What is your perception of the VM's performance? Is it acceptable?
The guest OS seeing 100% utilization can be a good thing. This means that the OS is getting 100% of what it is asking for at that specific point in time.
A high CPU ready time is an indication of contention for CPU cycles, and serves as a good indicator of CPU bottleneck when troubleshooting performance problems. If my workloads are running acceptably (e.g. a web server is responding in time or batch jobs are completing within an acceptable time frame,) I don't panic just because I see high CPU ready time in my performance charts. I also pay no mind to guest OS CPU Utilization metrics. I only look at these things when I'm either troubleshooting or optimizing. Otherwise you'll drive yourself nuts.
"SO my question is whetehr high CPU ready value can cause the guest OS to think that its CPU is being utilised at 100%?"
- No, they are not related.