A Comparative Study on Financial Performance of Public Sector And
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© 2019 JETIR April 2019, Volume 6, Issue 4 www.jetir.org (ISSN-2349-5162) A COMPARATIVE STUDY ON FINANCIAL PERFORMANCE OF PUBLIC SECTOR AND PRIVATE SECTOR TELECOM COMPANIES IN INDIA JIBIN MATHEW M.Phil Scholar, Sree Narayana Guru College, Coimbatore. Dr. M. GEETHA Asst. Professor of Commerce, PSG College of Arts & Science, Coimbatore. Abstract Telecom or telecommunication means exchange of information by the use of technology. Telecom industry in India is one of the rapidly growing and ever changing industry in the world. B.S.N.L is the major public sector telecom company and which is the pioneer in the telecom industry. Bharati Airtel, Idea Cellular Ltd and Reliance Communications are the major private sector telecom companies in India. In this competitive world, this study is an attempt to compare the financial performance of public sector and private sector telecom companies in India in the recent years. KEYWORDS Mobile Network Operators : Telecommunication service providers provides wirelss voice and data communication for its subscribed mobile users. Direct To Home Operators : Telecommunication service providers those who provides television channels to subscriber’s home from satellite. Multiple System Operators : Multiple system operators are those who owns or operates two or more cable TV systems. Internet Service Providers : An internet service provider is a company which provides access to internet to its subscribers. Consolidated financial statements : Consolidated financial statements are the financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent company and its subsidiaries are presented as a statement of a single entity. Operating profit : Operating profit measures the profit earned by a company from its core business operations, excluding interest and any profit earned from investments made outside the firm. Trend in operating profit : Trend in operating profit measures the trend in operating profit of a company in different periods based on a base year’s operating profit. Here base year is 2012-13. Operating profit ratio : Operating profit ratio indicates how much profit a company makes after paying various costs of production. It is expressed as a percentage of sales or total revenue and it shows the efficiency of a company in controlling the costs and expenses associated with business operations. JETIR1904947 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 321 © 2019 JETIR April 2019, Volume 6, Issue 4 www.jetir.org (ISSN-2349-5162) Net profit : Profit earned by a company after deducting all business expenses is called net profit. It represents the actual profit of the company. Trend in net profit : Trend in net profit is a tool to measure the trend in net profit of a company in different periods based on a base year’s net profit. Net profit ratio : This profitability ratio shows the relationship between net profit after tax and net sales or total revenue. It measures the overall profitability of the firm. Return on Investment (ROI) : This ratio evaluates the efficiency of shareholder’s investments. It states the relationship between net profit and shareholder’s fund. Return on Capital Employed (ROCE) : ROCE is a long term profitability ratio that measures how efficiently and effectively a company can generate profits from its capital employed by comparing net profit to capital employed. Capital employed includes both shareholder’s fund and long term debts. Return on Assets (ROA) : ROA shows the percentage of profit a company earns in relation to its overall resources. Earnings Per Share (EPS) : EPS is an indicator of a company’s profitability. It is the portion of a company’s profit allocated to each equity share. It can be calculated by dividing the net profit available to equity shareholders with number of equity shares, Debt Asset Ratio : Debt asset ratio is a leverage ratio states the relation between total debts and total assets. A high ratio represents comparatively high leverage and a high financial risk. It also shows a company’s capacity to meet its liability towards outsiders. Debt Equity Ratio : Debt equity ratio is a measure of financial leverage and it indicates how much debt a company used to finance its assets relative to the value of shareholder’s fund. Current Ratio : Current ratio is a liquidity ratio and it measures a company’s ability to pay its short term obligations. It depicts the relation between current assets and current liabilities. Quick Ratio : Quick ratio is a liquidity ratio that measures how well a company can meet short term financial liabilities. It states the relationship between total quick assets and current liabilities. Quick asset includes cash, marketable securities, accounts receivables etc. 1. INTRODUCTION Telecom means telecommunication. Telecommunication is the exchange of information by the use of technology. In telecommunications, data is transmitted in the form of electrical signals known as carrier waves, which are modulated in to analog or digital signals for transmitting information. Telecommunications and broadcasting are administered worldwide by an agency called International Telecommunication Union (ITU). Most countries have their own agencies for enforcing telecommunications regulations. In India, Government of India set up Telecom Regulatory Authority of India in 1997 for the same. Indian telecom industry is a rapidly growing and technologically ever changing industries in the world. Telecom companies in India includes Mobile Network Operators, Direct to Home (DTH) Operators, Multiple System Operators (MSOs), Internet Service Providers (ISPs) etc. Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) are the public sector telecom companies in India. MTNL provides services in metros of India like Delhi and Mumbai. MTNL started its functioning in 1985. BSNL was setup by the department of telecom in 2000 to provide telecom services all over India and it is the pioneer in the Indian telecom industry. BSNL is the largest fixed line service provider in India and it has more than 60% market share in broadband services. It is the fifth largest mobile service provider in India. It has 115.29 million customers in2015. Its revenue in 2016 is Rs.32,918.70 crore and operating loss is Rs.4,169.31 crores. JETIR1904947 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 322 © 2019 JETIR April 2019, Volume 6, Issue 4 www.jetir.org (ISSN-2349-5162) Private sector telecom companies in India are Airtel, Reliance, Idea, Vodafone, Aircel, Tata docomo etc. Out of these Vodafone India is the Indian subsidiary of UK based Vodafone group. It is the world’s second largest mobile phone company and its operational head office in Mumbai. Idea Cellular Ltd was the third ranked telecom company in India and which was started in 1995. Its head office is situated in Mumbai. The extra-ordinary general meeting of Idea Cellular Ltd held on 26th June 2018 decided to merge with Vodafone India Ltd and changing the name to Vodafone India Ltd to face competition from Reliance and Airtel. Now Vodafone group and Aditya Birla group are the parent companies of Vodafone Idea Ltd. Currently, the Vodafone group holds 45.1% shares and Aditya Birla group holds 26% shares and the remaining portion of the combined entity is held by the public. By this merger, Vodafone India Ltd became the biggest telecom company in India and second largest mobile telecommunication network in the world. In July 2018, Vodafone Idea has 38.37 market share in India with 443.94 million subscribers. Bharati Airtel Ltd was the largest telecom company in India before the formation of Vodafone India Ltd. It was incorporated in 2015 with its head office in New Delhi. Airtel runs its operations in 20 countries across the world. It has 456 million customers at the end of June 2018. It ranks amongst the top 3 mobile service providers globally in terms of subscribers. The gross revenue of the company in the financial year 2017 is Rs.836.88 billion. Reliance Communications is a telecom company owned by Anil Ambani which was set up in 2004 and its head office is situated in Navi Mumbai. The newly started telecom company ‘Jio’ has no relation with Reliance Communications. Jio is a Mukesh Ambani’s Company. The 90% of the shares of the company is held by Reliance Anil Dhirubhai Ambani Group and the remaining 10% is held by Mobile TeleSystems India. In 2018, it has earned Rs.4,684 crore revenue. Aircel, Tata Docomo etc are other leading telecom companies in the private sector. Aircel commenced its operations in 1999 at Tamil Nadu and now it provide services in Tamil Nadu, Odisha, Assam and North- eastern telecom circles. Tata Docomo Ltd is a wholly owned subsidiary of Tata Teleservices, founded in 2008. This study is an attempt to compare financial performance of Indian telecom companies in public sector and private sector. For this purpose, public sector telecom company BSNL is taken on one side and major private sector telecom companies like Bharati Airtel Ltd, Idea Cellular Ltd, Reliance Communications Ltd etc. on the other side. 1.1 STATEMENT OF PROBLEM Telecom industry in India is a rapidly growing industry in the world. In India we can see a tough competition between these telecom companies. Public sector and private sector companies are existing in this field. BSNL is the major public sector telecom company and Bharati Airtel, Idea Cellular Ltd, Reliance Communications etc. are private sector telecom companies. This study is an attempt to compare financial performance of public sector and private sector telecom companies. 1.2 REVIEW OF LITERATURE Gajera, Alpeshkumar Chandulal (2016) have compared the financial performance of private sector banks and public sector banks and identified the affecting factors and their impact on performance. For this study they considered all public sector banks and all private sector banks and analysed financial data of 12 years from 2001-02 to 2012-13.