Financial Management & Corporate Finance Case Study

Case Title:

Bharati Airtel vs Reliance Communications: Managing Working Capital

Abstract:
The objective of the case study is to understand the significance of working capital management that deals with the minimum amount of resources required by a company to cover the manufacturing costs and expenses. The inability on the part of a company in maintaining efficient working capital would have a bearing on the profitability of the company. A company which is incapable of maintaining a satisfactory level of working capital is likely to become insolvent and may even be forced into bankruptcy.

The case study mainly focuses on the working capital requirements of two companies – Bharati Airtel and Reliance Communications – operating in the same industry. The telecom industry being an industry with high fixed costs requires very less working capital. Considering this fact, the case deals with the variations in the working capital requirements of both the companies and analyses the factors effecting the working capital requirements of both the companies. Further, the case study also discusses how the working capital requirement of companies vary with the nature of the industry they operate in.

Pedagogical Objectives:

• To discuss the concept of working capital management taking into consideration industry-wise factors
• To discuss and debate why two companies operating in the same industry have different levels of working capital requirements.

Keywords : Financial Management, Working Capital Management, Current Assets, Current Liabilities, Gross Working Capital, Net Working Capital, Negative Working Capital, Liquitidy, Telecommunications Industry, Indian Telecommunications Industry