobile (GSM) operators had 4.14 million rural subscribers as of January 2014, bringing the total to 285.35 million. Data traffic powered by third generation (3G) services grew at 146 per cent in India during 2013, higher than the global average that saw usage double, according to an MBit Index study by Nokia Siemens Networks (NSN). India's smartphone market grew by 171 per cent in 2013, to 44 million devices from 16.2 million in 2012, as per research firm IDC India. The increasing popularity of bring-yourown-device (BYOD) in the workplace is further adding momentum to the smartphone market. Indian telecom industry has grown from a tele-density of 3.58% in March 2001 to 74% in June 2013. This great leap in both number of consumers as well as revenues from telecom services has not only provided sufficient contribution in Indian GDP growth but also provided much needed employment to India youth.
5
“Financial Analysis of MTNL” Players in the market BSNL is the market leader with a 67.7 per cent share followed by MTNL with 11.5 per cent market share. Next is Bharti Airtle at 10.9% followed by Tata and Reliance at 5% and 4.1% respectively. BSNL as a company is growing and showed annual revenues of approximately $4.5 billion as of 2014. BSNL is serving more than 125 million customers across the country and is catalyst in checking the price point for telecom services. Also, with the government intensifying its rural focus, only BSNL can turn into reality the next wave of rural telecom penetration. BSNL is a 100% Central Government entity and employees with BSNL are entitled to get salaries and perks as decided by Government of India and not by BSNL However both, MTNL and BSNL are plagued by declining revenues coupled with high costs. BSNL has massive infrastructure, manpower, systems, and 80 per cent of landlines and 90 per cent of broadband connections in India are operated by it. “Vodafone is investing nearly US$ 3 billion over the next two years in India in expanding its network infrastructure and distribution channel in the country,” as per Vittorio Colao, CEO, Vodafone Plc. BlackBerry plans to set up enterprise solutions centres to educate corporate customers about various BlackBerry Enterprise Service (BES) 10 solutions. "India is one of the fastest growing markets in terms of smartphone and mobile data adoption,” said according to Sunil Lalvani, Managing Director (MD), BlackBerry India. Tata Teleservices plans to set up nearly 4,000 wi-fi hotspots in nine cities across the country in the next two years. Booming sectors: The tide has turned for the telecom sector in India, as growth and profitability has accelerated in recent times. Tower companies are reaping benefits of a turnaround in the sector as operators have started investing in networks to boost data penetration. However it is in the country’s booming mobile segment in which the major battles are being fought. Three major private players – Bharti, Reliance and Vodafone - with a 6
“Financial Analysis of MTNL” formidable 54% share of the market between them, lead a large field of mobile operators. State-owned enterprises –BSNL and MTNL – have also been making their presence felt with a combined market share of 12%. A look
ahead:
According
to
Craig
Wigginton,
vice
chairman
and
U.S.
Telecommunications leader, Deloitte & Touche LLP, the big challenge for the telecom industry in 2014 – which also presents a major growth opportunity for the sector – is that consumers are getting addicted to connectivity and speed. The ongoing expansion of the mobile ecosystem, coupled with demand for highbandwidth applications and services such as video and gaming, is keeping pressure on the industry to increase the availability and quality of broadband connectivity. What does this mean for players in the sector? Carriers will continue to pursue technological advancements to handle demand, including offloading some mobile bandwidth needs to Wi-Fi, which is proving an effective complement to mobile networks. At the same time, long-term spectrum availability, spectrum efficiency, small cells and continued backhaul improvements are likely to be a key focus to assure continued mobile broadband momentum.
FINANCIAL ANALYSIS OF TELECOM INDUSTRY OF INDIA & CHINA INTRODUCTION As we all know that India is fast developing country, it is one of the fastest growing telecom markets of the world. As China is more developed market as compare to India and that is because of the start of the development of telecom industry in China, which started earlier than India. In India this has started from 10-15 years. To analyze and compare the trends of Indian telecom sector with the other developing countries, a study of the telecom sector of China was conducted. This information brings out some of the highlights of this study. The report is based on analysis of financial and non-financial results Chinese telecom companies available in their Annual repots and material available on net. China is one of the largest telecom markets in the world. The subscriber base of China as on March 2013 was 674.5 million, 349.1 of these subscribers were subscribing to mobile services and 325.40 million fixed line services. The mobile and fixed line subscriber’s account for a Tele-density of 25.90% and 24.9% respectively. 7
“Financial Analysis of MTNL”
OBJECTIVE OF THE STUDY Objective provides a framework for optimum financial decision-making. The various objectives of studies are as follows: To know the financial position of the organization. To know the working style of the organization. To get the information about earning potential of this enterprise. To know the capability of payment of interest of dividend analysis. To know the trends of business, which help us in as curtaining whether the business is progressive or not. To find out the shortcomings of business. To know the financial growth of telecom industry. To provide a reasonable & adequate return on capital through improvement, efficiency & utilizing adequate internal resources to finance the company growth. To know the role of each concerned department regarding the technical & financial justification of financial statements. To know the real worth of an enterprise.
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“Financial Analysis of MTNL”
CHAPTER – 2 LITERATURE REVIEW Mahanagar Telephone Nigam Limited (MTNL) is a telecommunication company. The company provides telecommunication services including fixed telephone service, GSM and CDMA based mobile service, internet, broadband, ISDN and leased line services. It also offers value added services, enterprise services and intelligent networking services. MTNL's enterprise services include leased circuits, web hosting, intelligent network, NSDN and EPABX. The company's intelligent networking service comprise toll free service, charges for premium toll free numbers, premium rate service, virtual private network, televoting service, UAN service and virtual card calling service. MTNL is headquartered in New Delhi, India. This comprehensive SWOT profile of Mahanagar Telephone Nigam Limited provides you an in-depth strategic analysis of the companys businesses and operations. The profile has been compiled by GlobalData to bring to you a clear and an unbiased view of the companys key strengths and weaknesses and the potential opportunities and threats. The profile helps you formulate strategies that augment your business by enabling you to A non-systematic literature review was undertaken to identify the financial ratios included in articles in peer-reviewed journals, industry publications, and articles in magazines and newspaper. To identify ratios in peer-reviewed articles, searches of academic databases using keywords such as “financial management”, “Solvency”, “profitability and liquidity” and “ratio analysis” were undertaken. Articles published prior to 1995 were excluded from the searches in order to ensure that only the most recent studies were included. This exclusion was important because of the many changes in telecom since 1995 and the likely lower relevance of articles prior to these changes. Ratios were selected from the articles if results showed that they were statistically significant in explaining a dimension of Telecom Company’s financial performance, such as profitability or financial distress. To identify ratios in industry publication, the websites of various organizations were reviewed. Some of the major literature reviewed is –
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“Financial Analysis of MTNL” Lazaridis and Tryfonidis (2006) conducted a cross sectional study by using a sample of 131firms listed on the Athens Stock Exchange for the period of 2001-2004 and found statistically significant relationship between profitability, measured through gross operating profit and cash conversion cycle and its components. Based on the results analysis of annual data by using correlation and regression tests, they suggest that managers can create profits for their companies by correctly handling the cash conversion cycle and by keeping each component of the conversion cycle at an optimum level. Garcia-Terual et al (2007) collected a panel of 8872 small to medium-sized enterprises from Spain covering the period 1996-2002. They tested the effects of working capital management on SME profitability using the panel data methodology. The results, which are robust to the presence of endogeneity, demonstrated that managers could create value by reducing their inventories and the number of days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the firm’s profitability. Mathuva (2009) examined the influence of working capital management components on corporate profitability by using a sample of 30 firms listed on Nairobi Stock Exchange for the periods 1993- 2008. He used Pearson and Spearman’s correlations, the pooled ordinary least squares and the fixed effects regression models to conduct data analysis. The key findings of his study were that there exists a highly significant negative relationship between the time it takes for firms to collect cash from their customers and profitability, there exists a highly significant positive relationship between the period taken to convert inventories to sales and profitability and there exists a highly significant positive relationship between the time it takes for firms to pay its creditors and profitability. Praveen Kataria in his study attempted to predict corporate sickness of the companies. Financial information about all the sick companies was collected for five years before sickness. Healthy companies were matched with the sick companies on the basis of industry composition size. 54 financial ratios and 8 macro economic variables were taken to study their effect along with financial ratios. Two group linear discriminate analyses were applied in two parts. In the first part, only financial ratio was taken in discriminate analysis, while the macroeconomic variable was included along with the financial ratios
10
“Financial Analysis of MTNL” in the second part. The result showed that macroeconomic variable had very little impact on discriminate function. Rekha Pai dealt with the prediction of industrial sickness using multiple discriminate analyses. The data set constitutes 21 financial ratios of 34 Indian sick companies in 200001 and 38 contemporary non sick companies, both selected irrespective of size and industry category 3 years prior to sickness. The multiple discriminate analyses (MDS) showed greater accuracy in predicting industrial sickness up to three years in advance. The model was validated further using a test model, while exhibited very high predictive accuracy of the proposed model. Berryman, (1983) indicated that „poor‟ or „careless‟ financial management is a major cause of small business failure. In addition, a major survey by the Insolvency Practitioner Society, (CIMA 1994) indicated that 20% of UK corporate failures (the vast majority of which are small firms) were due to bad debts or poor credit management. According to Peel and Wilson (1994), “if the financial/working capital management practices in the small firm sector could be improved significantly, then fewer firms would fail and economic welfare would be increased substantially”.
COMPARISON Table no.1 Comparison of subscriber growth of base of basic and cellular service in China and India
Fixed Line (Mn)
Cellular Line (Mn)
Year
China
India
China
India
2006
70.00
14.54
15.00
0.34
2007
90.00
17.80
20.00
0.88
2008
110.00
21.59
40.00
1.20
2009
130.00
26.51
85.00
1.88
2010
180.00
32.44
145.00
3.58
2011
210.00
37.94
210.00
6.43
2012
263.00
40.62
269.00
12.69
11
“Financial Analysis of MTNL” 2014-15
312.00
42.58
335.00
33.60
2016
325.40
45.91
349.10
52.21
Sources: Ministry of Information industry of China (MII) and TRAI Subscriber base In the past few years, fantastic growth has taken place in the mobile segment in India but basic services are not growing at a similar pace. In china a remarkable growth took place in both basic and cellular market. In 2014 the growth rate of mobile service in India surpassed growth rate of china however in fixed line segment India continuous to show a much lower growth than Chinese growth rate. One of the reasons for slow growth of fixed line services could be late introduction of broadband services over DSL. Summary of result of Indian and Chinese market is given in the following table.
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“Financial Analysis of MTNL”
CHAPTER – 3 COMPANY ANALYSIS ABOUT MTNL MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, and introduce new services and to raise revenue for telecom development needs of India’s key metros – Delhi, the political capital and Mumbai, the business capital of India. The company has also been in the forefront of technology induction by converting 100% of its telephone exchange network into the state-of-the-art digital mode. The Govt. of India currently holds 56.25% stake in the company. In the year 2010-11, the company would focus on widening the cellular and CDMA-based WLL customer base, introducing 3G services and achieving at least 5,00,000 broadband customers and rolling out of telecom services in Mauritius through its subsidiary.
MISSION To remain market leader in providing world class Telecom and IT related services at affordable prices and to become a global player.
CORPORATE OBJECTIVE To expend customer base and services. To achieve the highest level of customer satisfaction and delight. To diversify in other areas for providing telecom services at national and international levels. To provide convergence of Telecom, Information Technology and related services. To improve productivity by training and redeployment of manpower.
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“Financial Analysis of MTNL”
Vision Vision for Tomorrow
Become a total solution provider company and to provide world class telecom services at affordable prices.
Become a global telecom company and to find a place in the ‘Fortune 500’ companies.
Enter into and expand new services viz. Long distance, Cellular mobile, W-CDMA, Internet / Broadband and ‘IN’ – services and development of telecom software.
Become the largest provider of private networks and leased lines. Venture into other areas in India and abroad on the strength of our core competency
Vision 2014 1. Internet Services
Internet for all
Global Roaming
Virtual Private network
Premium Internet Service
E-commerce enabling services, by setting up of Payment Gateway & Certification Gateway
Unified Messaging
2. Broadband Internet Access services
MTNL’s Broadband service, branded as “Triband” offers high speed internet connectivity at most affordable prices. Offering speeds from 256 kbps up to 2 mbps (8 mbps download speeds), the tariffs have been planned in form of various packages to suit every need and budget. MTNL plans to expand the capacity shortly by 1 million lines.
ADSL 2+, most affordable prices for connecting all for speeds up to 2 mbps
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“Financial Analysis of MTNL”
Cable TV, through strategic alliance, video on demand, e-gaming, e-learning, video conferencing, telemedicine, e-education & much more.
3. Mobile Internet services
Internet Services via Mobile phone with up to 4mb bandwidth
E-commerce
Global Roaming
High speed Mobile Internet services
Value added services on GPRS & CDMA
Wi-Fi
4. IP based Voice services. 5. IP Services in PSTN
Call waiting Internet Busy
Call Competition Internet Busy
6. International Gateway Leasing Services 7. Internet Exchange Connectivity Services 8. Expansion of Managed leased line data Services 9. ATM Services
LAN Emulation
ATM Bearer Service
High speed video conferencing
Distance Learning & Telemedicine
Bandwidth on demand
Video on Demand
10. Customer Care Services
15
“Financial Analysis of MTNL” New Telephone registration, Bill payment and complaint registration through Internet, retail outlets & agents
Smart Card for Payphone
Mediation Billing Customer care in GSM Mobile
Data Ware Housing
Voice Mail Service
Call Center
Complaints / enquiries through SMS
11. Wireless ATM Service 12. Expand operations Beyond Delhi & Mumbai through strategic linkages with Basic, Cellular and Internet companies either by tie-ups, taking major equity stake or by acquisition. Tie up arrangement with ISP's for content as well as for co-branded portals. Setting up of venture capital fund and R & D fund to finance & encourage research institutions and IIT's for developing innovative technologies.
Historical background
16
“Financial Analysis of MTNL” Historical Development 1911 Establishment of Delhi telephones system with manual exchange 1926 Opening if 1st automatic exchange (Lothian exchange) 1937 Opening of Connaught Place exchange. 1945 First Manual Trunk exchange opened. 1950 Opening of Cantt exchange 1953 Tiz Hazari Exchange (Lothian exchange ceased working) commissioned. 1955 Secretariat exchange commissioned 1958 Karol Bagh exchange (SXS) commissioned. 1961 Jor Bagh exchange (SXS) commissioned. 1961 Shahadara exchange (SXS) commissioned. 1962 Opening of First STC service to Agra. 1963 Delhi Gate (27) exchange commissioned. 1964 Delhi telephone crosses 50,000 lines. 1966 Opening of exchanges at Nangloi, Narela, Najafgarh, Bahadurgarh and 1967 1968
Ballabgarh. Rajpath (38) exchange commissioned 1st X-Bar exchange (KB58) commissioned. X-Bar exchange (JB62)
1969 1970 1972 1972
commissioned Trunk automatic exchange (TAX) commissioned Okhla X-Bar exchange commissioned. Opening of Idgah-I (51) Strowger exchange. X-Bar (31) Janpath-I exchange commissioned. Delhi telephones crosses 1
1973 1975
lac lines. Opening of X-Bar (67) Chanakya Puri exchange. X-Bar Janpath-IV (34) exchange commissioned. X-Bar Shahdara East
1976
(20) exchange commissioned. Shakti Nagar (74) exchange commissioned. Idgah-II (52) X-Bar exchange inaugurated by Mr. Fakhuriddin Ali Ahmed, President of India, on 28.8.76 and presided over by Mr S.D. Sharma (Minister of Communications). Opening of Shahdara East (20) Extension-I, X-Bar exchange on 31.8.76. It was inaugurated by Mr H.K.L Bhagat (Minister of State for Works & Housing) and Mr S.D. Sharma (Minister of Communications). Opening of Hauz Khas (65) X-Bar exchange on 18.10.76. It was inaugurated by Mr S.D. Sharma (Minister of Communications) and
1977
presided over by Mr Radha Raman (Chief Executive Councillor, Delhi). Opening of STD Service to Indore and Ambala on 5.10.77 by Mr Brij Lal
1978
Verma (Minister of Communications). Opening of Rajouri Garden-I (59) X-Bar exchange in Feb 78 Opening of Hauz Khas -II (66) X-Bar exchange on 15.2.78, by Mr Brij
17
“Financial Analysis of MTNL” Lal
Verma
Opening
of
(Minister Janpath-V
of
Communications).
(35)
X-Bar
exchange.
Opening of Nehru Place (68) Strowger exchange on 4.11.78 by Mr Brij Lal Verma (Minister of Communications) and presided over by Mr R.K. 1986 1986 1987 1988 1992 1996 1997 2004 2005
Gupta (Mayor of Delhi). Creation of Mahanagar Telephones Nigam Limited First digital exchange world technology brought to India Largle Scale introduction of push button telephone made dialling easier. Phone Plus services multiplied benefits to telephone users. Voice Mail Service Introduced ISDN services introduced Wireless in Local loop introduced Internet services introduced. Millennium Telecom Limited, a wholly owned subsidary of MTNL is
2006
born Launched GSM Cellular Mobile service under the brand name Dolphin Launched WLL Mobile services under the brand name Garuda. The
company
listed
at
New
York
stock
exchange
(NYSE)
United telecom ltd.,MTNL Joint venture in Nepal,for providing WLL based
services
in
Nepal
became
operational.
2007
CLI based Internet express services introduced. Launched pre-paid GSM Mobile services under the brand name
2008-09
Trump.Email on PSTN lines introduced under the brand name mtnlmail. Introduced CDMA 1x 2005 Technology under the brand name Garuda 1x. Introduced pilot project of ADSL based Broadband services.Introduced Virtual Phone services.Mahanagar Telephone Mauritius Ltd. bagged
2010-11
second operator license in Mauritius. Expanded GSM & CDMA capacity by 800,000 lines each (total 1.6 million lines expanded) STD/ISD rates slashed by almost 60%. MTNL subsidiary MTML obtained license to provide fixed, mobile & ILD services in Mauritius. Launched Wi-Fi & digital certification services.
2012-13
State of the art training centre “CETTM” commissioned. Leading market in GSM customer additions. Launched broadband services under the brand name “TRI BAND”. Floated tender for 1 million 3G
18
“Financial Analysis of MTNL”
Corporate Governance MTNL has been following the principles of Corporate Governance. As it is understood, the principles and Corporate Governance deals with laws, procedures, practices and implicit rules that determine a company's ability to take informed managerial decisions vis-à-vis its stake holders, in particular its shareholders, creditors, customers, the state and employees. The major constituents/components of Corporate Governance include: 1) Constitution of the Board of Directors. 2) Key information that are being reported to and are placed before the Board of Directors. 3) Proper functioning of Audit Committee. 4) Transparency and desirable disclosures by the company. At present, MTNL Board comprises of four non-executive Directors, apart from three full time Directors viz. Director (Tech), Director (Fin) & Director (HR) and two exofficio Directors on Board. There are two Govt. nominees on the Board. The meetings of the Board are held regularly, as per the agenda and their importance. Besides regular Board Meeting, emergency Board meetings are held as and when required. The information, which are reported to and placed before the Board includes: 1) Annual Plans, revenue, capital budgets, manpower and over-head budgets and manpower requirements. 2) Quarterly results of the company as a whole and its operating divisions. 3) Internal audit reports. There is a separate Internal Audit group formed & functioning in the company under whose jurisdiction member of independent Chartered Accountants Firms are appointed by the company to carry out audit of various departments of the company both in Delhi & Mumbai as well as Corporate Office. Apart from the internal audit, the company is also subjected to Govt. Audits and other audits/examination by Parliamentary Committees. Company has to report its monthly, 19
“Financial Analysis of MTNL” quarterly and yearly achievements in terms of financial and physical parameters to Dot and Department of Public Enterprises (DPE). Hence, it can be seen that the company functions in a most transparent manner. MTNL has been following the principles of Corporate Governance. As it is understood, the principles and Corporate Governance deals with laws, procedures, practices and implicit rules that determine a company's ability to take informed managerial decisions vis-à-vis its stake holders, in particular its shareholders, creditors, customers, the state and employees. The major constituents/components of Corporate Governance include: 1) Constitution of the Board of Directors. 2) Key information that are being reported to and are placed before the Board of Directors. 3) Proper functioning of Audit Committee. 4) Transparency and desirable disclosures by the company. At present, MTNL Board comprises of four non-executive Directors, apart from three full time Directors viz. Director (Tech), Director (Fin) & Director (HR) and two exofficio Directors on Board. There are two Govt. nominees on the Board. The meetings of the Board are held regularly, as per the agenda and their importance. Besides regular Board Meeting, emergency Board meetings are held as and when required. The information, which are reported to and placed before the Board includes: 1) Annual Plans, revenue, capital budgets, manpower and over-head budgets and manpower requirements. 2) Quarterly results of the company as a whole and its operating divisions. 3) Internal audit reports. There is a separate Internal Audit group formed & functioning in the company under whose jurisdiction member of independent Chartered Accountants Firms are appointed by the company to carry out audit of various departments of the company both in Delhi & Mumbai as well as Corporate Office.
20
“Financial Analysis of MTNL” Apart from the internal audit, the company is also subjected to Govt. Audits and other audits/examination by Parliamentary Committees. Company has to report its monthly, quarterly and yearly achievements in terms of financial and physical parameters to Dot and Department of Public Enterprises (DPE). Hence, it can be seen that the company functions in a most transparent manner. Two most important claimants to any company are creditors and shareholders and the Corporate Governance and good corporate practice must satisfy both these claimants. In this regard, MTNL, a debt free company, has a unique distinction of servicing its shareholders. The company has evolved its own “Insider Trading Code” as per SEBI Rules & Regulations. Date of Establishment
28-02-1986
Revenue
565.619 ( USD in Millions )
Market Cap
12726 ( Rs. in Millions )
Corporate Address
Mahanagar Doorsanchar Sadan,5th Floor, 9, C G O Complex,Lodhi Road New Delhi-110003, New Delhi www.mtnl.net.in/www.bol.net.in
Management Details
Chairperson –P.K.Purwar MD –P.K.Purwar Directors - Adit Jain, AK Garg, Anita Soni, Ashok Kumar Garg, J S Deepak, Kuldip Singh, Kumar Sanjay Bariar, Malay Shrivastava, Manish Sinha, Nirmala Pillai, NK Joshi, P K Purwar, R S P Sinha, Rajan Saxena, S Balasubramanian, S P Pachauri, S R Sayal, Sunil Kumar, Sushil Kumar Shingal, Sushil Kumar Singhal, T S Narayanasami, Usha Sahajpal, V S Iyer, V Umashankar, Vijay Aggarwal
Business Operation
Telecommunication - Service Provider
Background
The
company
started
its
operations
by
establishing Delhi telephone system with a manual exchange. Later in 1986 MTNL (Mahanagar Telephone Nigam) was established. In the same year it brought in digital exchange world technology for the first time in India.
21
“Financial Analysis of MTNL” MTNL, a state-owned telecom service Financials
Total Income - Rs. 37873.72 Million ( year ending Mar 2014) Net Profit - Rs. 78251.31 Million ( year ending Mar 2014)
Company Secretary
S R Sayal
Bankers
Allahabad Bank , Axis Bank , Bank of Baroda, Central Bank of India, Corporation Bank, Dena Bank, Federal Bank, ICICI Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce,
Punjab
National
Bank,
Standard
Chartered Bank, State Bank of India, Syndicate Bank, Union Bank of India, United Bank of India, Vijaya Bank Auditors
Dhawan & Co, Arun K Agarwal & Associates, Bansal Sinha & Co, Bansal Sinha & Co, Goel Garg & Co, Bansal Sinha & Co, Goel Garg & Co, Bansal Sinha & Co, Dhawan & Co, Dhawan & Co, Dhawan & Co, VK Verma & Co, VK Verma & Co, VK Verma & Co, VK Verma & Co, NM Raiji & Co, NM Raiji & Co, NM Raiji & Co, VK Dhingra & Co, Arun K Agarwal & Associates
Finance MTNL has a strong financial base and has shown consistent improvement in performance over the years. It has a customer base of over 5 million. MTNL possesses an impressive financial profile comprising of Paid up Capital of Rs.6300 million. Reserves and Surplus amounting to Rs.96976.28 million and Fixed Assets worth Rs.72102.82 million (as on 31.03.2014)
Financial Operations
Disinvestment/GDR/ADR
Telephone Bonds
22
“Financial Analysis of MTNL”
Capital Expenditure
The following operations have reinforced and strengthened MTNL's resource base:
Disinvestment/Global Depository Receipts MTNL is amongst the foremost public sector undertakings in India in terms of divestiture / GDR of the equity by Govt. of India. Govt. of India has disinvested approximately 375.63 million shares (including 70 million shares through GDR) up to 31.3.2010. MTNL’s outstanding shares as on 31.3.2014 were 730 million (including 30 million shares GDR) out of which Govt. of India owned 354.37 million shares (56.25% approximately). The MTNL’s share has been listed at the Stock Exchanges of Mumbai, Delhi, Chennai, and Calcutta & National Stock Exchange. MTNL was listed at the New York Stock Exchange on 6.11.2006, one more connection that brings more transparency in its operation. Foreign Institutional Investors, All-India Financial Institutions, Research Analysts, and Merchant Bankers etc consider the company’s equities as an excellent buy globally.
Shareholding and Dividend MTNL’s paid up Capital is Rs.6300 millions and the Govt. of India currently holds 56.25% stake in the company. The company has been consistently paying dividend @ 45% on the paid up share capital of Rs.6300 millions for last four years. An interim dividend of @ 20% has been declared for the financial year 2012-13 and paid after approval of the board in January 2014.
Capital Expenditure The capital expenditure during 2012-13 was Rs 9.65 billion as against Rs.10.53 billion in 2011-12 and the capital expenditure for both the years was fully met by internal resources.
Millennium Telecom Limited Looking for new horizons 23
“Financial Analysis of MTNL” Incorporated on 17th Feb., 2005, Millennium Telecom Limited is a wholly owned subsidiary of MTNL that has been formed to do practically any type of Telecom Business with a focus on value added services. It intends to be a Universal Telecom solution provider to meet the needs of the customers, both Telecom and its Applications, on a one stop basis through Service Level Agreements using Multi Service, Flexible, customized access supported by a strong billing system. It intends to roll out a router-based packetised telecom network and create facilities like Application Development Centre, Internet Data Centre, STP facilities and payment gateway. Presently, it has a category ‘A’ ISP licence and is in the process of application development and rolling out the services. The company also started its operation in Himachal Pradesh in association with HPSEDC from 25th Feb, 2007.Web Enabled Tendering has also been started from 14.1.2007 for information on various tenders by logging on to nividasewa.com. The company has signed MOUs for co-operation with 1) West Bengal Electronics Limited. 2) Karnataka State Electronics Limited.
Joint ventures United Telecom Limited (UTL) MTNL has formed a Joint Venture company in Nepal by the name of United Telecom Ltd. (UTL) in collaboration with Telecom Consultants India Limited (TCIL), Videsh Sanchar Nigam Limited (VSNL) and NVPL (Nepal Ventures Pvt. Ltd., a Nepalese Company) The Company is operational since 10th October, 2006 for providing WLL based basic services in Nepal.
Mahanagar Telephone Mauritius Limited (MTML) MTNL has set up its 100% subsidiary “Mahanagar Telephone Mauritius Limited” (MTML) in Mauritius, for providing basic, mobile and international long distance services as 2nd operator in Mauritius. Necessary licenses have been obtained in January, 2009 infrastructure is being set up and MTML rolled out its services by the middle of year 2010.
24
“Financial Analysis of MTNL”
Market Share of MTNL in Total Subscriber Base As on 31st March 2015, the total subscriber base of fixed lines including WLL(F) stood at 50.2 million. The incumbents BSNL and MTNL have 74% and 8% market share respectively in the subscriber base, while all the five operators have 18% share. In the current quarter the share of private operators has increased by 15 and the share of BSNL has declined by 1% whereas the share of MTNL remains the same. As on 31st march 2015 total urban DELs are 35.49 million and rural DELs are 14.68 million.
Market Share of DELs (Fixed + WLL (F)) as on 31st March 2015
Private Operators ; 18% Private Operators
MTNL MTNL; 8%
BSNL
BSNL; 74%
Performance Indicators in Other Areas 1) Public Call Offices (PCO) During the current quarter 4, 64,470 new PCOs have been added.
Total number of
PCOs in the country as on 31st March 2015 is 41, 99,157. The contribution of BSNL is 20,64,174 i.e. 49% of the total PCOs. The contribution of MTNL and other Private Operators combined is 2, 79,041 (7%) and 18, 55,942 (44%) respectively. Operator-wise market share of PCO is depicted in the chart below. 25
“Financial Analysis of MTNL”
Market Share of PCOs as on 31st March 2015
BSNL;Operators 49% Private
MTNL
Private Operators ; 44% BSNL
MTNL; 7%
2) Market Share in Internet Service Provider (ISP) The growth trends indicate a considerable growth in market share of PSU owned ISPs. During the last year PSU owned ISPs have captured 56.43% market share. The market share of top 5 ISPs are: ISP BSNL MTNL Sify Ltd. VSNL Bharti Televentures Ltd. Others
% Share 42% 14% 13% 8% 6% 17%
26
“Financial Analysis of MTNL”
Subscriber Base
45%
42%
40% 35% 30% BSNL 25% 20%
MTNL
Sify Ltd. 14%
VSNL
Bharti Televentures Ltd.
Others
17% 13%
15%
8%
10%
6%
5% 0% % Share
Among PSU owned ISPs; M/s BSNL has reported a subscriber’s base of 29.29 lakhs during the quarter ending 31st March 2015 as against 25.97 lakhs during the previous quarter registering an increase of 12.79%. M/s MTNL has reported a subscriber base of 9.84 Lakhs against the subscriber base of 13.14 lakhs reported during the previous quarter, registering a decrease of 25.09%.
Average Revenue per User (ARPU) ARPUs in Indian and Chinese market are comparable in mobile sector but ARPUs for basic services are much higher in India. Result for various sectors is summarized below:
Table No. 2 Particulars Fiscal year ARPU- Basic ARPU Mobile (GSM+CDMA)
China Mar-2015 US$ US$
27
9.14 9.69
India Mar-2015 15 9.04
“Financial Analysis of MTNL”
16 14 12 10 China 15-Mar
8
India 15-Mar
6 4 2 0 US$
US$
ARPU- Basic
ARPU (GSM+CDMA)
OPEX Per subscriber Operating expenditures of basic and mobile services are compared in the following table. The OPEX in both segments is higher for Indian companies. High salaries, expenses on advertisement, license fee etc are some of the reasons for higher opex for Indian companies.
Table No. 3 Particulars
China
Opex per subscriber per month-basic
US$
4.30
5.92
Opex per subscriber per month-mobile
US$
2.41
4.18
28
India
“Financial Analysis of MTNL”
6 5 4 China
3
India
2 1 0 Opex per subscriber per month-basic
Opex per subscriber per month-mobile
Capital Employed cost per subscriber The capital employed in china for basic segment is almost half of what has been employed in the Indian market but for mobile segment is almost similar. Higher capacity utilization is one of the reasons for it.
Table No. 4 Particulars
China
India
Fiscal year
Mar-2015
Mar-2015
Capital Employed cost per subscriber-basic service
US$
169
362
Capital Employed cost per subscriber-mobile service
US$
163
167
Return on Capital Employed (RoCE) Chinese companies have much higher returns on capital employed than Indian companies. Lower Opex and higher ARPUs are reasons for higher RoCE. Comparison is given in the following table.
29
“Financial Analysis of MTNL”
Table No. 5 Particulars
China
India
Fiscal year
Mar-2015
Mar-2015
RoCE- Basic
US$
14.79%
10.92%
RoCE-Mobile
US$
22.87%
7.83%
FINANCIAL STATEMENTS ANALYSIS: Financial Statement present a mass of complex data in absolute monetary terms and reveals little about the liquidity, solvency and profitability of the business. In financial analysis, the data given in Financial Statement is classified into simple groups and a comparison of various groups is made with one another to pinpoint the stung points and weaknesses of a business.
SIGNIFICANCE OF THE STUDY Now a day analysis of financial statements has become of general interest various parties are interested in the financial statements of a business due to various reasons. By analyzing the financial statements each party can as retain whether his interest is safe or not. The significance of the financial statements analysis for different parties is as follows: Significance for management: The management can measure the effectiveness of the own polices and decisions, determine the advisability of adopting new polices, procedures and document to owners, the result of their managerial efforts. Significance for Investors: With the help of financial analysis investors and share holders of the business can know about the earning capacity and the safety of their investment in the business. Significance for Creditors: Financial analysis tells them whether companies have sufficient assets and funds to pay off its Creditors.
30
“Financial Analysis of MTNL” Significance for Government: Government can judge, the basis of analysis of financial statements, which industry is progressing on the desired lines and which industry needs the financial help. Significance for Financial Institutions: With the help of financial statement analysis financial institutions can know the profit earning capacity of the business and its long term solvency. Significance for Employees: Analysis of financial statements helps the employees in determining the true profit of the business enterprise. Value Creation Return on Capital Employed
Mar'0 6 9.21%
Mar'0 7 5.47%
Mar'0 8 6%
Mar'0 9 5.51%
Mar'1 0 2.51%
Growth Parameters
31
Mar'1 1 24.29 %
Mar'1 2 20.96 %
Mar'1 3 26.01 %
Mar'1 4 42.35 %
Mar'1 5 4.82%
“Financial Analysis of MTNL”
Industry Screener Company Name
Latest Price (Rs.)
MTNL
20.1
Tata Teleservice(Mah GTL
8.44 14.77
Hathway Cable & Data
53.8
Dhanus Technology Vital Communication
0.08 0.69
Price Change Rs.(%)
Market Cap
Net Sale s (Rs. Cr.)
Lates t EPS (Rs.)
Net Profit Margi n%
Lates t P/E
Lates t P/BV
-0.1 (-0.5%) 0.08 (0.96%) -0.27 (-1.8%) -1.25 (-2.27%)
Small Cap Small Cap Small Cap Small Cap
3,39 2 2,73 1 2,26 5 980
115.9 1 -2.88
-8.64
0.17
0.48
-20.52
-
-0.58
45.85 -1.78
-21.96
-
-0.52
-12.04
-
3.63
0 (0%) 0 (0%)
Small Cap Small Cap
53.5
-0.07
-20.97
-
-
0
-0.01
-
-
0.06
MTNL gets tax refund amounting Rs 146.50 crore on 15 Apr 2015
Mahanagar Telephone Nigam is currently trading at Rs. 21.35, up by 0.25 points or 1.18% from its previous closing of Rs. 21.10 on the BSE.
The scrip opened at Rs. 21.00 and has touched a high and low of Rs. 22.20 and Rs. 20.65 respectively. So far 552693 shares were traded on the counter. 32
“Financial Analysis of MTNL”
The BSE group 'B' stock of face value Rs. 10 has touched a 52 week high of Rs. 39.10 on 25-Jun-2014 and a 52 week low of Rs. 14.60 on 25-Apr-2014.
Last one week high and low of the scrip stood at Rs. 22.65 and Rs. 19.15 respectively. The current market cap of the company is Rs. 1310.40 crore.
The promoters holding in the company stood at 56.25 % while Institutions and NonInstitutions held 22.18 % and 19.92 % respectively.
Mahanagar Telephone Nigam (MTNL), the state owned telecom firm which operates in Delhi and Mumbai, has added 19,353 mobile subscribers in March, 2015. Following the addition, the company’s total subscriber count stood at 34.2 lakh.
MTNL was set up by the Government of India to upgrade the quality of telecom services, expand the telecom network, and introduce new services and to raise revenue for telecom development needs of India's key metros -- Delhi and Mumbai.
Milestones
1911 Delhi telephones system with manual exchange was established.
1926 Lothian exchange, the first automatic exchange was inaugurated.
1937 Connaught Place exchange was opened.
1945 First Manual Trunk exchange was opened.
1950 Cantt exchange was opened.
1953 Tiz Hazari Exchange was commissioned whereas Lothian exchange ceased working.
1955 Secretariat exchange was commissioned
1958 Karol Bagh exchange (SXS) was commissioned.
1961 Jor Bagh exchange (SXS) was commissioned.
1961 Shahadara exchange (SXS) was commissioned.
1962 First STC service was opened at Agra.
1963 Delhi Gate (27) exchange was commissioned.
1964 Delhi telephone crosses 50,000 lines.
1966 Exchanges at Nangloi, Narela, Najafgarh, Bahadurgarh and Ballabgarh were opened.
1967 Rajpath (38) exchange was commissioned.
33
“Financial Analysis of MTNL”
1968 1st XBar exchange (KB58) was commissioned. XBar exchange (JB62) was commissioned.
1969 Trunk automatic exchange (TAX) was commissioned.
1970 Okhla XBar exchange was commissioned.
1972 IdgahI (51) Strowger exchange was opened.
1972 XBar (31) JanpathI exchange was commissioned. Delhi telephones crosses 1 lakh lines.
1973 XBar (67) Chanakya Puri exchange was opened.
1975 XBar JanpathIV (34) exchange and XBar Shahdara East (20) exchange was commissioned.
1976 Shakti Nagar (74) exchange, XBar exchange, Shahdara East (20) ExtensionI, XBar exchange and Hauz Khas (65) XBar exchange were commissioned.
1977 STD Service to Indore and Ambala were started
1978 Rajouri GardenI (59) XBar exchange, Hauz Khas II (66) XBar exchange, JanpathV (35) XBar exchange and Nehru Place (68) Strowger exchange were inaugurated.
1986 Mahanagar Telephones Nigam Limited was incorporated.
1986 First digital exchange world technology brought to India
1987 Introduction of large scale push button telephone made dialling easier.
1988 Phone Plus services multiplied benefits to telephone users.
1992 Voice Mail Service was introduced.
1996 ISDN services were introduced.
1997 Wireless in Local loop was introduced
1999 Internet services were introduced.
2000 Millennium Telecom Limited, a wholly owned subsidiary of MTNL was born.
2001 The company launched GSM Cellular Mobile service under the brand name Dolphin. WLL Mobile services under the brand name Garuda was also launched. The company got listed at New York stock exchange (NYSE). United telecom, MTNL entered into joint venture in Nepal, for providing WLL based services in Nepal became operational. CLI based Internet express services was introduced.
34
“Financial Analysis of MTNL”
2002 The company launched prepaid GSM Mobile services under the brand name Trump. Email on PSTN lines were introduced under the brand name mtnlmail.
2003 CDMA 1x 2000 Technology under the brand name Garuda 1x was introduced. A pilot project of ADSL based Broadband and Virtual Phone services were introduced. Mahanagar Telephone Mauritius bagged second operator license in Mauritius.
2004 The company expanded GSM & CDMA capacity by 800,000 lines each (total 1.6 million lines expanded) STD/ISD rates slashed by almost 60%. MTNLs subsidiary MTML obtained license to provide fixed, mobile and ILD services in Mauritius. WiFi and digital certification services were launched. State of the art training centre CETTM was commissioned.
2005 The company launched broadband services under the brand name TRI BAND. It also floated tender for 1 million 3G GSM lines.
35
“Financial Analysis of MTNL”
CHAPTER - 4 RESEARCH METHODOLOGY The quality and reliability of research studies is dependent on the information collected in a scientific and Methodology manner. Scientific planning of designing of research method is a blue print for any research study therefore proper time and attention should be given in designing the plan of research. By proper definition of problem tells the researcher where he was to go, proper design tells him how he should go. Selection of Methodology for a particular project is made easy. By sorting out a number of alternative approaches, each of them having its own advantages and disadvantages. Efficient design is that which ensure that the relevant data are collected accurately. The researcher has to think about what procedure and technique should be adopted in the study. He should arrive at the final choice by seeing that methodology chosen for the project is indeed the best one, when compared with others.
RESEARCH DESIGN Research Design is the first and the foremost step in Methodology adopted and undertaking research study. It is the over all plan for the collection and analysis data in the research project. Thus it is an organized, systematic, approach to be formulation implementation and control of research project. In fact a well-planned and well-balanced research design guards against collection of irrelevant data and achieves the results in the best possible way.
NATURE AND SOURCES OF DATA The main purpose or objective of this study is to undertake the financial appraisal of MTNL. To attain this objective this objective, time series and cross section data are collected on the basis of universe. The basis sources of data are as under. Annual reports of MTNL, which are recasted and presented in a condensed form. The statement showing total costs under various heads have also been prepared. Some information has been collected through formal as well as informal discussion with various department heads.
36
“Financial Analysis of MTNL” Data are bricks with which the researcher has to make a house. While the quality of research findings depend on the data. The adequacy of appropriate data in turn depends upon proper method of data collection. A number of methods are at the disposal of the researcher of which one has to select the most appropriate one for visualizing the research objective. Thus he has to see the method adopted is compatible with the resources and research and research study. PRIMARY DATA: Data that are collected fresh and for the first time and thus happens to be original in character. Primary data are gathered for specific purpose. SECONDARY DATA: Data that collected from primary data i.e. they already exist somewhere. For the purpose of our study we collected both the data.
ANALYSIS OF THE DATA OR THE METHODOLOGY For the analysis of the data, simple and cross tables are prepared for the study. For comparison percentages and indices are computed for the different variables in the study. The techniques of comparative and common size balance sheet, analysis, profitability analysis, working capital analysis, common size profit and loss accounts, ratio analysis, trend analysis, have been adopted for the financial appraisal. Statistical techniques like percentage average, index numbers etc. have been used wherever found useful.
37
“Financial Analysis of MTNL”
CHAPTER - 5 DATA ANALYSIS, FINANCIAL ANALYSIS & INTERPRETATION CONCEPTUAL FRAMEWORK OF THE PROJECT A number of methods can be used for the purpose of analysis of Financial Statements. These are also termed as techniques or tools of financial analysis. Out of these, any of the techniques is used for analysis of Financial Statements. The Principal techniques of Financial analysis are:1. Ratio Analysis 2. Comparative Financial Statements. 3. Common-Size Statements. 4. Trend Analysis Anyone out of these techniques can be chosen for financial analysis of an enterprise.
38
“Financial Analysis of MTNL”
RATIO ANALYSIS 1. LIQUIDITY RATIOS (A) Current Ratio Year Current Assets
= Current Assets Current Liabilities 2013 1.352
2014 1.378
2015 1.37
Current Assets 1.39
1.38
1.38
1.37
1.37 1.36
1.35
1.35 1.34 1.33 Years
Interpretation: Current ratio is less than 2:1. It indicatives lack of liquidity and shortage of working capital.
2. Activity or Turnover Ratios:(A)
Stock Turnover Ratio
Year Stock Turnover ratio (in times)
=
Cost of goods sold Average Stock 2013 2014 22.49 55.9
39
2015 35.1
“Financial Analysis of MTNL”
Stock Turnover ratio (in times) 55.9
60 50 40 30
35.1 22.49
20 10 0 Year
(B)
Average Collection Period =
Year Average collection period (in times)
Average Debtors X365 Net Credit Sales 2013 2014 2.08 2.78
2015 3.66
Average collection period (in times) 4
3.66
3.5 2.78
3 2.5 2
2.08
1.5 1 0.5 0 Year
(C)
Working capital turnover ratio
=
Year Working capital turnover ratio
40
Cost of goods sold Working Capital 2013 2014 147.14% 130%
2015 120%
“Financial Analysis of MTNL”
Working capital turnover ratio 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00%
147% 130%
120%
Year
3. Profitability Ratios A. On the basis of Net profit (A) Net Profit ratio Year
=
2013
Net profit ratio
Net Profit Net Sales 2014
17.35%
22.10%
Net profit ratio
25.00% 20.00% 2013
2014
2015
15.00% 10.00% 5.00% 0.00% B. Operating Net Profit ratio =
Operating net Profit Net Sales X100 41
X100 2015 16.80%
“Financial Analysis of MTNL” Year Operating Net profit ratio
2013 17.30%
2014 22.10%
2015 13.59%
Operating Net Profit Ratios
25.00% 20.00% 2013
2014
2015
15.00% 10.00% 5.00% 0.00%
4. EBIT ratio = Year EBIT ratio
EBIT Income from servicesX100 2013 2014 22.26% 27.01%
EBIT Ratios
30.00% 25.00% 20.00%
2013
2014
2015
15.00% 10.00% 5.00% 0.00%
42
2015 22.38%
“Financial Analysis of MTNL”
Interpretation: Net profits ratio was constantly decreasing up to year 2012 but after this year this has shown a rise in 2013, but again in 2014 it is down. Decrease in net profits ratio must be considered similar to decrease in net profits. This is not at all be called inefficiency of management, but somehow the projects taken in these years will fetch more benefits in the coming future, but this is a serious matter to look into by the management Operating net profits ratio with a trend of increase and decrease in alternate years has been going down. This ratio is calculated by establishing the relationship of operating net profits with the income from services. Operating net profit is the actual indicator of the operations of the company. Earnings before interest and tax (EBIT) ratio is constantly decreasing over the years expect in the year 2013 which was an expectation to this, which shows a sudden increase of almost 5% in it. As in this competitive world, a company can only increase its profitability by decreasing the dr. side of profits & loss account. So this is very much important, as it is one of the healthiest contributors to the cost. MTNL in the year 2007 was spending almost 1/5th of its earnings over its Employee’s benefits, but in the year 2015 MTNL is spending almost one Re. For every 3 Rs. earned i.e. 1/3rd of its income is going for the benefits of its employees. The ratio is extremely high and this must be looked into and the areas where it can be possible expenses should be cut-off or at least these must not increase any more.
43
“Financial Analysis of MTNL”
44
“Financial Analysis of MTNL”
1. On the basis of capital employed A. Return on Capital Employed =
Year Return of Capital Employed
Profit before interest, tax and divided Capital employed X100
2013 14.35%
2014 16.81%
2015 11.58%
Return Of Capital Employed
18.00% 16.00% 14.00% 12.00%
2013
2014
2015
10.00% 8.00% 6.00% 4.00% 2.00% 0.00% B. Return on total Shareholder’s funds = Net profit after interest & tax Total Shareholder’s funds X100 Year Return funds
on
total
Shareholder’s
2013 9.24%
45
2014 110.14%
2015 8.58%
“Financial Analysis of MTNL”
Return on Total Shareholder's Funds
120.00% 100.00% 80.00%
2013
2014
2015
60.00% 40.00% 20.00% 0.00%
C. Earning per share (E.P.S.)
= Net profit-Dividend on preference Shares Number of Equity Shares
Year Earning per share (E.P.S.) Rs.
2013 13.92
2014 18.26
Earning per Share (E.P.S)
20.00% 18.00% 16.00% 14.00% 12.00%
2013
2014
2015
10.00% 8.00% 6.00% 4.00% 2.00% 0.00%
46
2015 14.90
“Financial Analysis of MTNL”
D. Dividend per share (D.P.S.) = Year Divided per share (D.P.S) Rs.
Divided paid to Equity Shareholder’s Number of Equity Shares 2012 2013 2014 4.5 4.5 4.5
Dividend per share (D.P.S) Rs. 9.0 8.0 7.0 6.0
2013
2014
2015
5.0 4.0 3.0 2.0 1.0 0.0
47
#REF!
“Financial Analysis of MTNL”
Interpretation: Return on capital employed is decreasing over the years. In the years 2014 it was on its pea to 16.91% but it is now down to only 11.58%. The profitability of the firm is going down. This is mainly because of the so many players are in the market to eat the same slice, so the share is decreasing, private companies are coming out with new schemes, some of which are very attractive , so the customer base is decreasing. Companies have to be innovative if it wants to remain its position in the market. Return on equity shareholder’s funds, which was once more than the return on capital employed, is now down to less than of its four years back. Earnings per Share (EPS) of the co. are going down and even the number of shares is constant. Decrease in EPS is a straight indicator of decrease in profits for the equity shareholders of the co. In spite of decreasing income and increasing expenditure, the co. has followed the stable dividend policy and has been announcing the same amount of dividend of 2835 Mn. Rs. from many years, which comes to 4.50 Rs. per share. Stable dividend policy ensures the minimum income for the shareholders and also strengthens their confidence in the performance of the co. Because of the dividend is paid irrespective of the income, therefore decrease in income shows the high dividend payout ratio. EPS is going down and DPS is stable, therefore the payout ratio is going up in % form, otherwise in the Rs, form it is same. This ratio shows that how much of the earnings MTNL is paying as dividend to its shareholders. Even the market value of MTNL is going down this is visible from some of the Ratios are calculated with the help of market value of one share of MTNL. Earning yield & Dividend yield are almost similar to EPS & DPS respectively; just they are closer to reality as they are calculated with the help of Market value of shares.
48
“Financial Analysis of MTNL”
DATA ANALYSIS COMMENTS ON COMPARATIVE B/S 2014 & 2015 Comments (2014-15) A year in which a company after making good profits ad even after good performance is facing this kind of critics shows that how much this deserves and how much this deserves and how much big are the expectations.
Comparative Balance Sheets of 2013 & 2014 show that there is a marginal increase in the value of total Assets of company by 5.75%.
Because of the less profits as compare to 2011 & 2012 in the year 2013-14 the growth in reserve & surplus is only 6.35% as compared to last year increase of 9.4%
Deferred tax liability, which increased by 15.58% last year, is increase by just 1.87%.
A good change in the Assets side is that this year investments are increased by 4.4% this year, as it was just 2.6%.
Working capital is increased by 5.63%. Actually the reasons why it is increase last year are almost opposite this year. This year current liabilities, which decrease last year, increase this year by 7%. And cash increase last year by 41%, decrease this year by 1.4%.
Another surprise is the inventories, which rose this year by 110.17% as compare to decrease in previous year of 41%. Capital W.I.P. increase by 30% last year it was down by 42%.
COMMENTS ON COMPARATIVE P/L 2012, 2013 & 2014 Comments (2014-15)
MTNL is a big name in the telecom industry and lots of people were expecting good results from organization. But it can’t match the expectations of the market. Its net profits for the year are 9389.79 million Rs. It is not a bad amount, but it is not a good amount for a company like MTNL, which in the previous year shows the profits of Rs.11504.78 million
On the basis of previous year its net profits is down by 18.38%. The total income is also down by 18.38%. The total income is also down almost 9% & income from services, which is down by 12.2% coming amount to 7772 million Rs. 49
“Financial Analysis of MTNL”
A little relief is from the side of other income which increases by 56.43% to reach at 4917 million Rs. With an increase of 1773 million Rs. over the previous year 2014.
If we see the profits & loss account, we find that the total cost for this year has gone done by 2.59% over 2014. But that isn’t enough for it.
Profits before tax are down by 27.89%, net profits by 18.38%, profits after tax by 23.18%.
These kinds of figures don’t suit to this kind of company. But we can call this the worst time for a company, because of the reputation it has gained in the market and a year comes which stuck the confidence in the company.
Almost all cost has gone down or a small increase is shown expect employee’s benefits, which have still increase by 13.37%. This expense is now on the no.1 position in the expenditure side coming no.2 last year.
But this is not the first time for MTNL, if we take the data of last 4-5 years. In the year 2013 the condition of the company was almost similar this year. Profits were down; income was not increased infect it was down.
But MTNL survives from this position and shows good results in the next year i.e. 2013. But again in 2015 the situation is same.
If this happen again and again, then the company will lose the confidence. It is not consistent in the previous years. Some expenses have been increasing constantly while these income from services is not increasing infect if we compare this of 2015 with that of 2012 it is down by almost 2006 million Rs. it means that it is ground in the market.
COMMENTS ON COMMON-SIZE B/S 2014 & 2015 Comments (2014-15)
The conditions of Common-Size balance Sheet is also not as good as like the profits and loss a/c.
Because of fall in the profits, increase in reserves 7 Surplus balance is negligible. They are the same as they were before of the total sources of funds.
50
“Financial Analysis of MTNL”
Fixed assets portion is almost the same i.e. proportion, but the working capital for the year. This is mainly because of the reason that the fund’s investment in current liabilities has gone down this year to 445 from 47.45%. Previous value it in the case W.I.P.
Investment this year is same as before
COMMENTS ON COMMON-SIZE PROFIT& LOSS A/C 2014 & 2015 Comments (2014-15)
As it is evident from the comparative Profits and loss a/c that the income and profits of the company are down as compare to previous year but this is used to describe the different the different position of the company.
This shows that the income service, which was 955 of total income last year, has contributed just 91.9% this year i.e. the part of other income has rise sharply. Income from the operations of the business is the much low as comparison to the total income.
Profits earned in 2014 is 15.43% on the total income is good % but as compare to 17.21% last year, this was expected to be somewhere around 20%.
While taking of expenditure side the portion of employee’s benefits is at the top position using 30.185 of total income and it is almost double to its nearest expenditure was 245 it has risen up by 25% (over its previous value of 24%) this year, this fact is also evident from Employees expenditure Ratio.
Revenue sharing has decrease more than proportion.
This is critical condition when income has fall sharply but expenditures are standing firmly on their position.
51
“Financial Analysis of MTNL”
FINANCIAL GRAPHICAL ANALYSIS(TREND LINES) Operating Profit & OPM Operating Profit gives an indication of the current operational profitability of the business and allows a comparison of profitability between different companies after removing out expenses that can obscure how the company is really performing.
Interest cost depends on the management's choice of financing, tax can vary widely depending on acquisitions and losses in prior years, and depreciation and amortization policies may differ from company to company.
52
“Financial Analysis of MTNL”
EBITDA, PBT & PAT EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. PBT stands for Profit Before Tax, and PAT stands for Profit After Tax. The graph visually shows how the net profit of the company stand reduced due to the impact of Interest, Depreciation, and Tax.
Total Assets & Asset Turnover Ratio Total Assets is the sum of all assets, current and fixed. The asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. The higher the ratio indicates that the company is utilizing all its assets efficiently to generate sales. Companies with low profit margins tend to have high asset turnover.
53
“Financial Analysis of MTNL”
Net Sales Sales are the total amount of products or services sold by the company.
EBITDA EBITDA is an acronym for Earnings before Interest, Taxes, Depreciation, and Amortization. It gives an indication of the current operational profitability of the business and allows a comparison of profitability between different companies after removing out expenses that can obscure how the company is really performing.
54
“Financial Analysis of MTNL”
55
“Financial Analysis of MTNL” Profit Before Tax Profit before tax deducts all expenses from revenue including interest expenses and operating expenses, excluding tax. Since taxes change every year, PBT gives investors a good idea about the company profits every year.
Profit After Tax Profit after tax, also referred as the bottom-line, is a measure of the profitability of the company after deducting all its expenses.
56
“Financial Analysis of MTNL”
CHAPTER - 6 CONCLUSION & IMPLICATIONS Financial management is of crucial importance in management decision making. The optimal of financial soundness is could be achieve by company that manage the tradeoff between liquidity and solvency management. The purpose of this study is to investigate the effective liquidity management to support companies while meeting its short term operational or working requirements where as analysis of solvency, fixed assets and return on equity concentrates on long term performance. A descriptive statistics discloses that liquidity and solvency position in both long and short term is very dissatisfactory and companies soon have to opt for its correction. F-tests confirm a lower degree of association between and within financial variables. Thus, company manger should concern on financial management, especially unexplained variables in purpose of creation shareholder wealth. Being a government undertaking ‘MTNL’ has proved its efficiency over the years and has emerge as market leader in spite of the stiff complementation from private players and a bundle full of government restrictions and regulations. It ranked as a ‘NAVRATAN’ company by the government of India. It is continuously increasing its operations and coming out with new products to meet the consumer needs. MTNL is a good profit making firm and its efficiency is increasing over the years but in the year 2011, 2012 its profitability has gone down due to some factors, which have been explained, in the preceding chapters and at adequate time. MTNL as it was operating few years back is now in a different world of competition. There are so many good players, which are eating its market share slowly. There is only one-way to gain or even retain its current market is to go more innovative. MTNL in a world where its competitors are announcing new schemes every day, have to come out from the image of a government undertaking it should move according to the need of the hour. In MTNL there is strong need of an effective Management information System (MIS), which could help improving its current position. An effective MIS is demanded from an organization, which dreams to be successful. 57
“Financial Analysis of MTNL” It should cut its cost, because when earnings are hard to increase then to increase profits there is only one way left, which is to control the expenditures. In case of MTNL this s very much important to cut its cost, because this is an organization, which expands 1/3rd of its earnings on its Employees and 1/5th on the Administration, expenses. It has to fast up its collection from its customers. It has come out with some good schemes like advance payment of bill and it is offering 5% interest on the advance deposited with it by the customers. It needs few more schemes which could motivate the customers to pay early or even in time. It has to change its picture 7 it should present itself in the market as a very attractive company, because it has resources and it is able to provide good services to more also, but the need is to attract customers. Marketing of its products like advertising needs to be more effective because if the fixed cost is divided among more customers than per customers cost will be low and revenue per customer will fetch more profits to the company, as at this very point china is far away from India. Timely revision of rentals and introduction of new schemes will make a significant difference in its customer’s base and people will start thinking that the company is committed to provide more benefits to them and working in this direction. Because the major contributor to the generation of revenue is the capital assets and therefore MTNL should change its priority of spending more for the benefits of employees to the generation of capital assets or the modernization of them. It should look more for the fixed assets, which could contribute or can render services in the coming years. It can go for schemes like VRS and can take steps like shortening the retirement age to control the employee’s by decreasing the employee base. Actually this problem has its origin in the policy of MTNL’S social obligations to generate more employment for the nation. It should also go for the detailed analysis of the cost centers, revenue centers & profits centers so that the least profitable activities if possible are eliminate but without effecting the performance or at least control must be there. Well if we compare the efficiency of Indian telecom co’s (MTNL, BSNL) with that of Chinese (Chinese telecom, Chinese Netcom), then we will see that Average Revenue Per User (ARPU) of Basic Phone of Indian companies is 15 U.S. $ and of Chinese is 9.14 58
“Financial Analysis of MTNL” U.S. $ and APRU of mobile (GSM+ CDMA) of Indian is 9.04 U.S. $ and that of Chinese firms is 9.69 U.S. $. But the significant difference are there in OPEX (Operating Expenditure) per user of basic in India is 5.92 U.S. $ & in china 4.3 U.S. $ and of mobile in India is 4.18 U.S. $ as compare to very low in china is only 2.41 U.S. $. That is major difference why Chinese firms are more effective than Indian firms &that is mainly because of the Expenses of License fee, revenue sharing, etc. contributes almost 10% of our earrings. But in china is almost negligible, because there are all 4 layers are government Competition within India is also increased because of the TRAI’s decision to allow the companies to operate in both areas of telecom i.e. Basic &Cellular by having a single license. Earlier two different Licenses were needed to enter in two areas. Also MTNL doesn’t have any debt capital; it has whole Equity capital, so it is away from reaping the benefits of Debt Capital from the market. Well Debt capital has so many benefits, it is easily available and there is a fixed cost of it. It has flexibility in nature. Its interest is a tax-deductible expense in the profits and loss account. So MTNL must think in this area of using Debt capital to reap some of its benefits. In the end I could only say that there is a lot of scope for MTNL to improve its efficiency in certain areas cited above. But because of a government undertaking it is helpless in some areas where the private competitors have an edge over it like it can’t overlook the societal aspect it has to generate Employment, it is providing services in the Rural Areas coming under its region, it is not earning from these areas but this is just because of its social obligations to provide services there also. It has to pass through government rules and restrictions, it is not fully independent, it has to survive from these limitations and therefore it is said that could improve a lot if these restrictions are reduced.
59
“Financial Analysis of MTNL”
CHAPTER - 7 LIMITATIONS OF ANALYSIS However I have tried my best in collecting the relevant information, yet there are always present some limitations over which researcher has to work. In my case also there were some problem, which were being faced by me. Some of them are as follows:
Sample Size The sample size taken by me was limited over three years, which may not be fully representative of the universe. A large sample size could not be taken due to time and cost constraints. Sample Area: New Delhi & Ghaziabad Period of study The study has been carried out for the period financial 2014 to 2015.
No availability of current data Being a govt. organization MTNL proved its efficiency. But still financial statements are not prepared. Its shows work culture of a govt. organization.
Lack of Experience Another faced by me during the training was my lack of experience in the organization, it takes some time to adjust, but the time frame was limited to just two months. Still I have tried my best to overcome this problem.
Money The money available with me also imposed a limitation on the comprehensiveness of this research.
60
“Financial Analysis of MTNL”
BIBLIOGRAPHY 1) Altman,(1968)–: “Financial ratio discriminate analysis and prediction of corporate bankruptcy”, Journal of finance 2) Abdul Aziz, (1984)–: “Bankruptcy prediction and investigation of cash flow based models”, PhD. Thesis at Dallas, 3 – 9.. 3) Abhulimen, R.A. and Chibuike U.U.(2002). Research design and implementation in accounting and finance, university of Benin Press 4) Ben Kwame Agyei-Mensah, (2010). “Financial management practices of small firms in Ghana: An empirical study”, African Journal of Business Management Vol.5 (10) Reference of Web Pages 1. http://www.investopedia.com/walkthrough/corporate-finance/5/capitalstructure/mtnl 2. https://www.mtnl.net.com/Pages/FinancialStatement.aspx?Year=null 3. http://www.trai.gov.in 4. http://www.myaccountingcourse.com/financial-ratios/ 5. http://en.wikipedia.org/wiki/mtnl A huge amount of reliable data was required to accomplish this task, which was made available to me by following sources: Printed Literature Annual general reports of MTNL.
Functional specification of WFMS.
Newspapers such as “The Economic Times” & “The Times of India” out of which the data was collected through the press releases of MTNL & also the share prices of MTNL.
61
“Financial Analysis of MTNL”
ANNEXURE BALANCE SHEET Balance Sheet of Mahanagar Telephone Nigam Mar '14 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Networth Secured Loans Unsecured Loans Total Debt
Mar '13 12 mths
- in Rs. Cr. ----Mar '12 Mar '11 Mar '10 12 mths 12 mths 12 mths
630.00 630.00 630.00 630.00 0.00 0.00 0.00 0.00 4,410.71 -3,414.43 5,040.71 -2,784.43 4,365.00 5,932.35 9,755.44 5,606.34 14,120.4 11,538.6 4 9 19,161.1 8,754.26 5 Mar '14 Mar '13 12 mths 12 mths
630.00 630.00 0.00 0.00 1,906.70 2,536.70 7,000.00 2,647.49 9,647.49
630.00 630.00 0.00 0.00 6,016.48 6,646.48 2,553.97 4,901.71 7,455.68
630.00 630.00 0.00 0.00 8,818.40 9,448.40 0.00 0.00 0.00
12,184.1 9 Mar '12 12 mths
14,102.1 6 Mar '11 12 mths
9,448.40
24,808.9 7 0.00
27,700.6 2 0.00
27,784.8 6 0.00
29,377.9 8 0.00
28,275.7 7 0.00
12,801.4 3 14,899.1 9 932.24 221.98 81.95 381.00 109.89 572.84 9,724.27
12,024.6 8 15,760.1 8 897.00 491.98 100.56 328.83 86.83 516.22 9,241.76
13,054.9 5 16,323.0 3 1,170.25 494.66 125.48 610.09 122.82 858.39 9,490.86
Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities
13,588.0 2 11,220.9 5 382.57 201.98 69.89 291.80 246.31 608.00 15,022.7 8 0.00 15,630.7 8 0.00 6,281.75
0.00 10,297.1 1 0.00 6,236.31
0.00 9,757.98 0.00 5,714.82
17.36 10,366.6 1 0.00 5,605.70
Provisions
1,993.40
9,008.13
8,646.68
Total CL & Provisions
8,275.15
11,359.9 4 17,596.2 5
11,720.7 9 16,554.9 8 1,177.96 509.54 158.51 720.04 100.01 978.56 10,811.6 0 4,775.38 16,565.5 4 0.00 17,094.4 5 8,265.17
14,722.9 5
14,252.3 8
25,359.6 2
Total Liabilities
Application Of Funds Gross Block Less: Revaluation Reserves Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances
62
Mar '10 12 mths
“Financial Analysis of MTNL” Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
7,355.63 -7,299.14 -4,964.97 -3,885.77 -8,794.08 0.00 0.00 0.00 0.00 0.00 19,161.1 8,754.27 12,184.1 14,102.1 9,448.40 3 9 7 6,288.82 6,808.10 3,393.68 3,378.52 4,607.59 80.01 -44.20 40.27 105.50 149.97
63
“Financial Analysis of MTNL”
Mahanagar Telephone Nigam Standalone Profit & Loss account
Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT
Previous Years » ------------- in Rs. Cr. ---------------
Mar '14
Mar '13
Mar '12
Mar '11
Mar '10
12 mths
12 mths
12 mths
12 mths
12 mths
3,391.74 0.00 3,391.74 12,016.5 7 0.00 15,408.3 1
3,428.66 0.00 3,428.66 285.42
3,373.25 0.00 3,373.25 251.16
3,675.51 0.00 3,675.51 232.31
3,657.75 0.00 3,657.75 1,234.55
0.00 3,714.08
0.00 3,624.41
0.00 3,907.82
0.00 4,892.30
0.00 262.74 2,615.40 0.00
0.00 244.71 4,901.37 0.00
0.00 213.53 3,711.56 0.00
0.00 205.48 3,258.55 116.87
0.00 219.44 4,869.48 102.56
0.00
0.00
0.00
678.86
757.89
1,436.38 0.00
1,212.55 0.00
1,298.72 0.00
603.71 -38.41
680.59 -36.61
4,314.52 Mar '14 12 mths -922.78
6,358.63 Mar '13 12 mths 2,929.97 2,644.55 1,180.26 3,824.81 1,476.94 0.00 5,301.75 -19.38 5,321.13 0.00 5,321.12 6,358.62 0.00
5,223.81 4,825.06 Mar '12 Mar '11 12 mths 12 mths 1,850.56 1,149.55 -917.24 1,599.40 949.16 494.56 - -1,411.80 2,548.56 1,496.22 1,410.15 0.00 0.00 4,044.78 2,821.95 -65.02 26.58 4,109.80 2,795.37 0.00 0.19 4,109.78 2,801.92 5,223.81 4,825.06 0.00 0.00
6,593.35 Mar '10 12 mths 2,935.60 1,701.05 11.03 1,712.08 1,759.49 0.00 3,471.57 509.58 2,961.99 -355.11 3,063.79 6,593.35 0.00
Interest PBDT
11,093.7 9 1,390.15 9,703.64
Depreciation Other Written Off Profit Before Tax
1,165.74 0.00 8,537.90
Extra-ordinary items PBT (Post Extra-ord Items)
-215.58 8,322.32
Tax Reported Net Profit
497.18 7,825.13
Total Value Addition Preference Dividend
4,314.52 0.00
64
“Financial Analysis of MTNL” Equity Dividend 0.00 Corporate Dividend Tax 0.00 Per share data (annualised) Shares in issue (lakhs) 6,300.00 Earning Per Share (Rs) 124.21 Equity Dividend (%) 0.00 Book Value (Rs) 80.01
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
6,300.00 -84.46 0.00 -44.20
6,300.00 -65.23 0.00 40.27
6,300.00 -44.47 0.00 105.50
6,300.00 -48.63 0.00 149.97
Mahanagar Telephone Nigam ------------------- in Rs. Cr. -------------------
Cash Flow Mar '14
Mar '13
Mar '12
Mar '11
Mar '10
12 mths 8537.89 -4249.12
12 mths -5301.74 -374.25
12 mths -4044.77 -754.22
12 mths -2774.75 -11004.62
12 mths -3418.91 11136.17
3150.43
-330.95
-584.17
-766.80
-10989.87
1235.11
728.26
1285.08
7036.21
-73.71
136.42
23.06
-53.31
-4735.21
72.59
Equivalents Opening Cash & Cash
109.89
86.83
140.14
4875.39
4802.80
Equivalents Closing Cash & Cash
246.31
109.89
86.83
140.18
4875.39
Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash
Equivalents
65
“Financial Analysis of MTNL” Mahanagar Telephone Nigam Standalone Quarterly Results
Net Sales/Income from operations Other Operating Income Total Income From Operations EXPENDITURE Consumption of Raw Materials Purchase of Traded Goods Increase/Decrease in Stocks Power & Fuel Employees Cost Depreciation Excise Duty Admin. And Selling Expenses R & D Expenses Provisions And Contingencies Exp. Capitalised Other Expenses P/L Before Other Inc. , Int., Excpt. Items & Tax Other Income P/L Before Int., Excpt. Items & Tax Interest P/L Before Exceptional Items & Tax Exceptional Items P/L Before Tax Tax P/L After Tax from Ordinary Activities Prior Year Adjustments Extra Ordinary Items Net Profit/(Loss) For
------------------- in Rs. Cr. -------------------
Dec '14 813.92
Sep '14
Jun '14
Mar '14
Dec '13
845.26
854.33
840.35
847.20
3.00
5.46
1.69
1.38
6.19
816.92
850.72
856.02
841.73
853.39
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
-562.89 291.11 -171.06
-645.88 289.10 -229.06
-654.11 290.48 -173.02
--409.59 307.37 -704.22
-1,048.49 135.20 -175.66
---
---
---
---
---
-224.40 -432.54
-162.13 -475.45
-162.98 -424.57
-157.80 81.93
-159.41 -665.35
64.52 -368.02
50.59 -424.86
54.31 -370.26
162.80 244.73
47.22 -618.13
362.81 -730.83
409.36 -834.22
362.97 -733.23
363.27 -118.54
358.71 -976.85
--730.83 --730.83
--834.22 --834.22
--733.23 --733.23
10,216.05 10,097.51 497.18 9,600.33
1,404.88 428.03 -428.03
--
--
--
--
--
--730.83
--834.22
--733.23
-9,600.33
-428.03
66
“Financial Analysis of MTNL” the Period Equity Share Capital 630.00 Reserves Excluding -Revaluation Reserves Equity Dividend Rate -(%) EPS Before Extra Ordinary Basic EPS -11.60 Diluted EPS -11.60 EPS After Extra Ordinary Basic EPS -11.60 Diluted EPS -11.60 Public Share Holding No Of Shares (Crores) 27.56 Share Holding (%) 43.75 Promoters and Promoter Group Shareholding a) Pledged/Encumbered - Number of shares -(Crores) - Per. of shares (as a % -of the total sh. of prom. and promoter group) - Per. of shares (as a % -of the total Share Cap. of the company) b) Non-encumbered - Number of shares 35.44 (Crores) - Per. of shares (as a % 100.00 of the total sh. of prom. and promoter group) - Per. of shares (as a % 56.25 of the total Share Cap. of the company) Notes | 201412
630.00 --
630.00 --
630.00 --
630.00 --
--
--
--
--
-13.24 -13.24
-11.64 -11.64
152.39 152.39
6.79 6.79
-13.24 -13.24
-11.64 -11.64
152.39 152.39
6.79 6.79
27.56 43.75
27.56 43.75
27.56 43.75
27.56 43.75
--
--
--
--
--
--
--
--
--
--
--
--
35.44
35.44
35.44
35.44
100.00
100.00
100.00
100.00
56.25
56.25
56.25
56.25
|201409
|201406
|201403
|201312
67
“Financial Analysis of MTNL” Mahanagar Telephone Nigam Standalone Half Yearly Results
Net Sales/Income from operations Other Operating Income Total Income From Operations EXPENDITURE Consumption of Raw Materials Purchase of Traded Goods Increase/Decrease in Stocks Power & Fuel Employees Cost Depreciation Excise Duty Admin. And Selling Expenses R & D Expenses Provisions And Contingencies Exp. Capitalised Other Expenses P/L Before Other Inc. , Int., Excpt. Items & Tax Other Income P/L Before Int., Excpt. Items & Tax Interest P/L Before Exceptional Items & Tax Exceptional Items P/L Before Tax Tax P/L After Tax from Ordinary Activities
------------------- in Rs. Cr. -------------------
Sep '14 1,699.5 9 7.15
Mar '14 1,687.55
Sep '13 1,691.61
Mar '13 1,750.96
Sep '12 1,667.91
7.57
5.01
2.65
7.14
1,706.7 4
1,695.12
1,696.62
1,753.61
1,675.05
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
-1,299.9 9 579.58 -402.08
-638.89
-1,976.51
-2,951.81
-1,949.55
442.57 -879.88
723.18 -366.25
746.35 -362.06
730.59 -372.41
---
---
---
---
---
-325.11 -900.02
-317.21 -583.42
-351.37 -1,720.69
-385.74 -2,692.34
-356.44 -1,733.94
104.90 -795.12
210.03 -373.39
185.61 -1,535.08
152.91 -2,539.44
132.51 -1,601.43
772.33 1,567.4 5 -1,567.4 5 -1,567.4 5
721.99 -1,095.38
668.16 -2,203.24
628.68 -3,168.11
551.58 -2,153.01
11,620.93 10,525.55
--2,203.24
--3,168.11
--2,153.01
497.18 10,028.37
--2,203.24
--3,168.11
--2,153.01
68
“Financial Analysis of MTNL” Prior Year Adjustments Extra Ordinary Items Net Profit/(Loss) For the Period
--
--
--
--
--
--
--
--
--
--
1,567.4 5 630.00 --
10,028.37
-2,203.24
-3,168.11
-2,153.01
630.00 --
630.00 --
630.00 --
630.00 --
--
--
--
--
---
-34.97 -34.97
---
-34.17 -34.17
---
-34.97 -34.97
---
-34.17 -34.17
27.56
27.56
27.56
27.56
43.75
43.75
43.75
43.75
--
--
--
--
--
--
--
--
--
--
--
--
35.44
35.44
35.44
35.44
100.00
100.00
100.00
100.00
56.25
56.25
56.25
56.25
|201403
|201309
|201303
|201209
Equity Share Capital Reserves Excluding Revaluation Reserves Equity Dividend -Rate (%) EPS Before Extra Ordinary Basic EPS -24.88 Diluted EPS -24.88 EPS After Extra Ordinary Basic EPS -24.88 Diluted EPS -24.88 Public Share Holding No Of Shares 27.56 (Crores) Share Holding (%) 43.75 Promoters and Promoter Group Shareholding a) Pledged/Encumbered - Number of shares -(Crores) - Per. of shares (as a -% of the total sh. of prom. and promoter group) - Per. of shares (as a -% of the total Share Cap. of the company) b) Non-encumbered - Number of shares 35.44 (Crores) - Per. of shares (as a 100.00 % of the total sh. of prom. and promoter group) - Per. of shares (as a 56.25 % of the total Share Cap. of the company) Notes |201409
69
“Financial Analysis of MTNL”
70
“Financial Analysis of MTNL” Mahanagar Telephone Nigam Capital Structure Period Instrumen --- CAPITAL (Rs. t cr) --Fro To Authorise Issued m d 2013 201 Equity 800 630 4 Share 2012 201 Equity 800 630 3 Share 2011 201 Equity 800 630 2 Share 2010 201 Equity 800 630 1 Share 2009 201 Equity 800 630 0 Share 2008 200 Equity 800 630 9 Share 2007 200 Equity 800 630 8 Share 2006 200 Equity 800 630 7 Share 2005 200 Equity 800 630 6 Share 2004 200 Equity 800 630 5 Share 2003 200 Equity 800 630 4 Share 2002 200 Equity 800 630 3 Share 2001 200 Equity 800 630 2 Share 1999 200 Equity 800 630 0 Share 1997 199 Equity 800 630 9 Share 1994 199 Equity 800 600 7 Share 1993 199 Equity 800 600 4 Share 1992 199 Equity 800 600 3 Share 1991 199 Equity 800 600 7 Share
71
- PAI D U PShares (nos) 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 63000000 0 60000000 0 60000000 0 60000000 0 60000000 0
Face Value 10
Capita l 630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
630
10
600
10
600
10
600
10
600
“Financial Analysis of MTNL” Mahanagar Telephone Nigam Key Financial Ratios
Mar '14 Investment Valuation Ratios Face Value 10.00 Dividend Per Share -Operating Profit Per Share -14.65 (Rs) Net Operating Profit Per 53.84 Share (Rs) Free Reserves Per Share -(Rs) Bonus in Equity Capital -Profitability Ratios Operating Profit -27.20 Margin(%) Profit Before Interest And -55.14 Tax Margin(%) Gross Profit Margin(%) -61.57 Cash Profit Margin(%) -63.75 Adjusted Cash Margin(%) -63.75 Net Profit Margin(%) 206.6 1 Adjusted Net Profit 206.6 Margin(%) 1 Return On Capital -8.83 Employed(%) Return On Net Worth(%) 155.2 3 Adjusted Return on Net -71.02 Worth(%) Return on Assets 80.01 Excluding Revaluations Return on Assets Including 80.01 Revaluations Return on Long Term -12.87 Funds(%) Liquidity And Solvency Ratios Current Ratio 1.09 Quick Ratio 1.88 Debt Equity Ratio 2.80 Long Term Debt Equity 1.61 Ratio Debt Coverage Ratios Interest Cover -1.22 Total Debt to Owners Fund 2.80
Mar '13
Mar '12
Mar '11
Mar '10
10.00 --46.51
10.00 --29.37
10.00 --18.35
10.00 --46.66
54.42
53.54
58.34
58.06
--
--
88.44
129.13
--
--
--
--
-85.45
-54.85
-31.44
-80.36
-118.65
-92.33
-65.20
-94.18
-128.53 -102.98 -102.98 -143.26
-99.21 -70.31 -70.31 -113.39
-69.81 -35.34 -35.34 -71.20
-128.47 -25.32 -25.32 -61.40
-143.26
-113.39
-71.20
-61.40
-47.07
-25.40
-16.35
-35.63
191.10
-162.01
-42.15
-32.42
--
-159.45
-42.14
-31.99
-44.20
40.27
105.50
149.97
-44.20
40.27
105.50
149.97
-99.24
-32.45
-25.06
-35.63
0.46 0.58 ---
0.56 0.66 3.80 2.76
0.54 0.72 1.12 0.38
0.65 0.65 ---
-3.49 --
-3.26 3.80
-5.10 1.12
-2,670.39 --
72
“Financial Analysis of MTNL” Financial Charges -0.38 Coverage Ratio Financial Charges 7.47 Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio 48.53 Debtors Turnover Ratio 10.08 Investments Turnover 48.53 Ratio Fixed Assets Turnover 0.17 Ratio Total Assets Turnover 0.24 Ratio Asset Turnover Ratio 0.24 Average Raw Material -Holding Average Finished Goods -Held Number of Days In 298.5 Working Capital 0 Profit & Loss Account Ratios Material Cost Composition -Imported Composition of -Raw Materials Consumed Selling Distribution Cost -Composition Expenses as Composition 0.25 of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net -Profit Dividend Payout Ratio -Cash Profit Earning Retention Ratio 100.0 0 Cash Earning Retention -Ratio AdjustedCash Flow Times -Mar '14 Earnings Per Share 124.2 1 Book Value 80.01
-2.24
-1.69
-1.81
-145.72
-2.26
-1.75
-1.81
-117.21
41.84 9.66 41.84
33.54 7.19 33.54
-5.53 --
-4.87 23.07
0.18
0.18
--
--
6.24
1.01
0.26
0.39
0.33
0.26
0.31
0.34
--
--
--
--
--
--
--
--
-1,205.45
-916.00
-385.88
-865.52
---
---
---
---
--
--
2.08
3.29
0.11
0.17
0.10
0.13
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
-Mar '13
-Mar '12
-Mar '11
-Mar '10
-84.46
-65.23
-44.47
-48.63
-44.20
40.27
105.50
149.97
73
“Financial Analysis of MTNL” Mahanagar Telephone Nigam ------------------- in Rs. Cr. -------------------
Mar '14 Investment Valuation Ratios Face Value 10.00 Dividend Per Share -Operating Profit Per Share -14.31 (Rs) Net Operating Profit Per 55.17 Share (Rs) Free Reserves Per Share -(Rs) Bonus in Equity Capital -Profitability Ratios Operating Profit -25.94 Margin(%) Profit Before Interest And -54.05 Tax Margin(%) Gross Profit Margin(%) -60.22 Cash Profit Margin(%) -61.79 Adjusted Cash Margin(%) -61.79 Net Profit Margin(%) 201.9 7 Adjusted Net Profit 201.9 Margin(%) 7 Return On Capital -8.85 Employed(%) Return On Net Worth(%) 155.0 8 Adjusted Return on Net -71.08 Worth(%) Return on Assets 80.04 Excluding Revaluations Return on Assets Including 80.04 Revaluations Return on Long Term -12.89 Funds(%) Liquidity And Solvency Ratios Current Ratio 1.09 Quick Ratio 1.87 Debt Equity Ratio 2.80 Long Term Debt Equity 1.61 Ratio Debt Coverage Ratios Interest Cover -1.22
Mar '13
Mar '12
Mar '11
Mar '10
10.00 --46.23
10.00 --29.16
10.00 --19.28
10.00 --46.43
55.50
54.63
59.46
58.93
--
--
--
128.72
--
--
--
--
-83.29
-53.37
-32.42
-78.78
-116.54
-90.59
-64.88
-93.09
-126.10 -100.60 -100.60 -140.68
-97.26 -68.58 -68.58 -111.22
-70.41 -33.97 -33.97 -68.93
-126.51 -24.79 -24.79 -60.71
-140.68
-111.22
-68.93
-60.71
-47.09
-25.39
-16.45
-35.66
190.89
-162.18
-42.30
-32.50
--
-159.60
-42.32
-32.07
-44.26
40.22
105.15
149.56
-44.26
40.22
105.15
149.56
-99.35
-32.45
-25.25
-35.66
0.47 0.58 ---
0.57 0.66 3.81 2.76
0.45 0.70 1.13 0.39
0.67 0.62 ---
-3.49
-3.26
-5.12
-1,095.89
74
“Financial Analysis of MTNL” Total Debt to Owners Fund 2.80 Financial Charges -0.36 Coverage Ratio Financial Charges 7.48 Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio 48.32 Debtors Turnover Ratio 9.81 Investments Turnover 48.32 Ratio Fixed Assets Turnover 0.17 Ratio Total Assets Turnover 0.24 Ratio Asset Turnover Ratio 0.25 Average Raw Material -Holding Average Finished Goods -Held Number of Days In 288.0 Working Capital 2 Profit & Loss Account Ratios Material Cost Composition -Imported Composition of -Raw Materials Consumed Selling Distribution Cost -Composition Expenses as Composition 0.25 of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net -Profit Dividend Payout Ratio -Cash Profit Earning Retention Ratio 100.0 0 Cash Earning Retention -Ratio AdjustedCash Flow Times --
--2.22
3.81 -1.67
1.13 -1.98
0.00 -123.99
-2.24
-1.74
-2.05
-99.54
41.81 9.28 41.81
33.58 9.62 33.58
29.57 6.72 29.57
-4.76 23.24
0.18
0.18
0.20
0.22
6.39
1.03
0.81
-8.44
0.33
0.26
0.32
0.22
--
--
--
--
--
--
--
--
-1,181.91
-893.12
-682.40
-852.05
---
---
---
---
--
--
--
3.40
0.11
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
75