Monday, January 2, 2012

BHARTI AIRTEL = RESULTS FOR =Q2 FY 2012 = QTR ENDING SEP,2011 = DECREASING MARGINS & PROFITS =


Bharti Airtel Limited

Sunil Bharti Mittal


Q2 FY 2012 ENDING SEP,2011

proportionate revenue

Rs. 172,698 million (ended September 30, 2011-Audited)
Rs. 152,310 million ( ended September 30, 2010-Audited)

proportionate EBITDA

Rs. 58,151million ( ended September 30, 2011 - Audited)
Rs. 51,377 million ( ended September 30, 2010- Audited)
As per IFRS Accounts (Consolidated)

BHARTI AIRTEL is arguably the MOST EFFICIENT TELECOM COMPANY in India. Its YOY progress was always very impressive. If India progressed in the Telecom sector so fast – apart from regulatory and governmental actions – the entrepreneurial zeal of  Sunil Bharti Mittal and others is a great contributory factor.
But, as the Nation knows by now – the supportive governmental actions became  a little non-transparent and  illogical in recent past – leading to the present condition where making profits in Telecom sector is becoming progressively difficult.

In this context, we need to view the results of Bharti Airtel for the second quarter ending Sep,2011.

STAND ALONE RESULTS

Net Sales for Q2 FY 12 stands at Rs.10164.50 cr – down by -0.15% from Q1 FY 12; up by 3.42% from Q4 FY 11; up by 6.28% from Q3 FY 11; and up by 9.3% from Q2 FY 11.

Total Expenditure   for Q2 FY 12 stands at Rs.7999.70 cr – down by -1.92% from Q1 FY 12; up by 3.93% from Q4 FY 11; up by 6.9% from Q3 FY 11; and up by 13.19% from Q2 FY 11. Increase in expenditure is slightly more than proportionate compared to sales Revenue.

Profit from Operations for Q2 FY 12 stands at Rs.2164.80 cr – up by 6.95% from Q1 FY 12; up by 1.58% from Q4 FY 11; up by 4.06% from Q3 FY 11; but DOWN BY -3.02% from Q2 FY 11.

Interest costs have gone up to Rs.594.60 cr from Rs. 203.30 cr in Q1 FY 12;(Up by 192.5%); Rs.76.50 in Q4 FY 11 (Up by 677.25%); Rs.       55.70 cr in Q3 FY 11 (Up by 967.5%) and up from Rs.(-)146 cr in Q2 FY 11.

Profit  before tax stands at Rs.1583.20 cr – down by -14% from Q1 FY 12; down by -23.99% from Q4 FY 11; down by -22.37% from Q3 FY 11; and down by -34% from Q2 FY 11.

Net Profit stands at Rs.1307.50 cr – down by -8.71% from Q1 FY 12; down by -28.86% from Q4 FY 11; down by -29.24% from Q3 FY 11; and down by -37.8% from Q2 FY 11.

Basic EPS on a Face Value of Rs.5 stands at Rs.   3.44 in Q2 FY 12; Rs.3.77 in Q1 FY 12; Rs.4.84 in Q4 FY 11; Rs. 4.87 in Q3 FY 11; Rs.5.53 in Q2 FY 11. There is difficulty in predicting the direction of movement of the profits and EPS for next 2 quarters – even though Bharti may maintain upward movement in Sales. This is due to the severe competitive conditions in Telecom sector and the inability of players to increase tariffs on their own.

Annaulised EPS may therefore be around Rs.14 for FY 2012.

Current Market price of the share  is Rs.344.95 52 week high price is Rs.447.85 and 52 week low price is Rs.304.45

The Price Earnings Ratio stands at 24.64.

The performance report of Bharti presents interesting facts.

The total customer base as at Sep’11 is 236,986,000. This has been showing consistent upward trend.

Total minutes on network was 250,446 MLN MINs as at Sep,11 – whereas the same was 251,962 as of June’11, indicating a fall in it.

No.of countries of operation in 2009 was 2, in 2010, it was 3, and now, it is 19 countries. This shows the urgency with which Bharti is spanning out – out of India.

CONSOLIDATED FINANCIALS (Rs in Millions) :

Total Revenue was Rs.152,311(Sep,10); Rs.169,749(June,11); and Rs.172,698(Sep,11).

Cash Profit from operations after Exchange Rate fluctuations is : Rs.48,058 (Sep,10); Rs.48,508(June’11) and Rs.46,966 (Sep,11).

Net Income is Rs.16,612 (Sep,10); Rs.12,152 (June,11); Rs.10,270 (Sep,11)

EBITDA MARGIN is 33.7%.

Net Profit Margin is 5.9% in Sep,11(falling from 10.9% in Sep,10)

Return on shareholders’ equity has fallen from 18.5% insep’10 to 10.3% in Sep,11

ROCE has fallen from 13.9% to 7.9%

Average Revenue per user in India (for Mobile services) has fallen to Rs.183 from Rs.202 in the above period.

COMMENTS : If you are an Entrepreneur, where would you invest your money – will it be where the Net Profit Margin is  6% or where it is 11% ? Will it be where ROCE is less than 8% or where it is more than 14%?

This seems to explain why Efficient entrepreneurs of India are choosing foreign destinations now.

Investments in Telecom sector are not taking place in India now – at the speed required. If India is a better destination than Africa – would Bharti choose Africa?

Unfortunately, the changing trends in telecom sector are still not getting adequate attention of either the Government or the Regulator (TRAI).

Two operators - MTNL and BSNL - have slipped into RED already. Both are Central PSUs where Government’s own investment runs into lakhs of Crores. Government does not seem to have applied its mind adequately on what to do with that Investment. There are also several lakhs of Jobs at stake. 

Admittedly, they may come under the category of  least efficient operators, though that may not necessarily be the case. There are compelling reasons for them to undertake inefficient , less profitable operations and that also makes them less profitable. Plus, historic, low tech, low skill operations also need to be considered.

But then, Government needs to protect its babies. TRAI, under its charter, also has a duty – to FIX LOWER BAND OF TARIFFS – below which operators cannot go. But, this has never been done, on the ostensible reason that customers benefit by lower tariffs. This may be. But, below a certain level of profitability, even the most efficient operators would not want to put their moneys in India. That seems to be happening now.

It is high time that TRAI FIXES LOWER BAND OF TARIFFS for various services so that the 2 central PSUs also survive – and the most efficient ones have incentive to Invest in India further in Telecom sector.

Government also needs to cancel the LICENCES UNUTILISED / UNDERUTILISED SO FAR. Granting hundreds of Licenses was done – as though India’s market is bigger than world Market itself. This was perhaps the Biggest mistake and all these additional licences need to be cancelled forthwith.  

If these Governmental and Regulatory actions are forthcoming, Telecom sector in India will grow as ever – and Bharti will be a Great Investment Bet.

Else, we may have to invest -with confidence in Sunil Mittal's ability for making his foreign operations highly profitable.

RESULTS TABLE – STAND ALONE

BHARTI AIRTEL
30-Sep-11
30-Jun-11
31-Mar-11
31-Dec-10
30-Sep-10
Net Sales
1016450
1018000
982850
956370
929990
Other Expenditure
648210
659820
611840
599550
561560
Total Expenditure
799970
815590
769730
748340
706770
Profit from Operations
216480
202410
213120
208030
223220
Other Income
1300
1900
2810
1490
1990
Interest
59460
20330
7650
5570
-14600
Profit  before tax
158320
183980
208280
203950
239810
Tax expense
27570
40750
24490
19170
29780
Net Profit after tax
130750
143230
183790
184780
210030
Net Profit
130750
143230
183790
184780
210030
Face Value (In Rs
5
5
5
5
5
Paid Up Equity
189880
189880
189880
189880
189880
Reserves
4496850
4365760
4221070
4079010
3892160
Basic EPS
3.44
3.77
4.84
4.87
5.53
Public holding (%)
31.67
31.71
31.71
31.8
32.13

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