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Aitel Credit Rating

Aitel Credit Rating

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CREDIT RATING OF AIRTEL

Submitted To Professor Asit Mohanty

XAVIER INSTITUTE OF MANAGEMENT, BHUBANESWAR GROUP – 1
U110010 – Apil Jain U110015 – Ayush Rungta U110019 - Desaraju Rao U110025 - K Pallavi Dora U110030 - Meenakshi Mittal U110031 - Mohammed Rehan U110033 - Nitya Mishra U110034 - Pankaj Arora U110035 – Prakhar Agarwal
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U110042 – Rishi Agarwal

EXECUTIVE SUMMARY
The assignment given was to calculate the credit worthiness of the bank. Hence a detailed analysis was done on the various ratios which would be needed to ensure that all the facets of a bank are considered to make a holistic appraisal of the bank. An analysis of the operating environment of the bank includes both macro and micro factors, market factors, market position, and financial flexibility. The methodology mainly focuses on evaluating the financial strength of the entity based on the entity’s cash generation and debt servicing abilities. The analysis is carried out based on the past audited financials. Not only financial rations, but non-financial dimensions were also considered for the appraisal The following broad risk parameters were considered for the rating – Business and Industry risk analysis Inevitably any industry comprises a number of market segments that will exhibit somewhat better or worse characteristics than the industry as a whole. Consequently, the analysis takes into consideration the particular segments of the market or industry in which that firm operates and the extent to which the firm’s operating environment diverges from the industry as a whole. The evaluation of the industry environment requires consideration of the following aspects:          Intensity of competition The relative profitability of the industry The outlook for Industry Profitability Concentration of the market Size of market Barriers to entry and ease of exit Regulatory, accounting & fiscal regimes Market growth potential Threat of substitute products / services

Operating Risk The companies that operate with high fixed cost in terms of investment in plant and machinery are subject to higher operating risk. Also the companies which are spread out and have large number of divisions and impact, any are considered. The other element of the operational risk is the management of inventory, the process of procurement of raw materials, quality control, production planning and control, capacity utilization of huge machinery etc. The companies that have sustainable raw material advantage in terms of location as well as who have higher productivity due to state of art machinery will score over others.
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interview process. and knowledge of customers and their needs. 3|Page .People People factor plays a very critical factor in today’s world. industry experience. Management's ability and willingness to develop workable strategies to address its system's needs. based on auditor qualifications. training. This is owing to the strong financial management and corporate governance by Airtel which has constantly fared well in all the aspects since last few years. and to be proactive in leading its company into the future are assessed.72/6 (or a 95. The assessment of management is based on such factors as tenure. The financial ratios that we studied are liquidity ratios. performance appraisal and motivation plans can build a successful talent team that cannot be easily replicated by a new company entering the industry. Effective HR process management can result in a high competitive advantage.33%) which correspond to a AAA rating which implies a minimum risk rating grade. Financial Risk Analysis We looked at a number of financial ratios that give clue for further study of some aspects of the corporation. While the country may be producing large number of graduates. leverage and interest coverage ratio. We also checked if the accounting numbers show a major deviation year to year or show a wide departure from the industry averages. where talent is scarce. We discounted the earnings quality as reported by the company. depth and stability of top management. to execute reasonable and effective long-term plans. Companies with excellent recruitment. the employability and finding the right kind of resource has always been a problem for a number of employers. The industrial processes are also robust which is evident from the good operating ratios. Final Rating The final rating obtained was a weighted score of the weighted scores obtained for financial risk and non-financial risk. asset quality. earnings quality and profitability ratios. and recent and prospective management changes. inventory turnover & asset turnover ratios. a grasp of industry issues. We looked at the cash flow projections as well as the past cash flows Management Quality Important considerations include strengths and weakness of key members of management. The final score obtained was 5.

To earn Gold Certification. microwave links. Airtel is the largest provider of mobile telephony and second largest provider of fixed telephony in India. with over 171. Call rates have come down much further. Telemedia.8 million subscribers across 19 countries at the end of June 2011. service. Nokia Siemens Network and Huawei. So. The company has a submarine cable landing station at Chennai.85 million subscribers as of August 2011. 4|Page . behind China Mobile and China Unicom. homes and small offices.It is the largest cellular service provider in India. to be paid by the minute for installation and maintenance of their equipment rather than being paid up front. It operates a GSM network in all countries. and is also a provider of broadband and subscription television services. This enabled the company to provide pan-India phone call rates of Rs. It is known for being the first mobile phone company in the world to outsource everything except marketing and sales and finance. The organisational structure that existed till recently concentrated on the hierarchy of the operations(not services)inside the company as a whole.Ericsson agreed for the first time. is an Indian telecommunications company that operates in 20 countries across South Asia. by combining the erstwhile business units – Mobile. It also acts as a carrier for national and international long distance communication services. 1/minute. etc. providing 2G or 3G services depending upon the country of operation. in India). Bharti Airtel's B2C business unit will comprehensively service the retail consumers.The company also provides land-line telephone services and broadband Internet access (DSL) in over 96 cities in India.business support by IBM and transmission towers by another company (Bharti Infratel Ltd. Airtel is the fifth largest telecom operator in the world with about 230. Its network (base stations.During the last financial year. Bharti Airtel is the first Indian telecom service provider to achieve this Cisco Gold Certification. Digital TV. The structure depicts the corresponding operation/region of different in-charges and hence it didn't hold anyone responsible for each of its services. commonly known as Airtel. Airtel is the 3rd largest in-country mobile operator by subscriber base. Bharti has roped in a strategic partner Alcatel-Lucent to manage the network infrastructure for the Telemedia Business. the company found it better to restructure its organisational chart and it came into implementation from 1 August. support and customer satisfaction set forth by Cisco. It offers its telecom services under the Airtel brand and is headed by Sunil Bharti Mittal.) are maintained by Ericsson. The transformed organisational structure will have two distinct Customer Business Units (CBU) with clear focus on B2C (Business to Customer) and B2B (Business to Business) segments. which connects the submarine cable connecting Chennai and Singapore. Bharti Airtel had to meet rigorous standards for networking competency.About the Company Bharti Airtel Limited. Africa and the Channel Islands.

219 out of the total 745. The B2C organization will consist of Consumer Business and Market Operations.Airtel has reported that its revenues for the fourth quarter of 2010 grew by 53% to US$3. Bharti Airtel announced that it would acquire 100% stake in Telecom Seychelles for US$62 million taking its global presence to 19 countries. M-advertising etc. making the firm the world's No. However. In March 2010.2 billion compared to the previous year. Company has gone through many mergers and acquisitions in the last few years. 5|Page .46% market share as of December 2010. On August 11. net profits dropped by 41% from US$470 million last year to US$291 million this year due to a US$188 million increase in radio spectrum charges in India and an increase of US$106 million in debt interest.000 subscribers in India or about 20. newly acquired Zain Africa division contributed US$911 million to the total. M-health. Airtel is the market leader in India with about 152.). 2010. Bharti Airtel completed its $9 billion acquisition of African operations from Kuwait's Zain.495. 5 wireless carrier by subscribers.and other emerging businesses (like M-commerce.000. in India's second biggest overseas acquisition after Tata Steel's $13 billion buy of Corus in 2007. Bharti struck a deal to buy the Kuwait firm's mobile operations in 15 African countries.

Very High degree of sustainability (Minimum Risk).33% marks and corresponds to rating of “AAA.00 4.30 30.An exceptionally high position of strength. financial and facility risk category risk has been given the highest rate as this are the risk category directly linked to and under the control of the firm and depends on the past performance and capability of the firm to perform in coming years. The score of 5.10 5. The Industry risk and Business risk have been given low scores owing to uncontrollable factors in hands of the firm.High Risk Caution & Not Acceptable Default The detailed scoring for the corporation has been given below: 6|Page .72/6 corresponds to 95.39 – 5.4 5.Average Risk Weakness on a parameter in comparison to peers.Rating Model The weight distribution of the various categories and the scores for Airtel is as follows.40 2.72 The Management.30 30.30 3.20 4.29 -2..39-1.00 0. Weighted Score 6.Marginal Risk A moderate degree of strength with positive outlook…Moderate Risk A moderate degree of strength with stable or marginally negative outlook….80 27. Unstable outlook……Acceptable Risk A fundamental weakness with regard to the factor.5.00 Rating AAA AA A BBB BB B C D Description An exceptionally high position of strength.19 – 3.40 5.09 .9 – 0. Very High degree of sustainability…. High degree of sustainability…..00 Total Score (Max 6) 5.46 5. Unlikely to improve under normal circumstances…. Category C1 C2 C3 C4 C5 Industry Risk Business risk Management Risk Financial Risk Category Facility risk Max Score 6 6 6 6 6 Weight 3 2 5 5 5 Scored 6.00 Weighted Score 18.00.00 <0.00 8.Minimum Risk A high degree of strength on a factor among the peer group..4.05 6.

Importance to the Economy - CAGR of more than 19% Contributes to around 3% of GDP Risk Score Weight Weighted Score - Creates huge opportunity for direct and indirect employment Yes Not very important 6 0 6 6 30 1. it has not dented the business of any telecom operator significantly Recent corruption in spectrum Risk Score Weight Weighted Score 7|Page . Policies (RF) b) Risk Factor :. Policies - Independence in setting up call tariff Contrary to the apprehensions about MNP.Sensitivity of the Industry to Govt.2 Sensitivity of the Industry to Govt.1 Importance to the Economy (RF) a) Risk Factor :.INDUSTRY RISK 1 Industry Characteristics (RP) 1.

allocation indicates tightening of noose around the neck in the future New guidelines issued by TRAI in 2010 about spectrum charges and M&A will be detrimental. particularly after the telecom companies roll out their 3G services Positive Outlook Moderate / negative Risk Score Weight Weighted Score - - 6 0 6 6 36 Total Weighted Score for Risk Parameter Industry Characteristics = 108/18 = 6 8|Page .3 Growth outlook… (RF) c) Risk Factor :.Growth Potential/Outlook - Mobile subscriber base expected to gro to 1 bn till 2014 Saturation in mobile subscriber base expected after 2015 Reduced tariff hurting the bottom-line for all operators Users for the broadband base are going to reach 100 million mark by 2014. especially to GSM operatorers No Yes 6 0 6 6 36 1.

2 Competitive forces…(RP) a) Risk Factor :.Intensity of Competition - High competition with increasing number of players Focus of competition shifting to tower sharing and value added services MNP has not been able to increase competition Risk Score Weight Weighted Score - - High demand with greater bargaining power of customers implies consolidation in future Least Competition High Competition 00 06 6 6 36 b) Risk Factor :.Barriers to entry for New Players - High capital investment Nation-wide network and aggressive sales force required High License fee Risk Score Weight Weighte d Score Continuously expanding technology implies a dedicated R&D center High Barriers No/ Medium Barriers 06 0 6 6 36 9|Page .

Presence of substitutes/ Threat of Imports Products and services from non-traditional telecom industries pose serious substitution threats Cable TV and satellite operators. Industry Financial……. Delivered by ISPs . offer broadband internet services.3% Risk Score Weig ht Weig hted Score 10 | P a g e .not telecom operators "internet telephony" could take a big bite out of telecom companies' core voice revenues. and satellite links can substitute for high-speed business networking needs. (RP) a) Risk Factor :.a) Risk Factor :. with their own direct lines into homes.ROCE (average for last Three years) The Return on Capital Employed would be calculated for the Industry as an average for three years ROCE = 9. No Sustitutes Few / many substitutes available to the borrower’s product 00 06 6 6 00 36 Risk Score Weight Weighte d Score - - Total Weighted Score for Risk Parameter Competitive forces = 108/18 = 6 3.

Profit Margin (average for last Three years) The actual profit Margin of the Industry for last 3 years is to t be taken into consideration Risk Score Weig ht Weig hted Score Profit Margin . 20%  15% and 20% < 15% 6 3 0 6 6 6 36 b) Risk Factor :.8%  10% < 10% 6 0 5 5 30 c)Risk Factor :.Earning stability - Increasing competition means lower revenue Increasing cost of capital due to volatile markets Substitutes pose a strong threat for the company Hence – No Risk Score Weight Weighted Score - - Stable Business No 6 0 5 5 30 Total Weighted Score for Risk Parameter Industry Financial = 96/16 =6 11 | P a g e .

No. Risk Parameter Maximum Marks Business Growth Growth in sales or Growth in income 02 08 02 1 Percentage increase in Operating Profit Margin (Before Tax) Over the Previous year’s margin Total Customers Base 02 12 | P a g e . S. Competitive force Industry Financials Total 6 6 6 6 18 36 36 108 Weighted Average Score of Industry Risk Category = 108/18 = 6 Business Risk Category The business risk of a company is evaluated through a combination of parameters that determine the company’s business position within the industry and its sustainability. 1 Risk Parameter Risk Score Weight Weighted Score Industry Characteristics 6 6 36 2 3 1.Weighted Average Score of Industry Risk Category S. No .

25% Increase of  0.25% and 0.5 0 2 1.5 1 .63%)  20  15 and 20 (17.5 1 0.10% and 0.87) 10 and 15  0 and 10 0  20%  15% and 20% Risk Factors Growth in sales or income : If the Growth rate in sales/ income of the borrowing firm during last completed year as compared to the earlier year was Percentage increase in Operating Profit Margin (Before Tax) Over the Previous year’s margin: If the Percentage increase shows Total Customers Base ( in cr) Non Voice Revenue as a % of mobile revenues 13 | P a g e Respective Score 2 1.00% Increase of  0.5 1 0.10% (-8.5 Score 2 0 1.11%)  15% and 20% 10% and 15%  0% and 10%  0% Increase of  1% Increase of  0.50% Increase of  0.5 0 2 1.5 0 2 1.5 1 0.50% and 1.Non Voice Revenue as a % of mobile revenues 02 Operating Efficiency Population Coverage Management of Operating Costs 02 02 01 08 01 01 01 2 Average Minutes of Use Per User Prepaid Customers as a % of total customers Average Revenue Per User (ARPU) Technology Adoption & Location Advantage Score Card for Business Growth Risk Parameter : Business Growth Range/Value  20% (42.

75 0.75 0.5 0.10% and 15% (14.5 0 Score Card for Operating Efficiency Risk Parameter : Operating Efficiency Range/Value /Situation Risk Factor Population Coverage  80%  60% and 80% 40% and 60% (14.5 0.3%)  90% and 95% 85% and 90%  80% and 85%  80%  250  150 and 200 (190) 100 and 150  50 and 100  50  600  450 and 600  300 and 450 (445)  150 and 300  150 1 0.75 0.5 0 Score Recei ved 2 Management of Operating Costs: (Operative costs like Energy/Technology/Employee).6%)  0% and 10%  0% 1 0.25 0 1 0.5 0.25 0 1 0. engineering.: this factor plays an important role. Greater degree of automation normally leads to optimization of employee costs.) Average Minutes of Use Per User (in Minutes)  95% (96. Cost of acquiring technology in technology oriented industries. automobiles etc.6%)  20% and 40%  20% Respec tive Score 2 1.75 0.25 0 1 0. Prepaid Customers as a % of total customers Yes 2 2 No 1 Average Revenue Per User (ARPU) (in Rs.5 1 0.5 14 | P a g e . Impact of IT related problems and cost of mitigating measures also needs to be taken into consideration.

etc. Working capital management Total Score = 4. 6. Location Advantage: Location Advantage could help reducing manufacturing cost as well as selling cost on account of proximity to key utilities. 7.5 + 7.25 = 11. No. 2.Technology Adoption: Adoption of cost effective technology is very vital in the present day scenario. 8. 2. Risk Parameter/ Factors Achievement during last year of targeted Net Sales/Income/Receipts as the case may be Achievement during last year of targeted Net Profits Risk Scores 5 Risk weight 4 1. 3 3 3 3 3 3 3 2 15 | P a g e . 4 4 3. Yes 1 1 No 0 1. 3 4 5. of years of experience of the Principal Promoters in the line of business Financial support to the borrowing firm from the Promoters/Group Frequency of change in the Board of Directors Qualification of the Board of Directors Retention of funds generated from the borrower's business profits 4 4 4. MANAGEMENT RISK CATEGORY S. Availability of utilities such as power etc. Capability of the Principal Promoters/Management run the business No.75 out of 16.

Achievement by Borrower (during last completed year) of targeted Net Profit (after tax) Risk Score  90% and = 100% of the target 4 Weight Weighted Score  75% and  90% of the target  60% and  75% of the target  45% and  60% of the target  30% and  45% of the target  15% and  30% of the target 3.5 (84. Achievement during last completed year of targeted Net Sales/Income/Receipts Risk Score Weight Weighted Score Achievement (during last completed year) of targeted Net Sales/Income/Receipts was to be extent of  100% of the target 5  90% but  100% of target  80% but  90% of target  70% but  80% of target  70% of target 4 (95%) 3 2 1 4 16 2.5%) 3 2.9. Transparency in communicating to the Shareholders in the Annual Report 3 1 1.5 4 14 16 | P a g e .5 2 1.

Risk Score  10 years  5 years and  10 years  5 years Weight 4 Weighted Score 12 3 2 1 5. Capability of the Promoters/Management to run the business i. No. either they have the business skills to run the business and/or have employed professionals Risk Score Excellent Very Good Good Satisfactory 4 3 2 1 Weight 4 Weighted Score 16 4.< 15% of the target 1 3. Financial Support to the borrowing firm from the Promoters/Group Risk Score Whether the promoters or their Group Concerns are willing to extend financial support in case of need Yes No Whether the promoters or their group concerns have adequate financial resources to 17 | P a g e 03 00 Weight Weighted Score 3 9 .e. of years of experience of the Promoter(s)/Management in the line of business.

Frequency of change in the Board of Directors Risk Score >5 yrs >4 yrs and <5 yrs >3yrs and <4yrs <3 yrs 3 2 1 0 Weight Weighted Score 3 6 7.5 2 Weight 3 Weighted Score 9 1. Retention of funds (in the borrowing firm) generated from the borrower's business profits last year 18 | P a g e . Qualification of the Board of Directors Risk Score Highly Qualified with rich experience Highly Qualified with less experience Medium Qualified with higher experience Medium Qualified with no experience Low Qualification with no experience 3 2.5 1 8. Adequate financial resources Less than adequate financial resources No financial resources 03 02 01 3 9 Weighted Score of the Risk Parameter 18/6 = 3 3 9 6.assist the borrower in case of need.

of years of experience of the Principal Promoters in the line of business Financial support to the borrowing firm from the Risk Scores 4 Risk weight 4 Weighted Score 16 1. Risk Parameter/ Factors Achievement during last year of targeted Net Sales/Income/Receipts as the case may be Achievement during last year of targeted Net Profits Capability of the Principal Promoters/Management run the business No.Risk Score  60% Weight 2 3 (95%) Weighted Score 6  30% and 60%  30% 2 1 9. 3. 3. 2. Transparency in communicating to the Shareholders in the Annual Report Risk Score Weight 1 High Transparency Medium Transparency Transparency only in Financial Statements Low Transparency 3 2 1 Weighted Score 3 0 Weighted Average Score of MANAGEMENT RISK CATEGORY Risk Category S.5 4 4 4 14 16 4. No. 3 3 9 19 | P a g e . 3 4 12 5.

No 1 2 8. 7.25 20 | P a g e . Frequency of change in the Board of Directors Qualification of the Board of Directors 2 3 3 3 6 9 Sl. 40% Range Score to be allotted 6 4 (39.04%) Weight 5 5 Weighted Score 30% and <40% 20 3 2 6 Retention of funds generated from the borrower's business profits Transparency in communicating to the Shareholders in the Annual Report TOTAL 9. 3 1 3 3.25 28 91 Management Risk : 91/28 = 3.Promoters/Group 6.

No 1 2 3 4 40% 30% and <40% 20% and <30% <20% Range Score to be allotted 6 4 (39.74%) 4 2 0 Weight 6 6 6 6 Weighted Score 36 15% and <20% 10% and <15% <10% 21 | P a g e .12%) 4 2 0 Weight 6 6 6 6 Weighted Score 36 15% and <20% 10% and <15% <10%  Return on Capital Employed Sl.Financial Risk Profitability (RP)  Operating Profit Margin: Sl.04%) 2 0 Weight 5 5 5 5 Weighted Score 20  Net Profit Margin Sl. No 1 2 3 4 20% Range Score to be allotted 6 (20. No 1 2 3 4 20% Range Score to be allotted 6 (22.

45 22 | P a g e .5 24  Sl. No 1 2 3 4 <1 TOL/TNW Range Score to be allotted 6 (. Return on Net worth Sl.56 Leverage Ratio  Long Term Debt to Equity Ratio Sl.5 Range Score to be allotted 6 4 (. No 1 2 3 4 < 0. No 1 2 3 4 15% Range Score to be allotted 6 (23.5 > 1.68) 2 0 Weight 5 5 5 5 Weighted Score  0.84%) 4 2 0 Weight 6 6 6 6 Weighted Score 36 10% and <15% 5% and <10% <5% Total Weighted Score for Risk Parameter (Profitability) = 128/23 = 5.5 and < 1  1 and < 1.85) 4 2 0 Weight 6 6 6 6 Weighted Score 36 1 and < 2  2 and < 3 3 Total Weighted Score for Risk Parameter (Leverage) = 60/11= 5.

00 >1.20 Total Weighted Score for Risk Parameter (Liquidity) = 16/8 = 2 Efficiency of Working Capital Management (RP)  Sl.Liquidity Ratio  Current Ratio Sl.45) 0 Weight 4 4 4 4 8 Weighted Score 0.52) 0 Weight 4 4 4 4 8 Weighted Score  Sl.5 and<0.00 Fixed Assets Turnover Ratio Range Score to be allotted 6 (0.75 and <1 0.20 and<0.No 1 2 3 4 1 Quick Ratio Range Score to be allotted 6 4 2(0.No 1 2 3 4 1 0.5 Range Score to be allotted 6 4 2(0.75 <0.60 <0.00 and 4.89) 3 0 Weight 6 6 6 Weighted Score 36 Total Weighted Score for Risk Parameter (Efficiency of Working Capital Management) = 36/6 =6 23 | P a g e .00 > 4. No 1 2 3 1.60 and <1 0.

67 24 | P a g e . 1 2 3 4 30 Dividend Coverage Ratio Range Score to be allotted 6(33.No. 1 2 3 4 5 4 and <5 3 and <4 <3 Range Score to be allotted 6(5.38) 4 2 0 Weight 6 6 6 6 Weighted Score 36  Sl.No.Cash Flow Indicator Ratios  Dividend Payout Ratio Net Profit Sl.No. 1 2 3 4 Net Cash From Operating Activities/Sales Range Score to be allotted 6 4 2(35.20%) 0 Weight 5 5 5 5 Weighted Score 50% 40% and <50% 30% and <40% <30% 10  Sl.87) 4 2 0 Weight 4 4 4 4 Weighted Score 24 20 and <30 10 and <20 <10 Total Weighted Score for Risk Parameter (Estimated Cash Flows) = 70/15 = 4.

Major deviations in valuation of Stocks/Other assets.Qualification by Statutory Auditors (of the Borrower) in the latest audited Balance Sheet of the Borrower Major qualifications: such as change in accounting policy affecting profits adversely. Non-providing or non-availability of critical information/data for verification by auditors etc. Minor qualifications: such as Debtors and Creditors balances not confirmed. or any other inspecting official with regard to the borrowers account. Maximum Marks – 02 1 2 3 4 No observation Minor observation Major observation Total Weight 6 3 0 3 3 3 3 18 Score Weight Weighted Score Total Weighted Score for Risk Parameter (Statutory Auditors) = 18/3 = 6 25 | P a g e . Maximum Marks – 02 1. etc. No Risk Factor :. stocks not checked physically. 2. Bank’s Statutory auditors. concurrent auditors. 3. No qualification of auditor Minor qualification of auditor Major qualification of auditor Total Weight 06 03 00 3 3 3 3 18 9 Score to be allotte d Weigh t Weig hted Score Total Weighted Score for Risk Parameter (Statutory Auditors) = 18/3 = 6 Audit/Inspection observations in the borrowers account Risk Factor: Observations of the Bank's internal inspectors.Auditors Qualifications in the Balance Sheet (RP) Sl.

05 (156.45 2 6 4.25 8 24 28 18 18 31 156.56 5.Weighted Average Score Financial Risk Category S.36 27. No.61/31) 26 | P a g e .67 6 6 Weight 6 5 4 4 6 3 3 Weighted Score 33. Risk Parameter 1 2 3 4 5 6 7 Profitability Leverage Liquidity Efficiency of Working Capital Management Cash Flow Indicators Auditors Qualifications in the Balance Sheet Audit/Inspection observations in the borrowers account Total Score 5.61 Total Score in Financial Risk Category = 5.

5. there have been no irregularities found or report ed in public domain with regard to Airtel’s conduct of accounts. 2011 (Rs. respectively) pertaining to joint ventures. 3.770 as of March 31.009 as of March 31. 2009. If it is a new borrower.816 as of March 31. realisable value of Tangible Collateral Security excluding personal guarantee.468 as of March 31.753 as of March 31. 34. 27 | P a g e . Airtel seems to be complying with timely submission of stock statements and renewal papers etc. 2011 (Rs. 2010 and March 31. The borrowings comprise of funding arrangements with various banks and FIIs taken by parent.541 and Rs. frequency of servicing of existing borrowings etc. 49. and Unsecured borrowings represented by Rs. Hence. 2009. 110. respectively) and secured borrowings represented by Rs. respectively) pertaining to Group excluding joint ventures.344 as of March 31. 2011 (Rs. o The details of security provided by the Group and its joint venture in various countries.080 as of March 31. 6. 2010 and March 31. 14.Facility Risk Facility Risk shows the Airtel's response to any bank after availing loan. 497. The details on availability of Personal / Corporate Guarantees to secure proposed exposure. 77. to various banks on the assets of parent. 8. The corporate doesn’t have any overdrawing beyond drawing power/limit but rather has some unused lines of credit.489 as of March 31. respectively) and Secured borrowings represented by Rs. 7. subsidiaries or JV’s are clearly mentioned in the annual report and to a satisfactory detail. 2009. 2009.Conduct and Operations of accounts Airtel Group and its joint ventures have taken borrowings in various countries towards funding of its acquisition and working capital requirements. 2011 (Rs. then facility risk is not applicable. 36. Risk Factor: .703 and Rs. 2010 and March 31. it has been given a facility rating score of 20 out of 20. 2010 and March 31. aren’t available in public domain.406 and Rs. However. Total borrowings disclosed include o Unsecured borrowings represented by Rs. subsidiaries and joint ventures.248 and Rs.

4 <30% 0 5 • Sl. 2. Non-providing or non-availability of critical information/data for verification by auditors etc. 1 2 3 4 30 Dividend Coverage Ratio Range Score to be allotted 6(33. 3. stocks not checked physically. Minor qualifications: such as Debtors and Creditors balances not confirmed. No Risk Factor :.Qualification by Statutory Auditors (of the Borrower) in the latest audited Balance Sheet of the Borrower Major qualifications: such as change in accounting policy affecting profits adversely.No. Maximum Marks – 02 1. No qualification of auditor Minor qualification of auditor Major qualification of auditor Total Weight 06 03 00 3 3 3 3 18 9 Score to be allotte d Weigh t Weig hted Scor e Total Weighted Score for Risk Parameter (Statutory Auditors) = 18/3 = 6 28 | P a g e . Major deviations in valuation of Stocks/Other assets. etc.67 Auditors Qualifications in the Balance Sheet (RP) Sl.87) 4 2 0 Weight 4 4 4 4 Weighted Score 24 ≥ 20 and <30 10 and <20 <10 Total Weighted Score for Risk Parameter (Estimated Cash Flows) = 70/15 = 4.

Risk Parameter 1 2 3 4 5 6 7 Profitability Leverage Liquidity Efficiency of Working Capital Management Cash Flow Indicators Auditors Qualifications in the Balance Sheet Audit/Inspection observations in the borrowers account Total Score 5. or any other inspecting official with regard to the borrowers account.45 2 6 4.67 6 6 Weight 6 5 4 4 6 3 3 31 Weighted Score 33. No. Maximum Marks – 02 1 2 3 4 No observation Minor observation Major observation Total Weight 6 3 0 3 3 3 3 18 Score Weight Weighted Score Total Weighted Score for Risk Parameter (Statutory Auditors) = 18/3 = 6 Weighted Average Score Financial Risk Category S.61 Total Score in Financial Risk Category = 5. concurrent auditors.25 8 24 28 18 18 156. Bank’s Statutory auditors.36 27.05 (156.61/31) 29 | P a g e .Audit/Inspection observations in the borrowers account Risk Factor: Observations of the Bank's internal inspectors.56 5.

5. 2011 (Rs. The borrowings comprise of funding arrangements with various banks and FIIs taken by parent.770 as of March 31. If it is a new borrower. 7. respectively) and Secured borrowings represented by Rs. 34.248 and Rs. Risk Factor: . then facility risk is not applicable. 36. and 30 | P a g e . subsidiaries and joint ventures. 2010 and March 31.Facility Risk Facility Risk shows the Airtel's response to any bank after availing loan. 2011 (Rs.753 as of March 31.Conduct and Operations of accounts Airtel Group and its joint ventures have taken borrowings in various countries towards funding of its acquisition and working capital requirements. 3. Total borrowings disclosed include ○ Unsecured borrowings represented by Rs. 2010 and March 31. 2009. 8.816 as of March 31. 2009.468 as of March 31. respectively) pertaining to joint ventures.541 and Rs.

respectively) and secured borrowings represented by Rs. 14. Airtel seems to be complying with timely submission of stock statements and renewal papers etc.009 as of March 31. 497.703 and Rs. 49.344 as of March 31. 110.406 and Rs.○ Unsecured borrowings represented by Rs. 2011 (Rs. The corporate doesn’t have any overdrawing beyond drawing power/limit but rather has some unused lines of credit. aren’t available in public domain. realisable value of Tangible Collateral Security excluding personal guarantee. Hence. 2010 and March 31. it has been given a facility rating score of 20 out of 20. The details of security provided by the Group and its joint venture in various countries. respectively) pertaining to Group excluding joint ventures. frequency of servicing of existing borrowings etc. 2009.080 as of March 31. 31 | P a g e . subsidiaries or JV’s are clearly mentioned in the annual report and to a satisfactory detail.489 as of March 31. 2011 (Rs. 77. However. The details on availability of Personal / Corporate Guarantees to secure proposed exposure. to various banks on the assets of parent. 2009. there have been no irregularities found or report ed in public domain with regard to Airtel’s conduct of accounts. 2010 and March 31. 6.

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