SUMMER INTERNSHIP PROJECT ON

“ EQUITY RESEARCH ON TELECOM SECTOR OF INDIAN ECONOMY

Submitted in partial fulfilment of The requirement for

Master of Management Studies (MMS)

Name of the Name of the Faculty Guide Company GuideProf. Mayur Malviya Mr. Pratin Koregaonkar

ByChetan P. Shivankar Day and Date:Roll No. 107, Div- B Friday, 31st Aug. 2012Batch of 2011-13

NCRD’S

STERLING INSTIUTE OF MANAGEMENT STUDIESAFFILIATED TO UNIVERSITY OF MUMBAI

Plot No. 93/93A, Sector19, Near SeawoodsRailway Station, Nerul (East), Navi Mumbai 400706.

Tel: 022-27702282 Fax:022-27722290

I

CERTIFICATE

II

CERTIFICATE by the INSTITUTE

This is to certify that ___________________________________ (Name) a student of

______ (discipline) _______from_________________________________________

(Institute/University) has done/is doing his/her semester project at

__________________ from __________to__________under my guidance.

The project work entitled “_______________________________________”

embodies the original work done by___________________during his/her above full

semester project training period.

Date:

Name of the Faculty Guide Authorize Signatory

___________________________

Place Your College Name with Stamp Director

III

CERTIFICATE OF ORIGINALITY

I Mr. Chetan Prakash Shivankar Roll No B-107 of 2011, a full time bonafide

student of first year of Master of Management Studies (MMS) Programme of Sterling

Institute of Management Studies, Nerul, Navi Mumbai, affiliated to University of

Mumbai.

I hereby certify that this project work carried out by me at BMA WEALTH

CREATORS LTD., SANPADA. The report submitted in partial fulfilment of

requirement of the program is an original work of mine under the guidance of the

industry mentor MR. PRATIN KOREGAONKAR and faculty mentor PROF.

MAYUR MALVIYA and is not based or reproduced from any existing work of any

other person or on any earlier work undertaken at any other time or for any other

purpose, and has not been submitted anywhere else at any time.

(Faculty Mentor’s Signature) (Student Signature)

31st August, 2012 31st August, 2012

IV

ACKNOWLEDGEMENT

This project would not have been a success without the guidance and motivation of

all my mentors. I am thankful to all the persons behind this project.

I would like to express my gratefulness to Mr. Pratin Korgaonkar (Branch Manager

of BMA Wealth Creators- Sanpada) who acted as a mentor throughout my project for

providing me valuable information and guidance.

Secondly, I would also like to thank Mr. Sai - Territory Manager of BMA Wealth

Creators (Sanpada) who has been very helpful in getting the required information

related to this project.

Last but not the least; I would like to thank my colleagues for motivating me all the

time throughout this project.

Student Name- Chetan P. Shivankar Signature

Date: 31st August, 2012

V

EXECUTIVE SUMMARY

Stock market is one of the booming sectors in today’s economy. But this is a place where people

enter and exit within a short period. Stock Market is a place where money is in bulk, you just need

to grab it in a right way. Professional investor will make more money & less loss than, who let their

heart rule. Their head eliminate all emotions for decision making. Be ruthless & calculating, you are

out to make money.

Decision should be based on actual movement of share price measured both in money & percentage

term & nothing else. Greed must be avoided patience may be a virtue, but impatience can

frequently be profitable.

In Equity Analysis anticipated growth, calculations are based on considered FACTS & not on

HOPE. Equity analysis is basically a combination of two independent analyses, namely

fundamental analysis & Technical analysis.

Fundamental analysis is used for the long term investment. In Fundamental analysis a company’s

goodwill, its performances, liquidity, leverage, turnover, profitability & financial health was

checked. These includes study of financial statement, financial rations of the company. Investors

prefer Fundamental analysis.

Technical analysis refers to the study of market generated data like prices & volume to determine

the future direction of prices movements. Technical analysis mainly seeks to predict the short term

price travels. The focus of technical analysis is mainly on the internal market data, i.e. prices &

volume data. It appeals mainly to short term traders.

VI

INDEX

1. Executive Summary....................................................................................................................VI2 Introduction to the study..........................................................................................................VIII4. History of the organisation...........................................................................................................X5. Basic Concepts..........................................................................................................................XII8. Technical Analysis................................................................................................................XVIII

a.............................................................................................................................................Patterns....................................................................................................................................................XXIIb...............................................................................................................................................Trends..................................................................................................................................................XXIXd..........................................................................................................................................Indicators..................................................................................................................................................XXXIe........................................................................................................................Live study of a Chart...............................................................................................................................................XXXIII

VII

INTRODUCTION TO THE STUDY

This Study has been undertaken to understand the” Stock Market” & how the trading is done in the

stock Market. In the Indian economy, there are two types of market i.e. Money Market and Capital

Market. Money market is regulated by Reserve Bank of India (RBI) i.e. the Central Bank of Indian

economy whereas; Capital Market is regulated by Securities and Exchange Board of India (SEBI).

Primarily there are two types of stock markets – the primary market and the secondary market. This

is true for the Indian stock markets as well. Basically the primary market is the place where the

shares are issued for the first time. So when a company is getting listed for the first time at the stock

exchange and issuing shares – this process is undertaken at the primary market. That means the

process of the Initial Public Offering or IPO and the debentures are controlled at the primary stock

market. On the other hand the secondary market is the stock market where existing stocks are

brought and sold by the retail investors through the brokers. It is the secondary market that controls

the price of the stocks. Generally when we speak about investing or trading at the stock market we

mean trading at the secondary stock market. It is the secondary market where we can invest and

trade in the stocks to get the profit from our stock market investment.

Equities are being traded on (BSE) Bombay Stock Exchange and (NSE) National Stock Exchange.

Metals, gold, silver are being traded on Multi-Commodity Exchange, and agricultural products are

being traded on (NCDEX) National Commodity and Derivative Exchange and Currencies are being

traded on CDS (Currency Derivative Segment).

Stock Market is the only market which provides “Value for your Sentiments”; and to understand

that value of sentiments we need to do analysis on the two platforms i.e. Fundamental and Technical

analysis. Fundamental analysis includes study of different accounting statements like Balance

Sheet, Cost Sheet etc. Industry Situation, Market Position whereas; Technical analysis includes

study of different Charts and their patterns, Volume, No. of Shares and its price.

VIII

OBJECTIVE OF THE STUDY

• To analyze the telecom industry and find the future growth opportunities.

• To carry out the company analysis of the selected companies and to suggest whether they

are a viable investment option.

• To look at the historical performance data of the company and estimate the future

performance of stocks.

• To estimate a value that an investor can compare with the security's current price and figure

out what sort of position to take with that security.

IX

HISTORY OF THE ORGANISATION

BMA Wealth Creators is a premier financial services organisation providing individual and

corporates with customized financial solutions. We work towards understanding your financial

goals and risk profile. Our expertise combined with thorough understanding of the financial markets

results in appropriate investment solutions for you. At Wealth Creators we realize your dreams,

needs, aspirations, concerns and resources are unique. This is reflected in every move we make with

and for you. We have deep appreciation for the Value of building an everlasting relationship with

YOU.

As the Managing Director and Chief Executive Officer, Mr Anubhav Bhatter is the guiding force of

the Company. A graduate in Commerce from St Xaviers College, Kolkata and a Chartered Financial

Analyst, Mr Anubhav Bhatter founded one of the leading financial services company in India, BMA

Wealth Creators Limited. With over nine years of financial experience, he has set new standards and

established niche operations to bring BMA Wealth Creators Limited to a position that it has reached

today.

Our financial services corporate entities are represented by:

BMA Wealth Creators Limited - which holds corporate membership in National Stock Exchange

Ltd, Bombay Stock Exchange Ltd. and Central Depositories Securities Ltd.

BMA Commodities Limited - which holds corporate membership in commodities exchange of

NCDEX and MCX. It is also SEBI approved AMFI registered Mutual Fund advisory and

intermediary.

We inherit the legacy of BMA group which has been one of the dominant entities in Ferrous and

Ferro Alloy industry in India. The BMA Group has created its niche in by promoting successful

ventures in the fields of coal mining, refractory, steel and ferro alloy. The strive to achieve

excellence and dynamic growth has been possible through optimum mix of technology, customer

orientation, best business practices, forging alliances, high quality standards and proactive business

culture.

X

Mission and Vision of the Organisation:

MISSION:

• To be a premier financial supermarket providing integrated investment services.

VISION:

• To provide integrated financial services building investor wealth and confidence.

XI

BASIC CONCEPTS:

1. Stock Exchange:

A stock exchange is a market on which shares are bought and sold (or "traded"). For a

company's shares to be traded on a stock exchange, they must generally be listed on that stock

exchange.

2. Share:

A share is a unit of ownership in a company. When you buy a share you become a part-owner, a

shareholder, in the company. Shares are also known as equities or securities. A company whose

shares may be bought by the public and traded on the open market is called a quoted Public

Limited Company (PLC).

A Share has a "nominal" price - at which it was originally authorised for issue - and a market

price - at which it is currently trading. You'll find prices quoted in most newspapers and in

specialist magazines. You can also find prices quoted on other places, like on Teletext and on

the internet for instance.

3. Bull: An operator who expects the share price to rise and takes position in the market to sell at a

later date.

4. Bull Market:

A bull market is one where prices are rising, whereas a bear market is one where prices are

falling. The two terms are also used to describe types of investors.

5. Bear:

An operator who expects the share price to fall.

6. Bear Market:

A weak and falling market where buyers are absent.

XII

7. Support & Resistance:

Support is the price level through which a stock or market seldom. Resistance, on the other

hand, is the price level that a stock or market seldom surpasses.

These support and resistance levels are seen as important in terms of market psychology and

supply and demand. Support and resistance levels are he levels at which a lot of traders are

willing to buy the stock (in the case of a support) or sell it (in the case of resistance).

8. Stop Loss:

An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order

is designed to limit an investor's loss on a security position.

Also known as a "stop order" or "stop-market order".

9. Target Price:

A price that, if achieved, would result in a trader recognizing the best possible outcome for his

or her investment. This is the price at which the trader would like to exit his or her existing

position so that he or she can realize the most reward.

10. Why Invest in Stocks?

XIII

While there are many ways you can choose to invest your money, the stock market has,

historically, provided the highest potential return to investors. Over the long-term, no other type

of investment has performed better than stocks. Over time, stock market investing has

outperformed CDs and cash investing instruments, bonds, and even real estate investing. On

average, stocks have provided about a 10% annual return to investors.

11. What are the Risks Associated with Stock Market Investing?

Every beginning stock market investor should know that stock prices can vary, sometimes

wildly, and that a significant or the entirety of a stock investment can be lost. Most stock

investors seek to minimize this risk by developing a balanced, diversified portfolio of stock

investments.

12. Intra-day and Delivery based Trading:-

Intra-Day:

Intraday trading is typically completed within a day that means you have sell the stocks that you

have purchased that day before the closing of the exchange. Even if you do not sell the stocks

by yourself, they will automatically square off before the closing of the exchange. In day trading

you can buy stocks without paying for the full price of the stocks. The market makers allow you

pay only a part of the price to hold the shares. So, you can gain more by investing less.

In day trading you can always short sell the stocks that mean you can always sell the stocks

before buying them and then buy the stocks before the closing of the market. This is one benefit

that can give you profit even when the price of the stock is sure to fall. The brokerage of the

intraday trading is always lower than the delivery trading. In day trading you are getting the

profit on the very day. So, you investment is for a few hours only. Therefore, even if the stock

price rises, a little your profit percentage is significant.

Delivery Based Trading:

In case of delivery based investment or long term investment, you can sell the stocks as and

when you wish to sell or buy them. With delivery based trading, you can always hold a stock till

it reaches the expected price. The long term investment can always get you dividend. You can

also benefit from split shares, bonus stocks and other benefits that the company announces.

XIV

EQUITY MARKET

Professional investor will make more money & less loss than, who let their heart rule. Their head

eliminate all emotions for decision making. Be ruthless & calculating, you are out to make money.

Decision should be based on actual movement of share price measured both in money & percentage

term & nothing else. Greed must be avoided patience may be a virtue, but impatience can

frequently be profitable.

In Equity Analysis, anticipated growth and calculations are based on considered FACTS & not on

HOPE. Equity analysis is basically a combination of two independent analysis, namely

fundamental analysis & Technical analysis. The subject of Equity analysis, i.e. the attempt to

determine future share price movement & its reliability by references to historical data is a vast one,

covering many aspect from the calculating various FINANCIAL RATIOS, plotting of CHARTS

to extremely sophisticated indicators.

A general investor can apply the principles by using the simplest of tools: pocket calculator, pencil,

ruler, chart paper & your cautious mind, watchful attention. It should be pointed out that, this equity

analysis does not discuss how to buy & sell shares, but does discuss a method which enables the

investor to arrive at buying & selling decision.

EQUITY ANALYSIS

ECONOMIC INDUSTRY COMPANY

FUNDAMENTAL TECHNICAL

Economic Analysis:XV

An Economic analysis is the filter or scanner of the surrounding at the time of equity research, which help the analyst to make a rational decision. In the economic analysis, the following factors are considered as a whole with a perspective of industry & also considered with a perspective of individual company:

1. Inflation rates.2. Economic growth.3. Governmental Exim & other policies regarding businesses & industry.4. LPG (liberalization, privatization, globalization)5. Interest rates: standards of returns for measurement.6. FII s perception to share market.7. Political feel.

Industry Analysis:

Since each industry is unique, a systematic study of its specific features and characteristics must be an integral part of the investment decision process. Industry analysis should focus on the following:

Structure of the industry. Nature of the competition. Nature and prospects of the demand. Costs, efficiency and profitability. Technology and research.

Company Analysis:

In the company analysis, the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analysed to take better investment decisions. The present and future values of the stock are affected by a number of factorssuch as:

Earnings Capital structure Management Competitive edge Operating efficiency Financial performance

Fundamental Analysis:

XVI

Fundamental analysis is the study of economic, industry and company conditions in an effort to determine the value of a company s stock. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued.Most fundamental information focuses on economic, industry and company statistics. The typical approach to analyzing a company involves four basic steps:

Determine the condition of the general economy. Determine the condition of the industry. Determine the condition of the company. Determine the value of the company s stock

Fundamental analysis facilitates comparison between two companies. It reflects the financial efficiency & financial position of a company. Fundamental analysis is fruitful in preparing plans for the future. However, fundamental Analysis should not be considering as the ultimate objective test but it may be carried further based on the outcome & revelations about the cause of variations. Fundamental Analysis is helpful in forecasting likely position of company in near future.

Fundamental analysis is a very powerful analytical tool useful for measuring performance of an organization. The ratio analysis concentrates on the inter-relationship among the figures appearing in the financial and accounting statements. The ratio analysis helps the investor to analyze the past performance of the firm and to make further future projection regarding financial position. Ratio analysis allows interested parties like shareholders, investors, creditors and government to make an evaluation of financial aspect of a firm s performance.

Fundamental Analysis consist of following:

Study of Balance sheet Study of Profit and Loss a/c Study of Ratios

Technical analysis:

Technical analysis refers to the study of market generated data like prices and volume to determine the future direction of prices movements. Technical analysis mainly seeks to predict the short-term price travels. It is important criteria for selecting the company to invest. It also provides the base for decision-making in investment. It is one of the most frequently used yardstick to check and analyze underlying price progress. For that matter a variety of tools are used.

Technical analysis involves the use of various methods for charting, calculating and interpreting graph & chart to assess the performances & status of the price. It is the tool of financial analysis, which not only studies but also reflecting the numerical & graphical relationship between the important financial factors.

The focus of technical analysis is mainly on the internal market data, i.e. prices & volume data. It appeals mainly to short term traders. It is the oldest approach to equity investment dating back to the late 19th century.

XVII

TECHNICAL ANALYSIS

History of Technical Analysis

Technical Analysis as a tool of investment for the average investor thrived in the late nineteenth

century when Charles Dow, then editor of the Wall Street Journal, proposed the Dow Theory. He

recognized that the movement is caused by the action/reaction of the people dealing in stocks rather

than the news in itself.

Technical analysis is a method of evaluating securities by analyzing the statistics generated by

market activity, such as past prices and volume. Technical analysts do not attempt to measure a

security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest

future activity. Just as there are many investment styles on the fundamental side, there are also

many different types of technical traders. Some rely on chart patterns; others use technical

indicators and oscillators, and most use some combination of the two. In any case, technical

analysts' exclusive use of historical price and volume data is what separates them from their

fundamental counterparts. Unlike fundamental analysts, technical analysts don't care whether a

stock is undervalued the only thing that matters is a security's past trading data and what

information this data can provide about where the Security might move in the future.

Basic premises of technical analysis:

a. Market prices are determined by the interaction of supply & demand forces.

b. Supply & demand are influenced by variety of supply & demand affiliated

c. Factors both rational & irrational.

d. These include fundamental factors as well as psychological factors.

e. Barring minor deviations stock prices tend to move in fairly persistent trends.

f. Shifts in demand & supply bring about change in trends.

g. This shift s can be detected with the help of charts of manual & computerized action,

because of the persistence of trends & patterns analysis of past market data can be used to

predict future prices behaviours.

XVIII

Why we use TECHNICAL ANALYSIS?

1. Technical analysis provides information on the best entry and exit points for a trade.

2. On a chart, the trader can see where momentum is rising, a trend is forming, a price is

dipping or other events are developing that show the best entry point and time for the most

profitable trade. With the constant movement of various currencies against each other in the

Forex market, most traders will focus on using technical indicators to find and place their

trades.

Usually the following tools & instruments are used to do the technical analysis:

Open - This is the price of the first trade for the period (e.g., the first trade of the day).

When analyzing daily data, the Open is especially important as it is the consensus price after

all interested parties were able to "sleep on it."

High - This is the highest price that the security traded during the period. It is the point at

which there were more sellers than buyers (i.e., there are always sellers willing to sell at

higher prices, but the High represents the highest price buyers were willing to pay).

Low - This is the lowest price that the security traded during the period. It is the point at

which there were more buyers than sellers (i.e., there are always buyers willing to buy at

lower prices, but the Low represents the lowest price sellers were willing to accept).

Close - This is the last price that the security traded during the period. Due to its availability,

the Close is the most often used price for analysis. The relationship between the Open (the

first price) and the Close (the last price) are considered significant by most technicians. This

relationship is emphasized in candlestick charts.

Volume - This is the number of shares (or contracts) that were traded during the period. The

relationship between prices and volume (e.g., increasing prices accompanied with increasing

volume) is important.

Open Interest - This is the total number of outstanding contracts (i.e., those that have not

been closed, or expired) of a future or option. Open interest is often used as an indicator.

XIX

Bid - This is the price a market maker is willing to pay for a security (i.e., the price you will

receive if you sell).

Ask - This is the price a market maker is willing to accept (i.e., the price you will pay to buy

the security).

Price Styles

Price in a chart can be displayed in three styles:

1. Bar Chart.

2. Line Chart.

3. Candlestick Chart.

99% of the traders use Candlestick charts to analyse or study the stocks.

1. Bar Charts:

The highs and lows of a foreign currency are plotted in a diagram and the points are joined

with vertical lines (bars). A small horizontal tick to the left denotes the opening level while a

small horizontal tick to the right represents the closing price of each interval.

2. Line Charts:

It gives the detailed information about every aspect.

The exchange rates for each time period are plotted in a diagram and the points are joined.

Prices on the y-axis, time on the x-axis.

The line chart chooses for example the closing price of consecutive time periods, but can

also work with daily, official fixings.

XX

The relatively easy handling of line charts is a great advantage. Line charts do not show

price movements within a time period. This can be a problem because important information

for exchange rate analysis can be lost. This problem was remedied with the development of

bar charts that represent a more sophisticated form of line chart.

3. Candle stick Chart:

A candlestick is black if the closing price is lower than the opening price. A candlestick is

white if the closing price is higher than the opening price.

XXI

PATTERNS

A. Bullish Pattern:

1. Long white (empty) line: This is a bullish line. It occurs when prices open near the low and

close significantly higher near the period's high.

2. Hammer: This is a bullish line if it occurs after a significant downtrend. If the line occurs

after a significant up-trend, it is called a Hanging Man. A Hammer is identified by a small

real body (i.e., a small range between the open and closing prices) and a long lower shadow

(i.e., the low is significantly lower than the open, high, and lose). The body can be empty or

filled-in.

3. Piercing line: This is a bullish pattern and the opposite of a dark cloud cover. The first line

is a long black line and the second line is a long white line. The second line opens lower

than the first line's low, but it closes more than halfway above the first line's real body.

XXII

4. Bullish engulfing lines: This pattern is strongly bullish if it occurs after a significant

downtrend (i.e., it acts as a reversal pattern). It occurs when a small bearish (filled-in) line is

engulfed by a large bullish (empty) line.

5. Morning star: This is a bullish pattern signifying a potential bottom. The "star" indicates a

possible reversal and the bullish (empty) line confirms this. The star can be empty or filled-

in.

6. Bullish doji star: A "star" indicates a reversal and a doji indicates indecision. Thus, this

pattern usually indicates a reversal following an indecisive period. You should wait for a

confirmation (e.g., as in the morning star, above) before trading a doji star. The first line can

be empty or filled in.

B. Bearish Patterns

XXIII

1. Long black (filled-in) line: This is a bearish line. It occurs when prices open near the high

and close significantly lower near the period's low.

2. Hanging Man: These lines are bearish if they occur after a significant uptrend. If this

pattern occurs after a significant downtrend, it is called a Hammer. They are identified by

small real bodies (i.e., a small range between the open and closing prices) and a long lower

shadow (i.e., the low was significantly lower than the open, high, and close). The bodies can

be empty or filled-in.

3. Dark cloud cover: This is a bearish pattern. The pattern is more significant if the second

line's body is below the centre of the previous line's body (as illustrated).

4. Bearish engulfing lines: This pattern is strongly bearish if it occurs after a significant

XXIV

uptrend (i.e., it acts as a reversal pattern). It occurs when a small bullish (empty) line is

engulfed by a large bearish (filled-in) line.

5. Evening star: This is a bearish pattern signifying a potential top. The "star" indicates a

possible reversal and the bearish (filled-in) line confirms this. The star can be empty or

filled in.

6. Doji star: A star indicates a reversal and a doji indicates indecision. Thus, this pattern

usually indicates a reversal following an indecisive period. You should wait for a

confirmation (e.g., as in the evening star illustration) before trading a doji star.

7. Shooting star: This pattern suggests a minor reversal when it appears after a rally. The star's

body must appear near the low price and the line should have a long upper shadow.

XXV

C. Reversal Patterns

1. Long-legged doji: This line often signifies a turning point. It occurs when the open and

close are the same, and the range between the high and low is relatively large.

2. Dragon-fly doji: This line also signifies a turning point. It occurs when the open and close

are the same, and the low is significantly lower than the open, high, and closing prices.

3. Gravestone doji: This line also signifies a turning point. It occurs when the open, close, and

low are the same, and the high is significantly higher than the open, low, and closing prices.

4. Star: Stars indicate reversals. A star is a line with a small real body that occurs after a line

XXVI

with a much larger real body, where the real bodies do not overlap. The shadows may

overlap.

5. Doji star: A star indicates a reversal and a doji indicates indecision. Thus, this pattern

usually indicates a reversal following an indecisive period. You should wait for a

confirmation (e.g., as in the evening star illustration) before trading a doji star.

D. Neutral Patterns

1. Spinning tops: These are neutral lines. They occur when the distance between the high and

XXVII

low, and the distance between the open and close, are relatively small.

2. Doji: This line implies indecision. The security opened and closed at the same price. These

lines can appear in several different patterns. Double doji lines (two adjacent doji lines)

imply that a forceful move will follow a breakout from the current indecision.

3. Harami ("pregnant" in English): This pattern indicates a decrease in momentum. It occurs

when a line with a small body falls within the area of a larger body. In this example, a

bullish (empty) line with a long body is followed by a weak bearish (filled in) line. This

implies a decrease in the bullish momentum.

XXVIII

TRENDS

The direction of the trend is absolutely essential to trading and analyzing the market. In the

Foreign Exchange (FX) Market, it is possible to profit from both UP and Down movements,

because the buying and selling of one currency is always linked to another currency e.g.

BUY US Dollar SELL Japanese Yen.

Types of Trend:

Up Trend:

When the market is constantly moving in upward direction as shown in the below chart, we

call it as upward trend. As the trend moves upwards the US Dollar is appreciating in value.

Down Trend

When the market is constantly moving in downward direction, we call it as downward trend.

As the trend moves downwards the US Dollar is depreciating in value.

XXIX

Sideways Trend

Prices are moving within a narrow range (The currencies are neither appreciating nor

depreciating)

XXX

INDICATORS

1. Moving Average Convergence:

A trend-following momentum indicator that shows the relationship between two moving

averages of prices. The MACD is calculated by subtracting the 26-day exponential moving

average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal

line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.

There are three common methods used to interpret the MACD:

a. Crossovers: As shown in the chart above, when the MACD falls below the signal line,

it is a bearish signal, which indicates that it may be time to sell. Conversely, when the

MACD rises above the signal line, the indicator gives a bullish signal, which suggests

that the price of the asset is likely to experience upward momentum. Many traders wait

for a confirmed cross above the signal line before entering into a position to avoid

getting "faked out" or entering into a position too early, as shown by the first arrow.

b. Divergence: When the security price diverges from the MACD. It signals the end of the

current trend.

c. Dramatic rise: When the MACD rises dramatically - that is, the shorter moving average

pulls away from the longer-term moving average - it is a signal that the security is

overbought and will soon return to normal levels.

XXXI

Traders also watch for a move above or below the zero line because this signals the

position of the short-term average relative to the long-term average. When the MACD is

above zero, the short-term average is above the long-term average, which signals

upward momentum. The opposite is true when the MACD is below zero. As you can see

from the chart above, the zero line often acts as an area of support and resistance for the

indicator.

2. Relative Strength Index:

The relative strength index (RSI) is another one of the most used and well-known

momentum indicators in technical analysis. RSI helps to signal overbought and oversold

conditions in a security. The indicator is plotted in a range between zero and 100. A reading

above 70 is used to suggest that a security is overbought, while a reading below 30 is used

to suggest that it is oversold. This indicator helps traders to identify whether a security’s

price has been unreasonably pushed to current levels and whether a reversal may be on the

way.

The standard calculation for RSI uses 14 trading days as the basis, which can be adjusted to

meet the needs of the user. If the trading period is adjusted to use fewer days, the RSI will

be more volatile and will be used for shorter term trades.

XXXII

LIVE STUDY OF A CHART

This is a candlestick chart of Kingfisher Airlines of last 1 year from July 2011 to August 2011.

Price of the share is as follows:Opening price: 11.2High Price: 12.1Low Price: 10.5Closing Price: 10.3

Red candles indicate Bearish Candle and white candles indicate Bullish Candle. By looking at the overall chart pattern of one year, we can see downward trend.As we know that Hanging man is a reversal pattern, we can see that after formation of Hanging man, price started falling down. And same with the Shooting star, market has gradually fallen down.

XXXIII

Apart from this candles, we have different patterns like RSI, MACD, OBV, etc. which might help us out to anticipate future price.

MACD (Moving Average Convergence and Divergence)-

When the main line crosses through the trigger line from below, this is seen as a buy signal for the security. If the main line crosses the trigger line from above, this is a sell signal. Also, moves through the zero line on the chart from above or below is used as a buy or sell signal.

It is also important to take note of divergence between the MACD and the share price. If the shares reach a new high, but the main line fails to do so, this is seen as bearish divergence. Should the stock make a new low, but the main line does not, this is known as bullish divergence.

RSI- Relative Strength Index

RSI is considered overbought when above 70 and oversold when below 30. In the above chart, twice the RSI has gone below 30, which indicates that the shares were over-sold, so that was an indication to buy the shares. It is a good signal for the buyers to enter into the market.

On Balance Volume

The On Balance Volume (OBV) line is simply a running total of positive and negative volume. A period's volume is positive when the close is above the prior close. A period's volume is negative when the close is below the prior close. Higher the volume, higher the trade taking place and higher the number of buyers and sellers.

XXXIV

TELECOM SECTOR IN INDIAN ECONOMY

India, emerging as a major player:

In 1975, the Department of Telecom (DoT) was separated from P&T. DoT was responsible

for telecom services in entire country until 1985 when Mahanagar Telephone Nigam Limited

(MTNL) was carved out of DoT to run the telecom services of Delhi and Mumbai. In 1990s the

telecom sector was opened up by the Government for private investment as a part of Liberalisation-

Privatization-Globalization policy. Therefore, it became necessary to separate the Government's

policy wing from its operations wing. The Government of India corporatised the operations wing of

DoT on October 01, 2000 and named it as Bharat Sanchar Nigam Limited (BSNL). Many private

operators, such as Reliance India Mobile, Tata Telecom, Hutch, BPL, Bharti, Idea etc., successfully

entered the high potential Indian telecom market.

Growth of mobile technology:

India has become one of the fastest growing mobile markets in the world. The mobile

services were commercially launched in August 1995 in India. In the initial 5-6 years the average

monthly subscribers additions were around 0.05 to 0.1 million only and the total mobile subscribers

base in December 2002 stood at 10.5 millions. However, after the number of proactive initiatives

taken by regulator and licensor, the monthly mobile subscriber additions increased to around 2

million per month in the year 2003-04 and 2004-05.

Although mobile telephones followed the New Telecom Policy 1994, growth was tardy in

the early years because of the high price of hand sets as well as the high tariff structure of mobile

telephones. The New Telecom Policy in 1999, the industry heralded several pro consumer

initiatives. Mobile subscriber additions started picking up. The number of mobile phones added

throughout the country in 2003 was 16 million, followed by 22 millions in 2004, 32 million in 2005

and 65 million in 2006 and over 100 million by mid of 2007. The only countries with more mobile

phones than India with 156.31 million mobile phones are China – 408 million and USA – 185

million.

XXXV

India has opted for the use of both the GSM (global system for mobile communications) and

CDMA (code-division multiple access) technologies in the mobile sector. In addition to landline

and mobile phones, some of the companies also provide the WLL service.

The mobile tariffs in India have also become lowest in the world. A new mobile connection

can be activated with a monthly commitment of US$ 5 only. In 2005 alone 32 million handsets

were sold in India. The data reveals the real potential for growth of the Indian mobile market.

PRESENT SCENARIO

• Although India's tele-density has improved from under 4% in March 2001 to over 18% at the end

of March 2007, we are way behind other developing nations. The total annual telecom revenue is

estimated to be over Rs 650 bn.

• The cellular telephony segment has emerged as the fastest growing segment in the Indian telecom

industry. The mobile subscriber base (GSM and CDMA combined) has grown from 1.9 m at the end

of FY00 to 140 m at the end of July 2007. A slew of tariff reduction in the past few years has helped

the segment to gain in scale. The cellular segment is playing an important role in the industry by

making itself available in the rural and semi urban areas where teledensity is the lowest.

• As far as the Internet services are concerned, India currently has a subscriber base of 6.9 m users.

Of this, around 19% is accounted for by broadband users (>=256 kbps). The ARPU for this segment

was Rs 210 at the end of FY06. PSU major, BSNL holds the top spot with a market share of 42%,

followed by MTNL with a share of 12%,. This is followed closely by Sify, which ranks third with a

market share of 11%.

• On the international basic telephony front, the end of VSNL's monopoly in 2002 brought three

private players in the international basic telephony business and the immediate effect was the fall in

tariffs. In the first six months only, the tariffs fell by 50% and the trend is likely to continue. With

the most favored customer status given to VSNL by fixed line majors like BSNL and MTNL going

away, the segment has been witness to fierce competition.

XXXVI

KEY POINTS:

Supply:

Intense competition has resulted in prompt service to the subscribers. However, smaller

towns and villages continue to have waiting periods on account of nonavailability of adequate

infrastructure.

Demand:

Given the low penetration levels in the country and continuously falling tariffs, demand will

continue to remain higher in the foreseeable future across all the segments.

Barriers To Entry:

High capital investments

Older and well-established players who have a nation wide network

License fee

Continuously evolving technology, and

Falling tariffs.

Bargaining Power Of Suppliers:

Improved competitive scenario and commoditization of telecom services has led to reduced

bargaining power for services providers.

Bargaining Power Of Customers:

A wide variety of choices available to customers both in fixed as well as mobile telephony

has resulted in increased bargaining power for the customers.

XXXVII

Competition:

The entry of fourth cellular player and commencement of WLL services has resulted in

intense competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be

unable to recover their high capital investments.

CHART SHOWING TOTAL TELECOM SUBSCRIBER BASE:

(Source: TRAI)

The Indian telecom industry is witnessing rapid rise in subscriber base, thanks to multiple

growth drivers like:

improving demographics

lower handset prices

expansion by wireless operators

infrastructure sharing

lower regulatory levies.

XXXVIII

SECTOR CONTRIBUTION TO SENSEX GROWTH:

The Sensex has grown immensely since 2011 and is still increasing. Currently it has reached

9000. This growth would not have been possible without the help and support of the various sectors

in the industry. One of the sectors which has a major contribution in this growth is the Telecom

Sector. In the last year, Sensex grew by 9.2% whereas the contribution of Telecom sector was seen

to be -0.2%.

XXXIX

TRENDS IN INDIAN CELLULAR SERVICES

Cellular Subscriber Base

Operator May'2012 May'2011 Var. (%)BSNL (21) 27994410 18000908 56%Bharti Airtel (23)* 40743725 21860212 86%Idea (11) 15266618 8062961 89%Hutchison Essar (18)$ 18083466 11040797 64%Spice Communication (2) 3007118 2027551 48%MTNL 2547895 2097478 21%BPL Mobile (1) 2091353 1792966 17%Dishnet Wireless (7) 1874481 424475 342%Reliance Telecom (23)# 4014404 2049254 96%Total Cellular SubscriberBase

130607955 75290092 73%

Source: COAI & AUSPI

Figure in the brackets denotes the current operating circles

* Include the WLL subscribers

# Include the GSM Subscribers in 7 telecom circles, the subscribers of Reliable Internet in Kolkata

circle and the WLL subscribers

$ Includes the subscribers of BPL Cellular but excludes subscribers of BPL Mobile Mumbai

XL

( Source: Cellular Operators Association of India)

Indian Telecom subscriber base has increased rapidly by 47% to touch 218.85 million in

May 2007, from 148.39 million in May 2006. The surge in subscriber based was powered by

impressive 73% spurt in GSM cellular subscriber base to 130.61 million in May 2007 from 75.29

million in May 2007. Nevertheless, the country has been witnessing sustained fall in Average

Revenue Per Unit (ARPU) from Rs 375 per unit in September 2005 to Rs 335 per unit in September

2006.

Nevertheless, thanks to strong growth in subscriber base, increasing non voice revenues and

lowering fixed cost per unit, the Indian telecom service sector is set to report buoyant growth in

revenues and profitability in the short to medium term.

IDEA and Uninor are the two companies been leading the market. And the companies like

Airtel abd Vodafone are the constituent player leading the market from from far years and are now

at the position nearby 9%, which shows that they are the consistent player of the market.

XLI

MARKET-SHARE OF THE MAJOR PLAYERS IN THE TELECOM SECTOR:

Players Market share %Bharti Airtel 22BSNL 15.97Idea 8.56Tata teleservices 9.7Reliance Communication 20.3Hutch 10.4Others 13.07Total 100

From the chart given above, it is observed that Bharti Airtel leads the race with major

market share i.e. 22%. The reason behind this is the widespread network, huge subscriber base,

plethora of services, pace with the new technology, etc. whereas reliance communication being a

comparatively late entrant has attained a significant market share. As competition among the

existing players is huge, it makes the role of new players unnoticeable. The major players in the

telecom industry cover almost 86.93% of the market share.

XLII

REGULATORY CHANGES

Access Deficit Charge (ADC) regime:

A revised ADC regime has been implemented w.e.f. April 01, 2007 wherein revenue-share ADC

reduced to 0.75% of AGR and per-minute ADC on outgoing ILD calls has been abolished. ADC on

incoming calls reduced to Rs.1.00 per minute. The revised estimate for ADC for 2007-08 is Rs. 20.5

bn

Universal Service Obligation (USO) Tender:

The DoT has finally extended the USO subsidy to wireless networks with the successful

conclusion of bidding under the USO scheme. 7,954 towers are entitled to the subsidy - in 19

service areas (except Metros).

National roaming tariff:

Domestic roaming tariffs have been revised with effect from February 15, 2007. Under the new

structure, there is no rental/surcharge for national roaming and lower ceiling for the 'per-minute

charges' for roaming calls. Incoming SMS while roaming is free though outgoing SMS rates

continue under forbearance.

Subscriber re-verification:

In November 2006, DoT directed all service providers to complete the reverification of their

entire prepaid subscriber base by March 31, 2007, in terms of collation of their identity/address

proofs and updating of their database with subscriber details. As DoT had imposed a penalty of

Rs.1,000 per unverified subscriber after the expiry of the deadline, most operators had to disconnect

some subscribers whose documentary proofs could not be collected until March 31, 2007.

XLIII

Increase in Foreign Direct Investment (FDI) cap from 49% to 74%:

On November 03, 2009, Government of India announced-enhancement of FDI ceiling from

49% to 740% in the telecom sector, subject to certain preconditions. In view of the complications

involved in implementation of the preconditions, DoT had granted several extensions to the telecom

licensees to ensure compliance. On April 19, 2007 DoT finally notified the FDI limit with a

deadline of July 18, 2011 to report compliance.

Terms and Conditions of resale in IPLC segment:

DoT has accepted the recommendations of TRAI on the terms and conditions on which reselling

of international bandwidth is to be permitted in India. The broad conditions include entry fee at

Rs.10 mn. License Fee at 6% of AGR, term of license being 10 years and identical terms for FDI

ceiling as applicable to ILDOs.

Port Charges Regulation:

In February 2007, TRAI amended the existing Port Charges Regulation 2001, by reducing the

port charges payable by private operators to BSNL/MTNL w.e.f. April 01, 2007. Another significant

change is that the slab rate for ports shall now be determined on the basis of the demand made and

not on the basis of ports finally allotted by BSNL.

Regulation on QoS for broadband services:

In October 2006, TRAI issued a regulation on QoS for broadband servicesoffered by all access

and internet service providers pursuant to a public consultation conducted in June 2006. This

regulation was implemented on January 01, 2007.

TRAI decision on Interconnect Usage Charge for Short Message Service

XLIV

(SMS):

On August 21, 2006, TRAI published its decision to refrain from specifying any termination

charge for SMS, thus leaving it under the Forbearance' category. At the same time TRAI has

expressed its concern that the tariff for premium rate SMS Is high and apparently unrelated to cost,

hinting to operators to voluntarily reduce these tariffs

TRAI decision on roaming revenue sharing:

After a public consultation, TRAI published its decision on September 11, 2006 disallowing any

revenue sharing on roaming calls. TRAI reiterated that the termination charges prescribed by them

are cost based and since no additional cost is incurred interminating roaming traffic, there is no

justification for higher payout to the terminating network.

Regulation for interconnection of Intelligent Networks (IN) of all service

providers:

On November 27, 2006, TRAI issued a regulation mandating all service providers to provide

interconnection to all eligible service providers so that subscribers of all access providers can access

the IN services offered by other service providers. Service providers are required to enter into

reciprocal and non-discriminatory agreements for technical and commercial aspects of such

connectivity within three months.

Changes in the NLD and ILD licenses:

There have been significant changes in the NLD and ILD licenses recently. The entry fees for

these licences have been substantially reduced to Rs.25 million each for ILD and NLD licences,

which has already led to a number of new players entering the field.

XLV

RECENT DEVELOPMENTS

The Bharti group's application for direct-to-home (DTH) broadcasting is all set to be cleared

and soon the group may be issued a letter of intent (LoI) for the DTH service. Recently,

clarifications were sought from Bharti on its foreign direct investment (FDI) component and the

equity structure, in connection with its DTH proposal.

Anil Ambani-promoted Reliance Blue Magic is expected to launch its DTH service soon.

Sun TV is also in the queue for DTH. As against the multi-operator DTH scenario in India, in most

countries, DTH attracts only one or two players.

Idea Cellular and Nokia Siemens Networks announced signing of a USD 500 million GSM

network expansion contract. Under the contract, Nokia Siemens Network will expand Idea

Cellular’s GSM/GPRS/EDGE networks to cover population centres across six more circles. The 2-

year contract includes supply and services of GSM equipment, Intelligent Network, Value Added

Services and Circuit and Packet core equipment. Nokia Siemens Networks will deploy the latest

state of art equipment like flexi BTS, mini-ultra base stations, Release 4 architecture, media

gateways and MSS servers.

Spice Communications promoted by Dilip Modi, part of the B K Modi group and providing

cellular services in the states of Punjab and Karnataka, has lined up a public issue to raise Rs 464

crore at lower band (Rs 41) and Rs 520 crore at upper band (Rs 46). The net proceeds from the

issue are intended to be used for part repayment of longterm debt, for payment of NLD and ILD

license fee and related capital expenditures to set up base infrastructure for NLD/ILD.

The Bangalore-based value-added services (VAS) provider OnMobile is planning to tap the

capital market with an initial public offering (IPO) of Rs 500-600 crore. The company’s maiden

offer is expected to open during the current financial year and it intends to invest the proceeds for

its foray into the Wireless Application Protocol (WAP) and General Packet Radio Service (GPRS)

segments. The company was incubated by Infosys Technologies in 2000, and at present the IT

major holds a 14 per cent stake in it.

XLVI

PROSPECTS OF TELECOM SECTOR

• As far as the fixed line business goes, the low penetration levels in the country and the increasing

demand for data based services such as the Internet will act as major catalysts in the growth of this

segment, which has touched 50 m subscribers by the end of FY12 (including WLL subscribers).

The huge market share of public sector behemoths, MTNL and BSNL (together they account for

82% of the total fixed line connections) is likely to get reduced further as the penetration by private

players spreads. In spite of this the PSUs will continue to retain their dominant position this is

on account of high capital investments required in setting up a nation wide network. As a result, the

private sector players will have to rely on key business centers and pockets of high urbanization for

their growth.

• Increasing choice and one of the lowest tariffs in the world have made the cellular services an

attractive proposition for the average consumer. The segment has grown at over 73% YoY in FY06.

It is being estimated that during the tenth five-year plan,around 31.6 m subscribers would jump

onto the cellular bandwagon all over India and this would entail an investment to the tune of Rs

252.4 bn. Policy measures like lowering of taxes on the cellular industry and benefits of enhanced

FDI limits shall further the prospects of the cellular industry.

• The International Long Distance (ILD) telephony business is expected to witness increased

competition with the entry of private players. Already, private players like Bharti, Reliance and

Data Access have started providing ILD services and this has pulled the tariffs significantly down.

Although increased competition will result in depressed revenues in the near term, low tariffs would

ultimately result in increased volumes and higher usage.

• Taking the competition further in the ILD space where we saw huge tariffs fall last year due to the

entry of private players, TRAI has written to the Ministry of Telecommunication and Information

Technology to permit resale of IPLC. If the move goes through, apart from increasing competition

in this space, it is expected that the bandwidth prices will come down by a further 20-25%. This

move is also believed to be a step forward in opening up the ILD sector

XLVII

SELECTION OF THE COMPANY

After understanding the dynamics of the telecom sector and the various issues revolving

around it, three companies were chosen from a group of players in the telecom sector. Such

companies have been chosen which showed consistent performance in the past and were also

fundamentally sound.

Some of the major players in Telecom sector are as follows:

Bharti Airtel

BPL Mobile Comm.

Escorts telecomm.

Hutchison Essar

Idea Cellular

MTNL

Reliance Communication

Spice Telecommunication

Tata Teleservices

VSNL

Time (2 months duration) being a major constraint, two companies were chosen from the whole

telecom sector. Companies chosen for further analysis are:

Bharti Airtel

VSNL

XLVIII

DATA ANALYSIS AND INTERPRETATION

BHARTI AIRTEL LIMITED

Bharti Airtel Ltd (Formerly known as Tele-Ventures (BTVL)) was incorporated on 7th July,

1995, for promoting investments in diversified telecom service projects. The company was formed

as a 80:20 joint venture between the Bharti Group through its subsidiary Bharti Telecom and STET

International Netherlands NV, a company promoted by Telecom Italia, Italy.

Bharti Airtel has bagged the 'Best Emerging Market Carrier' award at the Telecom Asia

Awards 2007. The GSM service provider was adjudged best from among a list of 30 telecom

companies in the Asia Pacific region. Earlier, Bharti Airtel had won the 'Best Indian Carrier' award

for two consecutive years, in 2005 and 2006. The company introduced new products like

BlackBerry wireless solution, Airtel Live and the company was the first wireless services operator

to introduce Ring back tones(Hello Tunes).

Also the company entered into the partnerships with the leading companies like Nokia,

Siemens, Ericsson and IBM for its network planning, supply & management and for its IT

requirements respectively. During 2005-2006, Vodafone acquired 10% economic interest in the

company by way of subscription of convertible debentures in Bharti Enterprises Ltd, representing

an indirect economic interest in Bharti Airtel Ltd and acquisition of direct interest in the company

from Warburg Pincus LLC. The company also signed a managed capacity expansion contract with

Ericsson to provide managed services and expand its GSM/GPRS network into rural India in 15

circles

XLIX

BUSINESS OVERVIEW:

Bharti is one of India's leading private sector service-provider of telecom services with more

than 20 million customers in India and is the first to have an all India presence. The company is

structured into three main units, Mobile Services which offers GSM Mobiles Servies and Infotel

Services which provides broadband & Telephone, long distance and enterprise services which offers

carriers and corporates. All the services of company is been provided under brand name AIRTEL.

The company was first GSM Operator to have more than ten million customers and also the

first telecom company to cover all the 23 telecom circles of India. The Company has a presence in

4,676 census towns and in 207,327 non-census towns and villages, covering an addressable

population of 59% of the total population. With this coverage facility the company became the first

operator to have an All-India footprint.

BUSINESS RISK:

The business is subject to extensive regulation by the Government; which could have an

adverse effect on the business. Technical failures and natural disasters could damage the

telecommunication networks. Changes in available technology could increase competition and the

capital costs.

MARKET RISK:

There is very little market risk in this segment, considering the ever increasing demand of

the telecom services. There have been substitutes for telecom services like the Postman, which has

been available for years but the demand for it is getting decreasedwhereas the demand for telecom

services has never been affected due to that. There is a permanent market for the product, and it

does not face any serious market risk.

L

VOLUME BASED BUSINESS:

The profits of the company are totally based on the volume of their business. The more

efficiently they provide the service, their turnover will increase accordingly and thereby adding

additional profits to the company’s account. With the expansion undertaken by the company in

recent times, it is slated to make the most of this situation.

FUTURE FORECAST:

In long term the demand for telecom services is expected to rise further. The reasons being

the low tariffs, technology, focus on rural areas, ever increasing population, etc. Telephony

penetration in urban areas is quite high as compared to rural penetration and as of now this is been

taken into consideration by various players. Technology is also expected to improve a lot in the

years to come, which would help not only in cost reduction but also in providing services

efficiently.

PRICE INFORMATION:Rs.

BSE(30/08/2012) 242.75NSE(30/08/2012) 242.85P/E 37.5EPS 21.27Market Cap 166930.252W High at BSE 96052W Low at BSE 410

LI

COMPARATIVE CHART OF BHARTI AIRTEL WITH SENSEX:

From the chart given above, it is observed that there has been an upside trend in

the SENSEX as well as the Share price of Bharti Airtel. But the rise in the value of Bharti

Airtel is more than that of SENSEX.

ONE YEAR PRICE MOVEMENT OF BHARTI AIRTEL:

The Chart given above shows a consistent rise in the price of Bharti Airtel in the

previous one year. Some minor fluctuations were observed during the year but it did not

affect the price movement to a remarkable extent. The stock observed an uptrend during

the year and is expected to rise further.

LII

PROJECTED PROFIT AND LOSS ACCOUNT

LIII

Net Revenues:

0

5000

10000

15000

20000

25000

30000

2008-09 2009-10 2010-11 2011-12

5000

10000

15000

20000

25000

30000

The net revenues of the company are growing at an average rate of 50.52% per year. As the

industry is under the growth stage, this may help in boosting the revenues further. Some of the

reasons behind this are declining prices due to competition, increasing rural penetration, technology,

etc.

Expenses:

The expenses of the company are growing but the company is able to keep them within

permissible limits, which would enable the company to earn higher operating profit.

Operating Profit:

The operating profit of the company as a percentage of net revenues is constantly above

30%, which indicates that even though the company is operating on a larger scale the operations of

the company are being carried out with utmost efficiency. The profitability of the company has not

taken a beating and real income of the company continues to look good.

Profit after Tax:

The company is being able to manage its financing very well and on that account

has managed to retain more interest of its shareholders. An increase in the interest

payments by the company is reflected in the profit after tax of the company. Inspite ofthis, the PAT

shows a consistent growth in the future years.

LIV

0

50

100

150

200

2008-09 2009-10 2010-11 2011-12

15000

10000

5000

Operating profit before tax:

The operating profit before tax of the company is increasing consistently every year. This is

a very good sign for the company that the operating profit of the company is ever increasing. It

shows that the performance of the company in terms of their operations is good. The company is

not only increasing its business in terms of volume but it is also realizing more profits or in other

words its margins have not dropped.

LV

PROJECTED BALANCE SHEET

The capital structure of the firm is stable i.e. there is proportionate rise in the shareholders’ funds and the debts of the company. As the current liabilities in the form of creditors are more, it signifies the creditworthiness of the company. Also, there is a consistent increase in the fixed assets of the company.

LVI

PROJECTED CASH FLOW SUMMARY

Year Mar.10 Mar.11 Mar.12Cash and Cash Equivalents at Beginning of

the year384.14 307.43 571.61

Net Cash from Operating Activities 4631.11 8107.95 13343.33Net Cash Used in Investing Activities -5084.34 -7975.09 -14594.8Net Cash Used in Financing Activities 376.35 340.13 2420492

Net Inc/(Dec) in Cash and Cash Equivalent -76.71 -473.03 -1530.31Cash and Cash Equivalents at End of the year 307.43 780.46 1302.92

Total cash from operations:

The total cash flow from operations for the company is also increasing. The rise in cash flow

from operations increases considerably in the years 2007 and 2008. This is a good sign for the

company. The rise in the cash flow from the operations signifies that the company is able to extract

maximum value from its available resources. The company has managed to maintain its margins

and thus not allowed its operating profit to dip.

On looking at the operating profit before tax and the total cash flow from operations it is

clear that the cash position of the company is secure. The company looks to be in a cash rich

position. The cash flow statement of the company indicates that the company is managing its cash

position very well and the inflows of cash are very well managed by the company and it is also

evident that the company is allocating adequate cash to increase their fixed assets.

Key Financial Ratios:LVII

Key Ratios Formulae Mar.10 Mar.11 Mar.12EBITDA Ratio EBITDA / Income 0.36 0.41 0.41Net Profit Ratio PAT/ Income 0.18 0.23 0.2Debt-Equity Ratio Debt / Equity 0.83 0.54 0.49Current Ratio Current Assets /

Current Liabilities0.46 0.46 0.47

Interest Cover EBIT / Interest 10.00 11.00 21.53Return on Equity (%) PAT / Equity 27.37 35.2 36.8Return on CapitalEmployed (%)

EBIT / CapitalEmployed

28.67 28.83 29.57

EBITDA or Operating Profit Margin:

The operating profit margin in true sense is the indicator of the company’s actual operating

efficiency. The company has increased its sales after Mar.10 by 0.5% to Mar.11and then it remains

constant considerably but if there is no rise in the operating profit margin then there is a lack of

efficiency on the part of the company. In this case the company’s operating profit margin is

consistently over 30%. This means that even though the company is undertaking huge expansions it

has maintained its operating profit margin.

Net Profit Margin Ratio:

The net profit margin ratio measures the overall efficiency of production, administration, selling,

financing, pricing, and tax management. The Net profit Ratio goes on increasing Mar.10 and

steadily to the positive direction. After looking at the company’s net profit margin, one can say that

it is consistent, which is considered to be favorable.

Debt-Equity Ratio:

The debt-equity ratio shows the relative contributions of creditors and owners. The debt-equity ratio

of the company is declining, and is expected to still lower down.

lower the debt-equity ratio, the higher the degree of protection enjoyed by the creditors.

Current Ratio:

LVIII

The current ratio measures the ability of the firm to meet its current liabilitiescurrent

assets get converted into cash during the operating cycle of the firm, and provide the funds needed

to pay current liabilities. Even though the current ratio of the firm is consistent but it is much lower

than the general norm i.e. 1.33 in India.

Interest Coverage Ratio:

Interest Coverage Ratio, a major determinant of bond rating is widely used by lenders to

assess a firm’s debt capacity. High interest coverage ratio signifies the ability of the firm to meet its

interest burden even if the PBIT suffer a considerable decline. Interest Coverage ratio in case of

Bharti Airtel is quite favorable as it is increasing consistently. The Interest cover given by Bharti

Airtel is high from Mar.11 by 11.00% to Mar.12 by 21.53% shows the ability of the firm to meet its

interest burden even if the PBIT suffer a considerable decline.

Return on Equity:

This ratio measures the profitability of equity funds invested in the firm. Bharti Airtel has a

favourable Return on Equity as it is increasing every year i.e. from 27.37 it has reached 36.8 in

2years duration. This ratio is of great interest to the equity shareholders.

Return on Capital Employed:

The ROCE measures the profitability of the capital employed i.e. shareholder’s funds plus

the total debt (both short term as well as long term). Bharti Airtel has attained a sharp rise in ROCE

in 2007 but is expected to give comparatively low returns in 2008 due to comparatively low PBIT

and increasing interest.

Earnings per share:

This ratio indicates the actual profit left for the owners of the company i.e. shareholders. A

growing EPS shows that the company is contributing to the shareholders value. A growing EPS

leads to increase in the value (price) of the company in the market.

Thus, it can be said that Bharti is contributing consistently to the shareholders value.

P/E Ratio:

LIX

It is the parameter to judge the proper valuation of the company in the market. Higher P/E

shows that the market is valuing the company at a higher multiple. This is the widely used

parameter by the market for judging the over or under valuation of the company for investment

purpose. A lower P/E is considered one of the most important criteria for the selection of the

company by the investors. The P/E ratio of Bharti is decreasing from 40.5 to 37.5, which is a good

sign from the point of view of the shareholders.

FUTURE PROSPECTS:

• The company has already completed the testing of IPTV in NCR region and will launch in select

part in NCR region in November-December this year and in the next calendar year in other parts of

the country.

• The company plans a $8bn spread by 2010 and 25% of the market share i.e. approximately 125

million subscriber base.

LX

• Bharti Airtel signed a memorandum of Understanding with Nokia Siemens Networks for USD

900 Million in July 2007. This is an expansion contract across Airtel’s mobile, fixed Network

platforms. Nokia Siemens Networks will expand Airtel’s GSM network in eight circles; its NLD

and ILD network with 1.8 million Next Generation Network (NGN) ports and its International

Calling Card prepaid service capacity by 4.5 million new users.

• The company is making major investments in international infrastructure and going to buy full

ownership of the i2i cable.

• Company expects to achieve 72-74% population coverage till March 2008 from current level of

62%.

• The company has filed the scheme of de-merger for approval of the Honourable High Court of

New Delhi of its passive telecom (mobile) infrastructure to Bharti Infratel, its wholly owned

subsidiary. The company expects the demerger to take place in October 2007.

LXI

VIDESH NIGAM SANCHAR LIMITED.

Videsh Sanchar Nigam Ltd (VSNL) was incorporated in 1st April 1986 as a GOI company,

to take over the activities of the erstwhile Overseas Communication Services (OCS) and with a

view to provide International Telecommunication Services to and from India. The company took

control and management of all international telecommunication services from OCS, a Department

of the Ministry of Communications. VSNL is the leading Indian provider of International Long-

distance (ILD) and Internet related services. VSNL is the first company to introduce retail internet

services in India in 1995.

Initially, GOI was holding 52.97% stake in VSNL. In February 2002, GOI divested 25%

stake to the Tata Group as a strategic partner along with the right to manage the company.

M/s.Panatone Finvest Limited, a company which is owned by various Tata Group companies picked

the stake at a price of Rs.202 per share. Following GOI's subsequent open offer of further 20%

equity of VSNL's, the tata group has become the biggest shareholder with a holding of over 45%,

while the GOI stake in VSNL came down to 26.12%. The company offers its products and services

under the brand name Tata Indicom in India.

BUSINESS OVERVIEW:

The company operates under three business segments in India- Wholesale Voice, Enterprise

and Carrier Data and other services. The company provides value added telecommunication

services such as international telephony, leased channels, dial-up internet, broadband, net telephony,

national long distance, enterprise data, frame relay and Internet Services. Apart from these services

the company is also providing TV uplinking services, transponder leasing services etc. VSNL's

main gateway centres are located at Mumbai, New-Delhi, Kolkata and Chennai. The international

telecommunication circuits are derived via Intelsat and Inmarsat satellites and wide band submarine

cable systems e.g. FLAG, SEA-ME-WE-2 and SEA-ME-WE-3.

VSNL is the first Indian service provider to enter in to a Wireless Broadband roaming

alliance with an international operator Star Hub, which is Singapore's second [54] largest info-

communication company. The company one of the leading player in the growth of Wi-Fi hotspot

industry in India has the largest public hotspot network in india with over 250 hotspots.

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BUSINESS RISK:

The business is subject to extensive regulation by the Government; which could have an

adverse effect on the business. Technical failures and natural disasters could damage the

telecommunication networks. Changes in available technology could increase competition and the

capital costs.

MARKET RISK:

There is very little market risk in this segment, considering the ever increasing demand of

the telecom services. There have been substitutes for telecom services like the Postman, which has

been available for years but the demand for it is getting decreased whereas the demand for telecom

services has never been affected due to that. There is a permanent market for the product, and it

does not face any serious market risk.

VOLUME BASED BUSINESS:

The profits of the company are totally based on the volume of their business. The more

efficiently they provide the service, their turnover will increase accordingly and thereby adding

additional profits to the company’s account. With the expansion undertaken by the company in

recent times, it is slated to make the most of this situation.

FUTURE FORECAST:

In long term the demand for telecom services is expected to rise further. The reasons being

the low tariffs, technology, focus on rural areas, ever increasing population, etc. Telephony

penetration in urban areas is quite high as compared to rural penetration and as of now this is been

taken into consideration by various players. Technology is also expected to improve a lot in the

years to come, which would help not only in cost reduction but also in providing services

efficiently.

PRICE INFORMATION:LXIII

Rs.BSE (27-07-12) 451.85NSE (27-07-12) 450.9P/E x 27.96EPS 15.68Market Cap. 11448.45 cr.52W High at BSE 51552W Low at BSE 342

COMPARATIVE CHART OF VSNL WITH SENSEX:

From the chart given above, it is observed that there has been an upside trend in the

SENSEX as well as the Share price of VSNL. But the rise in the value of VSNL is

more than that of SENSEX.

One Year Price movement of VSNL:

LXIV

The chart given above shows some fluctuations which can prove unfavourable

from investorss’ piont of views. There is not much movement in the stock priceand even if its there

keeps on fluctuating. Also, it can be said that the stock volumes traded on the exchange is quite less.

PROJECTED PROFIT AND LOSS ACCOUNT

Net Revenues:

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The net revenues of the company are growing at an average rate of 8.5% per year. The

revenues of the company underwent a sudden fall in 2004 due to the entry of various new players in

the industry. But after that the company is trying to regain its earlier position by growing at a

medium pace but with consistency. As the industry is under the growth stage, this may help in

boosting the revenues further. Some of the reasons behind this are declining prices due to

competition, increasing rural penetration, technology, etc.

Expenses:

The expenses of the company are growing but the company is able to keep them within

permissible limits, except the selling expenses which are expected to increase

comparatively more due to need arisen for more marketing. Ultimately, this would enable the

company to earn not only higher profit but also increase the subscriber base.

Operating Profit:

The operating profit of the company as a percentage of net revenues is constantly above

20%, which indicates that even though the company is operating on a larger scale the operations of

the company are being carried out with utmost efficiency.

Profit after Tax:

The growth in PAT is not consistent, it is quite fluctuating as is observed over a

LXVI

period of time. Also the amount of interest is much more high as compared to the interest that was

paid some few years back.

Operating profit before tax:

The operating profit before tax of the company is increasing consistently every

year. This is a positive sign for the company that the operating profit of the company is

ever increasing though at a low pace as compared to the other players in the industry. It

shows that the performance of the company in terms of their operations is satisfactory.

Projected Balance Sheet

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The increase in debts of the company is more as compared to the equity. The Company is

continuously making investments but there is no remarkable increase in the profits made by the

company. Also, the net current assets held by the company are reducing every year, the reason

being rising current liabilities and simultaneously reducing current assets. The Capital Work in

Progress is increasing continuously over a period of time.

Key Ratios Formulae Mar-06 Mar-07 Mar-08EBITDA Ratio EBITDA / Income 0.28 0.27 0.27

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Net Profit Ratio PAT / Income 0.13 0.12 0.11Debt-Equity Ratio Debt / Equity 0.01 0.02 0.03Current Ratio Current Assets /

Current Liabilities

1.32 1.25 1.15

Interest Cover EBIT / Interest 382.51 104.13 102.77Return on Equity (%) PAT / Equity 7.9 7.37 7.35Return on Capital

Employed (%)

EBIT / Capital

Employed

11.36 11.31 11.39

EBITDA or Operating Profit Margin:

The operating profit margin in true sense is the indicator of the company’s actual operating

efficiency. The company has increased its sales but still there is no rise in the operating profit

margin. This signifies lack of efficiency on the part of the company even if the company’s operating

profit margin is consistently over 20%. As the company is undertaking huge expansions it has

maintained its operating profit margin but it is low as compared to the other players in the industry.

Net Profit Margin Ratio:

The net profit margin ratio measures the overall efficiency of production, administration,

selling, financing, pricing, and tax management. After looking at the company’s net profit margin,

one can say that it is declining over a period of years, which is considered to be unfavorable.

Debt-Equity Ratio:

The debt-equity ratio shows the relative contributions of creditors and owners. The debt-

equity ratio of the company is increasing since 2007, and is expected to stay constant. The lower the

debt-equity ratio, the higher the degree of protection enjoyed by the creditors. But in this case the

debt-equity ratio is increasing that means the degree of protection enjoyed by the creditors is

comparatively low.

Current Ratio:

The current ratio measures the ability of the firm to meet its current liabilities- current assets

get converted into cash during the operating cycle of the firm, and provide the funds needed to pay

current liabilities. The current ratio of the firm is declining every year and also it is lower than the

general norm i.e. 1.33 in India.

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Interest Coverage Ratio:

High interest coverage ratio signifies the ability of the firm to meet its interest burden even

if the PBIT suffer a considerable decline. Interest Coverage ratio in case of VSNL is quite

unfavorable as it is decreasing. Also it is been observed that there was a sudden fall in the interest

coverage ratio in FY12.

Return on Equity:

This ratio measures the profitability of equity funds invested in the firm. VSNL has got an

unfavourable Return on Equity as it is decreasing every year i.e. from 7.9 it has reached 7.35 in

2years duration. This ratio being of great interest to the equity shareholders, they may loose interest

in the company due to declining RoE.

Return on Capital Employed:

The ROCE measures the profitability of the capital employed i.e. shareholder’s funds plus

the total debt (both short term as well as long term). VSNL has attained a continuous decline in

ROCE in previous two years and is expected to give comparatively low returns in 2008 due to

comparatively low PBIT and increasing interest.

Earnings per share:

This ratio indicates the actual profit left for the owners of the company i.e. shareholders. A

growing EPS shows that the company is contributing to the shareholders value. In case of VSNL,

the EPS is expected to increase in FY08 but as observed in the earlier years, there is no consistency

in EPS.

P/E Ratio:

It is the parameter to judge the proper valuation of the company in the market. Higher P/E

shows that the market is valuing the company at a higher multiple. This is the widely used

parameter by the market for judging the over or under valuation of the company for investment

purpose. A lower P/E is considered one of the most important criteria for the selection of the

LXX

company by the investors. The P/E ratio of VSNL is increasing from 25.07 to 27.96, which is not a

good sign from the point of view of the shareholders.

LXXI

VIDESH SANCHAR NIGAM LIMITED

Investment Rationale: At CMP 451.85 (as on 27 June, 2007) the share price

trades at 28.82 (on the basis EPS of FY 2007e i.e15.68) and at 111 times (on the

basis EPS of FY 2008e i.e. 17.56).

The increased competition in India with the DoT issuing ILD licences to new

players, some of who were VSNL's customers earlier, is expected to shrink the

Company's addressable market and hence affect this business adversely.

The growth in broadband subscribers has been slower than that in mobile

subscribers. The predominant reasons are the limited access to last mile networks

that limits the ability to serve retail customers and the inability to demonstrate an

adequate value proposition except to enterprises and a small group of individuals.

An important concern for the Company in its voice business continues to be the

lack of direct access to end customers.

The implementation of the CAC regime has not fallen in place so far, due to

technical and other reasons. The delay in implementation of the CAC regime is a

cause of concern for VSNL.

LXXII

RESEARCH METHODOLOGY

Research is often described as an active, diligent and systematic process of inquiry aimed at

discovering, interpreting and revising facts. This intellectual investigation produces a greater

understanding of events, behavior or theories and makes practical applications through laws and

theories. The term research is also used to describe a collection of information about a particular

subject, and is usually associated with science and scientific method.

BASIC RESEARCH:

Basic research is also called as fundamental or pure research. Its primary objective is the

advancement of knowledge and the theoretical understanding of the relations among the variables.

It is exploratory and often driven by researcher’s curiosity or interest. It is conducted without any

practical end in mind. Basic research often lays down the foundation for further applied research.

APPLIED RESEARCH:

Applied research is done to solve specific, practical questions. Its primary objective is not to

gain knowledge for its own sake. It is usually descriptive in nature. It is almost always done on the

basis of basic research. As far as equity research is concerned there are two types of research

methods that are followed:

Fundamental analysis

Technical analysis

Financial statement analysis is the biggest part of Fundamental analysis also known as

quantitative analysis, it involves looking at historical performance data to estimate the future

performance of stocks whereas Technical analysis does not care one bit about the value of the

company, it is only interested in the price movements of the company s share in the market.

LXXIII

This project deals with the fundamental analysis aspect of the equity research. The

researcher in this project has tried to look into the details of the financial statements of the

companies, the environment surrounding the telecom sector, the latest developments in this regard,

the management discussions on the part of every company and the government policies concerned

with the telecom sector.

DATA COLLECTION:

• Primary data for a project is the first hand information regarding the project being studied.

In this regard the primary data for this project would be getting the necessary information

from the company management by an interview, telephonic conversation or direct mail.

• Secondary data for a project would be the collection of information that has a bearing on the

outcome of the project from secondary sources like news, press releases, internet etc.

The data collected for this project was from a secondary source. The data was complied with

the help of sources like News articles, Internet, Capitaline software. In this research, primary data

could not be gathered as the company officials could not be contacted for a one to one interview or

a telephonic interview.

LXXIV

FINDINGS

BHARTI AIRTEL LTD

• Investment rationale:

At CMP 880.75 (as on 13 June 2012) the share price trades at 41.4 times (on the basis EPS of

FY2011 i.e. 21.27) and at 30.59 times (on the basis EPS of FY 2012e i.e. 28.79). I predict that the

share prices would rise from 880.75 to 1079.63 in a span of 8 months to 10 months.

• New technologies and paradigms:

The trend towards adoption of Next Generation Networks (NGN) is global and the discussions

in India are still at a preliminary stage. Technologies like Triple Play, wherein a single cable can

deliver voice, data and video on demand and IPTV, provide the company with a unique opportunity.

• Global foray:

Sri Lanka is the first international operation of Bharti Airtel and is in line with the Company's

plan to expand its telecom operations internationally in select markets. Bharti Airtel is in the

process of preparing a detailed business plan for rolling out GSM operations in Sri Lanka within the

next financial year.

• Strong strategic partnerships:

Singtel continues to be an investor and a strategic alliance partner and the company expects to

leverage the strengths and experience of Singtel in years to come

LXXV

RECOMMENDATIONS

• On completion of the company analysis, I feel that Bharti Airtel is fundamentally a very

strong company and has a tremendous growth potential. I recommend BMA Wealth Creators

Ltd. and all its clientele to Buy/Hold the company’s shares and derive maximum value from

it.

• Bharti Airtel is holds fundamentally and technically strong in the market as on the basis EPS

of FY2011 i.e. 21.27 and further as on the basis EPS of FY 2012 i.e. 28.79, the shares of the

company will shares their shares in the span of 8 to 10 months.

LXXVI

LIMITATIONS

• While conducting the research I was unable to collect data from primary source which I feel

would have had a bearing on the outcome of the research. Through interviews with the

concerned authorities I could have got first hand information about the company and this

could have certainly given me a broader perspective on the company’s future plans.

• Future changes are largely unpredictable; more so when the economic and business

environment is buffeted by frequent winds of change. In an environment characterized by

discontinuities, the past record proves to be a poor guide to future performance.

• The market behavior if irrational may give rise to – under-valuations for extended periods;

over-valuations from unjustified optimism and misplaced enthusiasm for unreasonable

lengths of time. The slow correction of under or over valuation poses a threat to the analysis.

LXXVII

ASSUMPTIONS

To arrive at a target price of the socks mentioned above, following assumptions were made:

The estimated growth in sales is calculated by taking Compound Annual Growth Rate for

last five years.

The Operating Profit Margin is assumed to be constant, to arrive at operating profit figure.

By keeping the OPM % constant we can arrive at the operating profit for next year.

Depreciation rate is assumed to be constant, due lack of availability of facts about assets,

method of calculating depreciation, depreciation is assumed to be constant.

Interest and tax rate are taken as per the current rates. That helped to arrive at more accurate

figures.

Profit earning ratio is assumed to be constant. As EPS is calculated from estimated profits,

target price is calculated by keeping P/E constant.

LXXVIII

CONCLUSION

Strong growth in subscriber base, increasing non voice revenues and lowering fixed cost per

unit, the Indian telecom service sector is set to report buoyant growth in revenues and

profitability in the short to medium term.

There are two key drivers for the growth in this business. First, the enhanced capability of

the Company to deliver services on a global basis is attracting new customers and opening

up new markets. Second, there is significant growth in the existing customers' businesses

globally.

Bharti Airtel, one of the major payers in the telecom service provider industry has attained a

significant market share in the country with its widespread network, huge subscriber base

and quality service. Also, the company to make its presence felt all across the globe, is

spreading its wings to international markets.

VSNL, a company striving to make its presence felt in domestic as well as international

market is lagging behind in the race against the new players. The reason behind this is the

inability of the company to operate efficiently due to the large number of its subsidiaries,

because of which there is no direct access to its end customers

LXXIX

BIBLIOGRAPHY

WEBSITES:

www.bmawc.com

www.google.com

www.capitalline.com

www.bseindia.com

www.nseindia.com

www.trai.gov.in

BOOKS:

Investment Analysis and Portfolio Management- Prasanna Chandra.

Security Analysis and Portfolio Management – Punithavathy Pandian

LXXX