FAS Group B1 (Sec-1):

19F104- ABHISHEK SHANKAR PANDEY

19F110- ANSHUMAN SAILESH SARAF
19F126- KUSHADITYA SHARMA
19F159- VIKRAMRAJ VENKATESH
19F160- YASHNA SATISH MEHER
(Under the guidance of Prof. Vrishali Bhat)

Financial Accounting Project

Bharti Airtel Limited is a leading global telecommunications company with operations in 18

countries* across Asia and Africa. Headquartered in New Delhi, India, the Company ranks among the
top three mobile service providers globally in terms of subscribers. Bharti Airtel has over 403 million
customers across its operations and the current market share is 26% at the end of March 2019.

Airtel’s main competitors are Reliance Jio, Vodafone-Idea. With new developments such as FTTH
and a converged digital entertainment platform, christened Airtel Xstream, Airtel hopes to capture
and grow market further.

Airtel operates majorly in Telecommunication sector but is involved in Mobile Banking Sector through
Airtel Payment bank and Entertainment sector through Airtel wink music and Airtel digital TV.

The main products Airtel provides are as following -

Main products in India
 2G, 3G and 4G wireless services
 mobile commerce
 Fixed Line Services
 high speed home broadband
 DTH
 Enterprise services (including national & international long distance)

Main products in Other Countries

 2G, 3G and 4G wireless services
 mobile commerce

The Maximum revenue by geography is generated within India with 70.9% weightage. Africa is
second with 26%. Also, maximum capital employed is in India with 76.4 %.

Segment wise Distribution

  Wireless services
 Homes services
 Landline
 Internet
 Airtel Business
 Mobile
 Digital TV services
 Tower Infrastructure

The Total revenue generated is 80,780.2 crores INR

According to the segment distribution the maximum revenue generated is through Mobile services
with 75.4% including 49% revenue from India itself but the maximum profit generated is through
Passive Infrastructure and Enterprise Services with 49% and 43.5% resp. The mobile services have a
loss of 91% in India for the year 2019.

The maximum tangible asset employed is 85.2% in Mobile Services.

Board of Director Details:

Gender,
Name Post Age Educational Qualification
Mr. Sunil Bharti M, 59
Mittal Chairman Years Post Grad,Harvard Business School
Non-
Ms. Chua Sock Executive F, 62 Degree in Accountancy from the University of Singapore,
Koong Director years Certified Public Accountant, CFA
Mr. Craig Edward Independent M, 64 Masters degree from Occidental College and a postgraduate
Ehrlich Director years fellowship with the Coro Foundation
Independent M,46 Master’s degree in physics with specialization in Electronics
Mr. D. K. Mittal Director years from University of Allahabad, India
M, 52
Mr. Gopal Vittal MD & CEO years MBA from IIM, Kolkata.
Ms. Kimsuka Independent F, 55
Narasimhan Director years Bachelor of Commerce degree from the University of Madras
Mr. Manish Independent M,51
Kejriwal Director years MBA from Harvard University
Non-
Mr. Rakesh Bharti Executive M, 64 Post Graduate Diploma in Electronics & Controls from the
Mittal Director years Y.M.C.A. Institute of Engineering
Mr. Shishir Independent M,79 Master of Arts in Developmental Economics, from Reading
Priyadarshi Director years University, UK
Non-
Executive Bachelors Degree (Honours) and a Fellow member of the
Ms. Tan Yong Choo Director F,55 years Institute of Singapore Chartered Accountants.
Mr. V. K. Independent M,78
Viswanathan Director years Chartered Accountant
The Board Members are quite diverse. There are members from different educational background
including CA, CFA and MBA. Gender Ratio of the board is 8:3 in terms of male : female. There are 6
independent directors on board. Considering the age factor every member is above 50 years of age
having variant industry experience and a mean average age of 60 years.

The Total number of board changes in fiscal year 2019 were 2. Date of last board change was
03/30/2019.

Compensation to Directors and Key Managerial Personnel= 519

Compensation to Non-Executive Directors including Independent Directors: 3.30
Compensation to Key Managerial Personnel other than Managing Director / Whole-time Director /
Manager: 86.84
Total Compensation: 519+3.30+86.84 = 60.9 crores INR
Total Revenue: 80,780.2 crores INR
Compensation as a % of Revenues: .075%

During FY 2018-19, the Board met six times i.e. on April 24, 2018, July 26, 2018, October 25, 2018,
December 20, 2018, January 31, 2019 and February 28, 2019.

The entity complies with regulations wrt Independent Directors & Women Directors. It has more than
one Women Director and more than 2 independent directors on Board.

Shareholders & Issued Share Capital:

No of shares & par value:
During the year 2018-19 Airtel issued 3,997,400,107 shares as compared to (March 31,2018 -
3,997,400,102) equity shares at par value of 5 each.

Has the company issued any shares during the year? How & to whom were they issued?
The extra 5 shares as compared to previous year were given to Institutional Investors.
During the year, the Company approved the issuance of upto 1,133,591,075 Equity Shares of face
value of Rs 5/- each by way of rights issue at a price of Rs 220 per rights equity share (including a
premium of Rs 215 per rights equity share) aggregating up to Rs 249,390.04 million on a rights basis
to the eligible equity shareholders in the ratio of 19 rights equity shares for every 67 equity shares
held by the eligible equity shareholders on the record date, that is, April 24, 2019. The issue opened
on May 03, 2019 and is scheduled to be closed on May 17, 2019.

Has the company bought back any shares?

In the recent years, Airtel has not proposed to buyback any shares. However, in April 2016, the
company had plans to buy back its 3.58 crore shares worth ₹ 1434 crore.
What is the shareholding pattern?
The shareholding pattern of the Company consists of the Promoter's holding, FII's holding, DII's
Holding, and shareholding by general public etc. The following chart represents the pattern:

Has it changed as compared to the immediate previous year?

The shareholding pattern has remained the same, throughout the previous years.
Have the directors pledged their shareholding as security? How much and Why?
There was no change in the share holding pattern and % of shares pledged /encumbered to total
shares were nil.

The shares are listed on which exchanges?

It is listed on the BSE with a BSE Code of 532454 and the NSE with an NSE Code of BHARTIARTL.

What is the highest & lowest price at which the shares traded during the financial year?
What is Book Value of the shares? How does book value compare with the par value & the current
market price?
The Company has only one class of equity shares having par value of Rs 5 per share and its book
value is 249.03. Its current market price is Rs 344 on NSE dated 13/09/2019.

Market Price Comparison Rs 352.19 on 14/09/2018

Rs 347.45 on 13/09/2019
% change in Market price= -6.32 %

Do you observe any relation between the Sensex/Nifty & the company’s stock prices?
BSE Price Change= Rs 38090.64 on 14/09/2018
Rs 37104.28 on 13/09/2019
% change in Market price= -2.58 %
From the rate comparisons for 1 year it can be observed that Airtel has underperformed with
respect to the market.

When was the AGM held? What was the agenda for the meeting?
The last AGM of Bharti Airtel was held on August 14, 2019.
What portion of current earnings is distributed as dividends?
For the year ending March 2019, Bharti Airtel has declared an equity dividend of 50.00% amounting
to Rs 2.5 per share. At the current share price of Rs 335.60 this results in a dividend yield of 0.74%.
Thus, as of now, they have not distributed any dividends.

Auditors:
Who are the auditors?
The Statutory auditors are Deloitte Haskins & Sells LLP, Chartered Accounts and the independent
auditors report are Mr. Sunil Bharti Mittal (Chairman Bharti Enterprises), Gopal Vittal (Managing
Director & CEO of Bharti Airtel - India & South Asia) and Raghunath Mandava (CEO Airtel Africa).
Cost Auditors are Sanjay Gupta & Associates - Cost Accountants. Secretarial Auditors are
Chandrasekaran Associates – Company Secretaries.

Have they changed from the last year – why/why not?

There was a change in Cost Auditors from RJ Goel and Co. to Sanjay Gupta & Associates as RJ Goel
and Company resigned as Cost Auditors of the company. The board on the recommendation from
the audit committee has approved Sanjay Gupta and Associates, cost accountants as cost auditors.
Bharti Airtel has re-appointed Chandrasekaran Associates, Company Secretaries as Secretarial
Auditors. Deloitte Haskins & Sells LLP have a 5 years contract with Airtel which started from the year
2017.

Are there any negative comments/qualifications in the audit report?

There were no negative comments in the audit report but audit procedures had a key audit matter
in note 23 (i) in respect of details contingent liabilities in the standalone financial statement. They
had evaluated the design and tested the operating effectiveness of internal control; it was uncertain
relating to the regulatory and tax matter.

Does the audit report contain any recommendation to present/potential investors?

The Audit Procedures team challenged the management underlying assumption in estimated tax and
regulatory after their internal discussion and external expert opinions. The Audit Procedures team
verified the appropriateness of the accounting policies, disclosures related to provisions for
subjudice matter and contingent liabilities in note 2.18, 20 and 23(1) in standalone financial
statement.

Did the auditors provide any non-audit services also?

None of the audit firm provide any other non-audit service to Bharti Airtel.

Fixed Assets:
What is the total investment in fixed assets as % of total assets?
The total fixed asset is 2,422,918 Million and total asset are 2,751,975 Million. The total investment
in fixed asset in % terms to total asset is 88.04%.

What is composition of tangible & intangible assets?

Intangible asset according to the consolidated balance sheet as on 31st March 2019 is 1,200,996
Million which comprises of (Goodwill, Other Intangible Asset and Intangible asset under
Development) and tangible asset are 815,228 Million.
Has the firm made additional investments in fixed assets? How does this compare with current
revenues, profits, operating cash flows?
Bharti Airtel has purchased assets worth 260,971 million. There was a loss before tax of 17,318
Million. The operating cash flow is 267,782 Million. The firm is in a bad condition as operating cash is
very less compared to its balance sheet and the firm is still making a loss before tax.

Has it scrapped or sold any fixed assets – what was the profit/loss in that case?
Bharti Airtel has sold Tower Asset worth 3,051 Million and the company has also made a profit on
sale of property, plant and equipment of 175 Million.

What is the policy for depreciation? Is it the same for all types of assets?
PPE and intangible assets use straight-line method of Depreciation. Yes, it is same for all the
different type of asset.

What is the depreciation as % of total revenues?

Depreciation is 95,317 Million and revenue is 807,802 Million. % of depreciation to revenue is
11.80%.

Has the company recognized any impairment losses? Has the company revalued any of its fixed
assets during the year?
Impairment cost in the company, the investments was subsidiaries to 357,533 million but the
management estimated the recoverable value of its investment in BIL (Bharti Infratel Ltd.), the
carrying value of which as at March 31, 2019 is 227,516 million.
The value of the fixed cost is 2,422,918 Million and Revenue is 807,802 Million. So, the return on
every rupee spent on fixed asset is Rs. 0.33. EBIT-17,318 Million and Fixed Assets is 2,422,918
Million.

How much revenue is generated per rupee of investment in fixed assets?

Return on Fixed asset is EBIT/Fixed Asset that is 0.007% that is a very worrying sign for the company
as they are making very little or no profit before tax and interest. Total asset in the company is
2,751,975 Million and EBIT is 17,318 Million. Return on Total is 0.006. As the company has barely
make any profit for the last year and the company still purchasing new equipment and making
investment the figure tends to die down.

What the return on total assets, return on fixed assets? What % of last year’s revenues, profits,
operating cash flows is invested in additional fixed assets?
Revenue for the year 2018-19 was 807,802 and year 2017-18 was 826,388. According to
consolidated profit and loss statement profit for the year 2018-19 was 16,875 Million and Year 2017-
18 was 21,835. Operating cash flows for the year 2018-19 was 267,782 Million and for the year
2017-18 was 306,355 Million. Bharti Airtel has purchased Fixed assets worth 260,971 million. As
there were not a lot of profit to go around and buy fixed asset the company had to use some of their
reserves. Bharti Airtel used 31.57% of its revenue from last year and 85.18% of its Operating cash
flow to purchase new fixed asset.

Revenues & Income

What are the major sources of revenues & other income?
Airtel being a telecom company the major sources of revenue are from the services they provide and
the sale of products. As mentioned above it generates revenue from mobile services, airtel business
and home services. Among these the major portion is rom data and voice services. With increase in
the number of people using data, the revenue from this has significantly increased as compared to
the past few years. It is recognized by categories such as service revenue, multiple element
arrangements and equipment sales. The sources of other income include the cost of PPE sold,
scrapped, retired, or otherwise disposed along with interest income and dividend income.

If revenue is generated from multiple business segments or geographical regions – what is the
proportion of each segment/region?
The major segment of business are mobile services, Airtel business and home services. They are
further divided by the region they serve, particularly India and the other countries. The revenue
generated from the other countries being a small amount in comparison to the Indian income, they
are consolidated and mentioned in the financial statements.
Particulars Mobile Services Airtel Business Home services Total
Geographical
regions: 376,633 51,909 21,758 450,300
India (90.77%)
Others 2,193 43,587 - 45,780 (9.2%)
Total: 378,826 (76.3%) 95,496 (19.2%) 21,758 (4.4%) 496,080
Major product
lines/service lines:
Data and Voice 348,175 78,322 20,736 447,233
services (90.15%)
Others 30,651 17,174 1,022 48,847 (9.8%)
Total: 378,826 (76.3%) 95,496 (19.2%) 21,758 (4.4%) 496,080

What is the growth in revenues?

Considering individual segments, in comparison to FY 2018, the FY 2019 showed the following
growths: Wireless services: India-(-10%) Africa-(+12%)
Home services (-8%)
Digital TV services (+9%)
Airtel Business (+10%)
Tower infrastructure (+3%)

What is the policy for revenue recognition?

There is an inherent risk with respect to accuracy of the revenue recorded in respect of Mobile
Services and Airtel Business segments due to the complexity of the IT systems and other support
systems, huge amount of volumes of data processed by the systems and the impact of changing
pricing models (tariff structures, incentive arrangements and discounts, etc.). Recognition of revenue
happens when the control of promised products or services is transferred to the customer at the
value which the Company has received or expects to receive.
The main categories being:
Service revenue: includes revenue from voice, data messaging, data and value-added services from
its own and other subscribers in case of roaming. Revenue is recognised based on actual units of
telecommunication services provided, period of subscription pack validity and the rest is mentioned
as unearned revenue.
Multiple element arrangement: involves delivering multiple products, services. There is recognition
on inception and their evaluation.
Equipment sales: Sale of telecommunication equipment and its accessories recognised when control
is transferred to customer.
Interest Income: Recognised using the EIR method
Dividend income: recognised when the right to receive the payment is established.
Inventories:
What type of inventories does the company hold?
For the massive network that Airtel has, its inventory consists of radio, microwave and core
elements for the research and development and establishment of better network services. Inventory
also includes the manufactured products and parts required for it.

What is the total investment in inventories? How does it compare with the previous year?
The value of inventories increased from 693 million in FY 2018 to 884 million in FY 2019.

What is the policy adopted for inventory valuation?

Inventory is value using the first in first out method at the lower of cost and net realizable value. It
includes the price at which the inventory is purchased and the cost of transportation incurred to
bring it from the supplier to the its present location and condition.

Long Term Borrowings:

What are the sources of long-term debt? Has the composition changed?
The details of the sources of the long-term debt and change in composition are given below long
with the amount borrowed:

Are the borrowings in different currencies?

Yes. The borrowings are in different currencies. They are as follows:
Which assets are offered as security against the borrowings?
The group has borrowings in various countries mainly for working capital, capital expenditure and
refinancing of existing borrowings. Bharti Airtel Ltd. has offered vehicles as a collateral for 10 million
loan amount and for the loans taken by Bharti Airtel Africa and its subsidiaries, it has pledged all the
fixed and floating asset it has in Africa as the loan amount is high, 3,071 million.

What % of total assets in funded by long term debt?

The Total of all the current and non-current assets comes up to 2,751,975 million and the long term
debt accounts to 161,874 million. Thus, only 5.88% of the total assets are funded by long term debt.

Did the company raise additional/repay existing long-term debt during the year?
The borrowings of Airtel increased by 23,034 million in the FY 2019. But, as mentioned in the cash
flow of the financing activities, the proceeds from borrowings in 2019 was 353,141 whereas along
with this the company re-payed 345,359 million rupees of borrowings that it currently had.

What were the specific reasons for additional borrowings during the year?
The Group made borrowings mainly for funding it’s Working Capital, refinancing of existing loans
and capital expenditure. Some of the borrowings have been taken to refinance the acquisition
related borrowing in Africa.

What is the interest coverage ratio?

The calculation of the interest coverage ratio changes from IFRS to Ind AS in FY 2016. Since then it
has dropped from 7.06 to 2.84 which is a 35% year-on-year decrease from FY 2018.

Are operating cash flows enough to meet interest & principal obligations?
Many borrowings/loans are about to reach their maturity period and the Company must pay out
382,037 million within the next one year. The operating cash flow generated before changes in
working capital is 267,782 which is considerably lower than the borrowing to be paid within a year.
Hence it is not sufficient to meet the interest and principle obligations of the Group.

Other Analysis:
a. Investments and Trading purpose:
 One of the key technological investments that Airtel made was the creation of a
content provisioning platform that could provide millions of telco customers access
to premium content from providers such as Amazon Prime, Netflix, Zee5 and Airtel
TV Premium. In line with our philosophy of being an “Open Telco”, they partnered
with a multitude of OTT providers to curate and offer products that cater to Airtel’s
user base.
 Airtel has been making sustained investments in strengthening their infrastructure
to build a network that enhances user experience with innovative services. Given
the changes in the telecom landscape which have necessitated unprecedented
network rollouts with emerging opportunities, their strategy is to sustain market
leadership by setting up an integrated network infrastructure to deliver brilliant
network experience for our consumers.
 During the year under review, Airtel made giant strides under the project with being
the first operator to launch 4G services in Andaman & Nicobar Islands and other
technological investments aimed to enhance consumer experience.
 As on March 31, 2019, the Company had cash and cash equivalents of ₹ 62,121
Million and short-term investments of ₹ 46,232 Million.
  The Company deployed LTE 900 technology in 10 circles which offers significantly
better indoor 4G coverage.
 The Company deployed state-of-the-art Massive MIMO technology at the Kumbh
mela this year and offered virtual reality based immersive experience to the visitors.
 Investments in subsidiaries such as Bharti Infratel Limited, Bharti Hexacom Limited,
etc., as at March 31, 2019 amounts to ₹ 357,533 million.
These investments and innovations helped reinforce the Company’s position as the fastest
network for download speeds for the Q1-Q2 and Q3-Q4 of 2018-19, according to many
independent industry leaders in speed and performance testing. The Company had 181,079
network towers, compared to 165,748 network towers in the last year. Mobile broadband
(MBB) base stations were at 417,613 the end of the year, compared to 298,014 at the end of
last year.

b. Income from Investments:

 Interest accrued of ₹ 602 million.
 Net gain on FVTPL investments of ₹ 476 million.
 Net (losses) / gains on fair value through OCI investments of ₹ (45) million.
 Sale of some Current Investments during the year fetched the Company ₹ 44,976
million.

c. Contingent Liabilities:
The Company is involved in various legal, tax and regulatory matters, the outcome of which
may not be favourable to the Company. Management in consultation with the legal, tax and
other advisers assess the likelihood that a pending claim will succeed. The Company has
applied its judgement and has recognised liabilities based on whether additional amounts
will be payable and has included contingent liabilities where economic outflows are
considered possible but not probable. The details for the same are given below:
 Sales and Service Tax of ₹ 8,032 million.
 Income Tax of ₹ 9,950 million.
 Customs Duty of ₹ 4,883 million
 Entry tax of ₹ 6,169 million.
 Stamp Duty of ₹ 404 million.
 Municipal Taxes of ₹ 121 million.
 Department of Telecom demands ₹ 93,522 million.
 Other misc. demands of ₹ 1,047 million
 Claims under legal cases of ₹ 12,558 million.
The Net Operating Cash Flows for the year were ₹ 1,02,368 million. The total Contingent
Liabilities were ₹ 1,36,686 million. Therefore, the Contingent Liabilities were 133.52% of Net
Operating Cash Flows (approx.)

d. Nature of Extraordinary Gains/Losses: The Company reported no Extraordinary

Gains/Losses for the year ended 31st March 2019.

e. Effective Tax Rate: 34.94%

f. Major Reason for Increase/Decrease in profits: The Company posted a loss of Rs 89.8 crore
before interest and taxes in its India services for the January-March quarter, compared with
an operating profit of Rs 101 crore a year earlier. Total India revenue and that from services,
including mobile, both rose by nearly 3 per cent to Rs 15,240 crore and Rs 10,632 crore,
respectively.
 The company attributed the rise in mobile revenue to its ‘Airtel Thanks’ programme that it
recently launched. Data traffic in the quarter surged by nearly two-and-a-half times and
voice services by 23.4 per cent from a year earlier. Operating loss at services, however,
nearly tripled to Rs 1,377 crore. It also attributed it’s rise in profits to an 18.6% increase in
India average revenue per user (ARPU) from the previous quarter to Rs 129.
The decrease in profits was attributed to the cost of managing multiple networks given its
users are also on 2G and 3G among other factors. Due to the entry of Jio, the Company has
been struggling to raise prices and add subscribers because of the tariff war. The launch of
low-cost tariff plans by Reliance Jio, a unit of Reliance Industries Ltd, forced rivals to drop
their rates, hurting profit margins. Smaller companies were forced to either shut shop or get
acquired, leaving just Airtel, Jio and the merged entity of Vodafone and Idea to compete in
the Indian market.

g. Cash from Operating Activities:

The Company generated ₹ 1,02,368 million as Net Operating Cash Inflow for the year ended
31st March 2019. Since the Operating Cash Flow is positive, we can state that the company is
making enough money from its primary activities to maintain and grow the company.
The Operating Loss for the year ended 31st March 2019 was ₹ 18,194 million. The reason for
such a difference between Operating Loss and Operating Cash flow was due to increase in
Licensing Fees, Network Operating Expenses and increase in Spectrum Charges. Depreciation
and Amortization also contributed to a decrease in the Operating Profit.
All the above factors along with migration of customers to Jio, contributed to Airtel’s
decrease in profits and incurring of Operating Loss.
Cash flow and net income statements are different in most cases because there is a time gap
between documented sales and actual payments. The situation is under control if invoiced
customers pay in cash during the next period. If the payments are postponed further, there
is a larger difference between net income and operative cash flow statements. If the trend
does not change, the annual report may demonstrate equally low total cash flow and net
income.
Usually, rapidly developing companies report low net income as they invest in improvement
and expansion. In the long run, high operating cash flow brings a stable net income rise,
though some periods may show net income decreasing tendency.
Constant generation of cash inflow is more important for a company's success than accrual
accounting. Cash flow is a better criterion and barometer of a company's financial health.
Managers and investors can avoid many traps if they pay more attention to operating cash
flow analyses.

h. Discontinuation of Operations: As of now, the Company hasn’t discontinued any of its major
operational activities. However, the Company has phased out its 3G services in Kolkata and
plans to shut down its 3G services and network across India’s 22 telecom circles by March
2020 and increase its focus on providing 4G services. This marks the first phase-out of the 3G
technology in India, which is now increasingly moving to 4G, triggered by the entry of 4G-
only Reliance Jio in September 2016.
However, the company does not expect much cost savings by shutting down 3G as it would
continue to use the same equipment to offer 4G services. “Our capex will continue for
deployment of new sites and some loading on 2300MHz band," Vittal said. The company
also plans to deploy L900 technology in the 900MHz band to complement its 4G services in
the 2300MHz and 1800MHz bands which would increase its Capex.

i. Mergers and Acquisitions: Bharti Airtel completed the acquisition process for Tata
Teleservices (TTSL) on 1st June 2019. Hence, all TTSL’s assets — including its customers —
 come under the Delhi-based telecom services provider. As part of the merger, Airtel will
absorb TTSL’s consumer mobile businesses operations in 19 telecom circles — 17 under TTSL
and two under Tata Teleservices (Maharashtra) (TTML).
Airtel has also agreed to take over a small portion of the unpaid spectrum liability of Tata
Teleservices. The merger will bolster Airtel’s spectrum pool with additional 178.5 MHz
spectrum in the 1800, 2100 and 850 MHz bands, widely used for 4G.
Airtel will add about 17 million of Tata Tele’s mobile subscribers to its over 340 million users,
adding to its subscriber and revenue market shares. The deal will allow the Tata Group to rid
itself of the loss-making mobility business, which has been a drag on its finances.

CSR Activities:
The CSR policy of the Company was adopted by the Board of Directors on April 29, 2014. The
Company’s CSR activities focus on promoting education for the underprivileged with special
emphasis on girl child, livelihood enhancement education programs, eradicating hunger, promoting
preventive health care and sanitation. Bharti Airtel’s CSR activities are committed to create and
support programs that bring about sustainable changes through education.
Applicability: As per Section 135 of the Companies Act 2013, and rules issued thereunder, CSR
norms are applicable on companies which has (a) net worth of Rs 500 Crore or more; (b) turnover of
Rs 1000 Crore or more; or (c) net profit of Rs 5 Crore or more.
Compliance: The companies, crossing the prescribed threshold, are required to spend at least 2% of
their average net profit for the immediately preceding 3 financial years on CSR activities.
In 2018, Bharti Airtel had an Average Net Profit before Tax for the last 3 financial years was ₹
55,883.00 (in Millions) and thus was eligible to spend towards CSR activities.

The table below shows the amount of money the company spent on CSR activities:
Particulars Amount (₹ Millions)
Average Net Profit before Tax for the last 3 55,883.00
financial years
Prescribed CSR Expenditure (2% of above) 1,117.66
Amount spent towards CSR activities 458.40
Amount not spent 659.26
Amount spent on other Charitable work 37.25

The allocated budget for CSR spending was ₹ 1117.66. However, the Company spent ₹ 458.40
towards various CSR activities which include the following focus areas:
a. Education Programs run by Bharti Foundation: Promotion of education.
b. Satya Bharti Abhiyaan: Sanitation of villages in and around Ludhiana and Amritsar.
c. Educate a Child: Promotion of education.
d. Crop Science R&D: Livelihood enhancement Program in Punjab.
e. Magic Bus Foundation: Promotion of education in Delhi and Mumbai.
f. Anubandh – Old Age Home: Setting up and supporting old age homes in Jodhpur.
g. Satya Bharti Foundation: Setting up of Satya Bharti University for Higher Education in NCR.
h. Sense International: Services for people with Deaf-blindness and Multi-Sensory Impairment
(MSl) in Delhi-NCR.
i. Ramadham Old Age Home: Setting up and supporting old age homes in Raigad district,
Maharashtra.
j. Vocational training program for hearing impaired young adults: Employment enhancing
vocation skills to differently abled in Delhi.
k. Skill development program for youth and vocational skills for women: Employment
enhancing vocation skills in Chhindwara, Madhya Pradesh.
 l. The Energy and Research Institute: Information and Communications Technologies (ICT)
based solutions for education, healthcare, nutrition, financial inclusion and governance, etc.
in Telangana, Maharashtra and Uttar Pradesh.

Reasons for not spending the prescribed 2% amount:

Despite the unprecedented challenges and pressure on the telecom industry, the Company had
scaled-up various CSR interventions during the FY 2018-19 which resulted into increased CSR
spending vis-à-vis previous financial year i.e. from ₹ 245.37 million in FY 2017-18 to ₹ 458.40 million
in FY 2018-19. Additionally, the Company had also contributed ₹ 37.25 million towards various other
charitable causes which are not covered within the provisions of Section 135 of the Companies Act,
2013.
The aggregate CSR spending of the Company for FY 2018-19 (including other contributions) is ₹
495.65 million. The Indian telecom industry is passing through a very challenging phase and the
Company continued to be under stress during the FY 2018-19. Despite all the adversities &
challenges, the Company has been committed in building its CSR capabilities on a sustainable basis
and is also committed to gradually increase its CSR contribution in the coming years. The CSR
spending is guided by the vision of creating long-term benefit to the society. The Company through
its Board and CSR Committee is determined to beef up its efforts to meet the targeted CSR
expenditure. With the strong foundation which has been established during the year along with the
proposed scaling up of several its CSR Projects, the Company believes that it has made meaningful
progress towards reaching the target in the coming financial years. Further, the Bharti Family has
also pledged a significant amount towards philanthropy, which will step-up scope and reach of
Bharti Foundation’s initiatives to create opportunities for the underprivileged and contribute to
nation building. Plan is to set up a world-class University namely Satya Bharti University, to offer free
education to deserving youth from economically weaker sections of society.

Ratio Analysis:
The following ratios have been calculated:
a. Operating Profit Margin: {Operating Profit/Revenue} x 100
For 2019: {12301.60/48608} x 100 = 24.69%
For 2018: {17804.90/53663} x 100 = 33.17%
For 2017: {23692.90/62276.30} x 100 = 38.04%
For 2016: {22311.20/60300.30} x 100 = 37.00%
b. Net Profit Margin: {Net Profit/Revenue} x 100
For 2019: {-1829/49608} x 100 = -3.68%
For 2018: {79.2/53663} x 100 = 0.14%
For 2017: {-9925.60/62276.30} x 100 = -15.93%
For 2016: {7780.30/60300.30} x 100 = 12.90%
c. Return on Net Worth: {Profit After Taxes/Net Worth} x 100
For 2019: {-1829/98359.30} x 100 = -1.85%
For 2018: {79.2/102860.90} x 100 = 0.07%
For 2017: {-9925.60/101207.30} x 100 = -9.80%
For 2016: {7780.30/111729.10} x 100 = 6.96%
Summary of the Ratios are given below:
Ratios March 2019 March 2018 March 2017 March 2016
Operating Profit Margin (%) 24.79 33.17 38.04 37.00
Net Profit Margin (%) -3.68 0.14 -15.93 12.90
Return on Net Worth (%) -1.85 0.07 -9.80 6.96
Operating Profit Margin Ratio is a profitability ratio that measures what percentage of total
revenues is made up by operating income. In other words, the operating margin ratio demonstrates
how much revenues are left over after all the variable or operating costs have been paid. Conversely,
this ratio shows what proportion of revenues is available to cover non-operating costs like interest
expense.
However, in the case of Bharti Airtel, we can see that the Operating Profit Margin has been on a
decline since 2016-2109. This decline can be attributed to the introduction of low tariffs by Reliance
Jio and the migration of customers to Jio which led to a decrease in the revenue and thus, the
Company wasn’t able to match its Revenue with its operating expenses.

Net Profit Margin Ratio directly measures what percentage of sales is made up of net income. In
other words, it measures how much profits are produced at a certain level of sales. This ratio also
indirectly measures how well a company manages its expenses relative to its net sales. That is why
companies strive to achieve higher ratios. They can do this by either generating more revenues why
keeping expenses constant or keep revenues constant and lower expenses.
However, in the case of Bharti Airtel, we can see that the Net Profit Margin has declined rapidly
particularly in 2017 when it reached its minimum. This was a result of a decline in the performance
and profitability levels. Due to Jio’s competitive pricing strategy, Airtel had to lower its prices, and
this resulted in a decrease in its net profit. The revenue also fell due to migration of customers.
However, the situation came a bit under control when Airtel’s Average Revenue Per User (ARPU)
rose to ₹ 129 and this helped in increasing its Net Profit Margin from -15.93 in March 2017 to -3.68
in March 2019.

Return on Net Worth is a profitability ratio that measures the ability of a firm to generate profits
from its shareholders investments in the company. Return on net worth measures how efficiently a
firm can use the money from shareholders to generate profits and grow the company. Unlike other
return on investment ratios. It is a profitability ratio from the investor’s point of view—not the
company. In other words, this ratio calculates how much money is made based on the investors’
investment in the company, not the company’s investment in assets or something else.
We see that in the case of Airtel, there has been an increase in the ratio from March 2017 to March
2019. This implies that the company has been using its investor’s fund effectively which is also
evident from the expenses it has made w.r.t to increasing its Capex to cater to the 4G demands of
the consumers.