BSE SENSEX Constituent
CNX Nifty Constituent
Headquarters Mumbai, Maharashtra, India
(Chairman and MD)
Crude oil, natural gas,
polyester, textiles, retail,
US$ 73.10 billion (2013)
US$ 7.14 billion (2013)
US$ 3.86 billion (2013)
US$ 58.67 billion (2013)
US$ 31.66 billion (2013)
The company was co-founded by Dhirubhai Ambani and his cousin Champaklal
Damani in 1960s as Reliance Commercial Corporation.
In 1965, the partnership was ended and Dhirubhai continued the polyester
business of the firm
In 1975, company expanded its business into textiles, with "Vimal" becoming its
major brand in later years.
In 1985, the name of was changed from Reliance Textiles Industries Ltd the
company to Reliance Industries Ltd.
In 1996, it became the first private sector company in India to be rated by
international credit rating agencies.
In the year 1995-96, the company entered the telecom industry through a joint
venture with NYNEX, USA and promoted Reliance Telecom Private Limited in
In 1998-99, RIL introduced packaged LPG in 15 kg cylinders under the brand
name Reliance Gas.
In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two
largest companies in terms of all major financial parameters.
In 2001-02, Reliance Petroleum was merged with Reliance Industries.
In 2002, Reliance announced India's biggest gas discovery (at the Krishna
Godavari basin). The in-place volume of natural gas was in excess of 7 trillion
cubic feet, equivalent to about 1.2 billion barrels of crude oil. This was the first
ever discovery by an Indian private sector company.
In 2002-03, RIL purchased a majority stake in Indian Petrochemicals Corporation
Ltd. (IPCL), India's second largest petrochemicals company, from Government of
India. IPCL was later merged with RIL in 2008.
In 2006, Reliance entered the organized retail market in India with the launch of its
retail store format under the brand name of 'Reliance Fresh'. By the end of 2008,
Reliance retail had close to 600 stores across 57 cities in India
In 2010, Reliance entered Broadband services market with acquisition of Infotel
Broadband Services Limited, which was the only successful bidder for pan-India
fourth-generation (4G) spectrum auction held by Government of India.
In the same year, Reliance and BP announced a partnership in the oil and gas
business. BP took a 30 per cent stake in 23 oil and gas production sharing contracts
that Reliance operates in India, including the KG-D6 block for $7.2 billion.
Reliance also formed a 50:50 joint venture with BP for sourcing and marketing of
gas in India.
The number of shareholders in RIL is approx. 3 million. The promoter group,
Ambani family, holds approx. 45.34% of the total shares whereas the remaining
54.66% shares are held by public shareholders, including FII and corporate bodies.
Life Insurance Corporation of India is the largest non-promoter investor in the
company with 7.98% shareholding.
Major subsidiaries and associates
Reliance Retail is the retail business wing of the Reliance Industries. In
March 2013, it had 1466 stores in India. Many brands like Reliance Fresh,
Reliance Footprint, Reliance Time Out, Reliance Digital, Reliance Wellness,
Reliance Trends, Reliance AutoZone, Reliance Super, Reliance Mart,
Reliance iStore, Reliance Home Kitchens, Reliance Market (Cash n Carry)
and Reliance Jewel come under the Reliance Retail brand.
Its annual revenue for the financial year 2012-13 was 10800 crore
(US$1.7 billion) with an EBITDA of 78 crore (US$12 million).
Reliance Life Sciences works around medical, plant and industrial
biotechnology opportunities. It specializes in manufacturing, branding, and
marketing Reliance Industries' products in bio-pharmaceuticals,
pharmaceuticals, clinical research services, regenerative medicine, molecular
medicine, novel therapeutics, biofuels, plant biotechnology, and industrial
biotechnology sectors .
Reliance Institute of Life Sciences (RILS), established by Dhirubhai
Ambani Foundation, is an institution offering higher education in various
fields of life sciences and related technologies.
Reliance Logistics is a single-window company selling transportation,
distribution, warehousing, logistics, and supply chain-related products,
supported by in-house telematics and telemetry solutions. It provides
logistics services to Reliance group companies and outsiders.
Reliance Clinical Research Services (RCRS), a contract research
organization (CRO) and wholly owned subsidiary of Reliance Life Sciences,
specializes in the clinical research services industry. Its clients are primarily
pharmaceutical, biotechnology and medical device companies.
Reliance Solar, the solar energy subsidiary of Reliance, was established to
produce and retail solar energy systems primarily to remote and rural areas.
It offers a range of products based on solar energy: solar lanterns, home
lighting systems, street lighting systems, water purification systems,
refrigeration systems and solar air conditioners.
Relicord is a cord blood banking service owned by Reliance Life Sciences.
It was established in 2002. It has been inspected and accredited by AABB,
and also has been accorded a license by Food and Drug Administration
(FDA), Government of India.
Reliance Jio Infocomm (RJIL), previously known as Infotel Broadband, is
a broadband service provider which gained 4G licenses for operating across
India. Now it is wholly owned by RIL for 4800 crore (US$730 million).
Reliance Industrial Infrastructure Limited (RIIL) is an associate
company of RIL. RIL holds 45.43% of total shares of RIIL. It was for
transporting petroleum products.
RIIL is mainly engaged in the business of setting up and operating industrial
infrastructure. The company is also engaged in related activities involving
leasing and providing services connected with computer software and data
incorporated in September 1988 as Chembur Patalganga Pipelines Limited,
with the main objective being to build and operate cross-country pipelines
Balance sheet analysis
The authorized share capital of a company is the maximum amount of share capital
that the company is authorized by its constitutional documents to issue to
shareholders which in this case is 6000 (equity shares + preference shares i.e. 5000
Paid up capital is the total amount of shareholder capital that has been paid in full
Paid-up capital is essentially the portion of authorized stock that the company has
issued and received payment for which has dropped from 3271(march 2012) to
RESERVE AND SURPLUS
ASSET REVALUATION RESERVE: it is an accounting concept and represents a
reassessment of the value of a capital asset as at a particular date. Reserve
account that records the surplus created when assets are revalued. Revaluation
reserve has dropped from 5467 to 3127
CAPITAL RESERVE: A reserve created if a company purchases capital for
long-term or large scale projects. The capital reserve has been 291cr for 2012 as
well as 2013.
CAPITAL REDEMTION RESERVE: An account specifically dedicated to the setting
aside of its own shares in circumstances that result in a reduction of share capital.
It is a reserve that cannot be distributed to the shareholders and thus ensures the
maintenance of the capital base of the company and protects the creditors’
There was no such reserve in the year 2012 and a reserve has been created as
declared in March 2013 for 4cr.
SECURITIES PREMIUM RESERVE: Excess amount received by a firm over
the par value of its shares. This amount forms a part of the non-distributable
reserves of the firm which usually can be used only for purposes specified under
corporate legislation. Also called paid-in surplus. This reserve has been reduced
from 50878 in 2012 to 50677 in 2013]
DEBENTURE REDEMTION RESERVE: Under the provision, debenture redemption
reserves will be funded by company profits every year until debentures are to be
redeemed. This reserve is constant in the year 2012 as well as 2013 which is
GENERAL RESERVE: Any retained earnings from a company's profits. General
reserves can be divided into either specific, general or legal. General reserves are
saved to offset potential future losses. This reserve has increased from 84000cr to
SURPLUS: Last year profit converts to reserves & surplus. The reserve created out
of profits transferred from profit and loss account is called general reserve. The
balance in the profit and loss account is called a surplus and will be shown under
this head in the balance sheet. in this case, the profits in the P&L account after
the deduction of the amounts transferred to the general and other reserve has
increased from 7609 cr in 2012 to 8610 cr in 2013
The total of reserve and surplus account shows an increase of 13941cr from
162825cr in 2012 to 176766 in 2013.
NON CURRENT LIABILITIES
LONG TERM BORROWINGS
SECURED: Debt backed or secured by collateral to reduce the risk associated
with lending. An example would be a mortgage. Assets backing debt or a debt
instrument are considered security, which means they can be claimed by the
lender if default occurs. The non current secured debt has gone down from 6192
cr in 2012 to 1989 cr in 2013. Wherein the current secured debt has increased
from 3064 cr in 2012 to 4204 cr in 2013
UNSECURED: A loan not secured by an underlying asset or collateral. Unsecured
debt is the opposite of secured debt. Unsecured debt carries more risk for the
lender, which in turn makes the loan more expensive. The non current unsecured
debt has slightly reduced from 41842 cr in 2012 to 41023 cr in 2013 wherein the
current unsecured debt has significantly risen from 6756 cr in 2012 to 13700 cr in
DEFFERRED TAX LIABILITY: A tax liability that a company owes and does
not pay at that current point, although it will be responsible for paying it at some
point in the future. In this case, the deferred tax liability has slightly risen to
12193 cr in 2013 from 12122cr in 2012.
SHORT TERM BORROWINGS: The secured short term borrowing has dropped
from 757cr in 2012 to 433cr in 2013. Whereas the unsecured short term loan has
risen from 9836 cr in 2012 to 11078cr in 2013.
Thus the total short term borrowings show a slight rise from 10593 cr in 2012 to
11511cr in 2013
TRADE PAYABLES: Trade payables are also known as accounts payable and
refers to money owed to creditors, lenders, vendors or suppliers for products or
services rendered. The trade payables are 45787cr in 2013 as compared to
40324cr in 2012 showing a rise.
OTHER CURRENT LIABILITIES: A balance sheet entry used by companies to group
together current liabilities that are not assigned to common liabilities such as
debt obligations or accounts payable. The total other current liabilities have
shown a rise of 7927cr from being 13713cr in 2012 to 21640cr in 2013.
SHORT TERM PROVISIONS: Provisions made for short periods, usually
3months. Short term provisions are 4348 cr in 2013 and were 4258 cr in 2012.
NON CURRENT ASSESTS
FIXED ASSESTS(tangible): A long-term tangible piece of property that a firm
owns and uses in the production of its income and is not expected to be consumed
or converted into cash any sooner than at least one year's time. Fixed assets (owned
and leased) are 82962cr in 2013 as compared to 88001cr in 2012.
INTANGIBLE ASSETS: In accounting, any asset that cannot be seen or
touched. Intangible assets include things like patents and brand recognition,
which add value to a company, but are difficult to price. The value of the total
intangible assets has slightly risen from 25722 cr in 2012 to 26786cr in 2013.
CAPITAL WORK IN PROGRESS: Capital work-in-progress comprises
outstanding advances paid to acquire fixed assets and the cost of fixed assets that
are not yet ready for their intended use at the balance sheet date. This account
shows a significant raise from 3695cr in 2012 to 13525cr in 2013.
INTANGIBLE ASSESTS UNDER DEVELOPMENT: this is accounted for
4059cr in 2012 and has increased to 5591cr in 2013
NON CURRENT INVESTMENTS: noncurrent investment is the investment
which is for long period and not releasable for the current period .The company’s
non current investments are in equity shares of associate companies, preference
shares of associate companies, equity share of subsidiary companies, preference
shares of subsidiary companies, debentures of subsidiary companies, government
securities, fixed maturity plans. The sum total of these investments account to
24143cr in 2013.
LONG TERM LOANS AND ADVANCES: A type of loan that has an extended
time period for repayment usually lasting between three and 30 years. Car loans
and home mortgages are examples of long-term loans. The balance sheet shows a
significant rise in the long term loans and advances from being 14340cr in 2012 to
21528cr in 2013.
CURRENT INVESTMENTS: An account in the current assets section of a company's
balance sheet. This account contains any investments that a company has made
that will expire within one year. For the most part, these accounts contain stocks
and bonds that can be liquidated fairly quickly. The company’s current
investments include investments in government securities, debentures and
bonds, fixed maturity plans, mutual funds, certificate of deposit with scheduled
banks. The total current investments sum up to be 28366cr in 2013 which is
slightly more than 27029cr in 2012.
INVENTORIES: The raw materials, work-in-process goods and completely
finished goods that are considered to be the portion of a business's assets that
are ready or will be ready for sale. The amount of total inventories (raw materials
as well as finished goods) is 42729cr which is more than the previous year (2012)
which was 35955cr.
TRADE RECEIVABLES: Money owed by customers (individuals or corporations) to
another entity in exchange for goods or services that have been delivered or
used, but not yet paid for. There is a drop in the amount of the trade receivables
from being 18424cr in 2012 to 11880cr in the year 2013.
CASH AND BANK BALANCES: bank and cash balance bank balance: - A bank
balance is that amount which is actually deposited in any of the bank. Or the
amount which has been credited in your bank account. Cash balance: - It is an
amount which is there in your hand. i.e., it is otherwise called as cash in hand. Or
else we can say that the hot cash which is there with you right now is called as a
cash balance. The cash and bank balances total has risen from 39598cr in 2012 to
49547cr in 2013.
SHORT TERM LOANS AND ADVANCES: In general, a loan with a maturity
period of one to five years. The short term loans and advances have reduces from
11089cr in 2012 to 10974cr in 2013.
OTHER CURRENT ASSESTS: The other current assets (i.e. the interest
incurred on investments) have increased from being 249cr in 2012 to 480cr in
Hence the total assets (current and noncurrent) account to be 318511crores as
opposed to 295140cr in the year 2012 indicating growth.
Current Ratio = Total Current Assets/Total Current Liabilities
Current assets i.e. 1, 43,976 crores exceeds the current liabilities i.e.
83286crores exhibiting financial strength. It means the business has
enough current assets to meet the payment schedule of current
liabilities with a margin of safety
Quick Ratio = (Current Assets - Inventory)/Current Liabilities =1.21
Quick ratios between 50 and 1 are considered satisfactory.
Accordingly, the quick ratio is good which says the company’s
liquidity is good
Working Capital = Total Current Assets - Total Current Liabilities=60,690
These are all ratios to check the company’s liquidity.
Stock price: rs.878.70
Face value: rs10
Industry: integrated oil and gas.
WTD AVG PRICE:
A trading benchmark used especially in pension plans. VWAP is calculated by
adding up the dollars traded for every transaction (price multiplied by number of
shares traded) and then dividing by the total shares traded for the day.
The theory is that if the price of a buy trade is lower than the VWAP, it is a good
trade. The opposite is true if the price is higher than the VWAP.
In this case the price is Rs. 877.60
Turnover: A measure of stock liquidity calculated by dividing the total number of
shares traded over a period by the average number of shares outstanding for the
period. The higher the share turnover, the more liquid the share of the company.
Here,the share turnover is 8.32.
TTQ – Total Traded Quantity (TTQ) is the sum of quantity traded on a given date
which includes both purchase and sale.
The TTQ is 0.95 lakhs.
Wtd. Avg Price: Sum of value of trades divided by the volume at a given point of
The wt avg price is 3.03 lakhs.
CIRCUIT LIMITS: upper limit (circuit) is the maximum price at which a particular
share can quote for buying / selling. Lower limit (circuit) is the minimum price at
which a particular share can quote for buying / selling.
Here, the upper circuit limit is Rs.964.35 and the lower circuit limit is Rs.789.05
MARKET CAP: Market capitalization is calculated by multiplying a company's
shares outstanding by the current market price of one share. The investment
community uses this figure to determine a company's size, as opposed to sales or
total asset figures.
The market cap for RIL is 28426crores.
MARKET CAP F F: Many different types of investors hold the shares of a company!
The Govt. may hold some of the shares. Some of the shares may be held by the
“founders” or “directors” of the company. Some of the shares may be held by the
FDI’s etc. etc!
Now, only the “open market” shares that are free for trading by anyone are called
the “free-float” shares.
The free float shared for RIL is worth 156343crores.
Ex DATE: The date on or after which a security is traded without a previously
declared dividend or distribution. This is the date on which the seller, and not the
buyer, of a stock will be entitled to a recently announced dividend.
Here, the Ex date is May10, 2013.
Reliance Industries topples ONGC to become
top-ranked Indian energy firm
PTI Oct 29, 2013, 08.18PM IST
(Reliance Industries topples…)
SINGAPORE: Reliance Industries has toppled state-owned Oil and Natural Gas Corp (ONGC)
to become the top Indian firm in a global ranking of energy companies.
Billionaire Mukesh Ambani-led RIL improved eight positions to grab the 19th position on the
Platts Top 250 Global Energy Company Rankings for 2013.
ONGC held on its 22nd ranking, the position it had in 2012, while RIL improved from last time's
This year's list is topped by Exxon Mobil Corp, with Chevron Corp in second place.
The US giants are followed by Royal Dutch Shell and Russia's Gazprom, Statoil of Norway,
Total of France and Lukoil of Russia. Chinese firm PetroChina makes an entry at number 8,
while UK's BP Plc is ranked number 11.
The Platts Top 250 Global Energy Company Rankings, now in its 12th year, is based on data
compiled and maintained by S&P Capital IQ, which, like Platts, is a part of The McGraw-Hill
The 2013 rankings reflect fiscal 2012 financial performance in four key areas: asset value,
revenue, profit and return on invested capital (ROIC).
Coal India improved its ranking from 48 to 43 while power utility NTPC went to 49th rank from
62 in 2012.
Oil refining and marketing company Indian Oil Corp improved two positions to rank at number
80 while gas utility GAIL India moved up four notches to 105. Cairn India, which held the 121st
position, moved up to 109 this year.
Bharat Petroleum Corp leaped to 119th position from 178 in the 2012 listing. Other Indian firms
featuring in the 250 listing include Power Grid Corp (ranked 139), Reliance Infrastructure (163),
Hindustan Petroleum Corp (177), NHPC (197) and Essar Energy (229th position).
Veerappa Moily approves taking away 5 gas
discoveries from Reliance Industries
ET Bureau Oct 29, 2013, 08.44AM IST
(Moily in the October 9 order,)
NEW DELHI: The oil ministry has decided to ask Reliance Industries to immediately surrender
five discoveries containing natural gas worth $6.8 billion in the controversial KG-D 6 block and
offer the fields to bidders in a fresh auction on a priority basis, giving another blow to Mukesh
Ambani's company. Oil Minister Veerappa Moily wants RIL to relinquish the discoveries
because it could not submit field-development plans on time.
The minister, however, allowed the company to retain three other fields, striking a middle path
after the directorate general of hydrocarbons recommended that all eight fields should be
relinquished. "According to the directive of the minister, 6,198.88 sq km area out of total 7,645
area, including five discoveries, stands relinquished. The fate of the three other discoveries will
be decided by the cabinet as per the minister's recommendations," an oil ministry official told
ET. Reliance faced stern treatment from the oil ministry during Jaipal Reddy's tenure, but things
seemed to improve after Moily became minister and obtained cabinet's approval for a new gas
price formula, which doubled gas rates to an estimated $8.4 per unit from April.
However, soon after the cabinet approval, the oil ministry prepared a new note for the cabinet
seeking to disallow the new price for RIL's existing fields because the DGH blamed the company
for the steep fall in output. RIL spokesmen declined comments, but sources close to the company
said that RIL would contest the decision. Sources also said that if the fields are auctioned again,
the new bidder would have to spend heavily in creating new infrastructure. The DGH has
estimated that the value of the gas contained in these fields is $6.76 billion at the new gas price
of $8.4. In a strongly worded note, Moily said he was taking a final view after "carefully"
examining the matter and giving an opportunity to RIL and its partner BP "in the interest of
principle of natural justice and in order to arrive at a balanced approach”.
"I agree with the proposal that the contractor should be asked to relinquish corresponding areas
pertaining to five discoveries with immediate effect," he said in the note, government sources
said. "Considering the estimated reserve of 805 bcf (billion cubic feet) in these five discoveries,
the relinquished area should be offered for competitive bidding on priority," he said. Moily,
however, allowed RIL to retain three other fields containing gas worth $2.9 billion at the new
price. The minister accepted Reliance's argument that a particular type of appraisal was initially
"In the particular case also, the DGH did not insist for DST (drill-stem test) in the past which
created an impression that even the DGH does not consider DST as a mandatory requirement,"
he observed. "The contractor during the course of presentation also very forcefully argued that
DST is not a singular mandatory test to establish surface flow as per the international practices
and regulations. This fact could not be contradicted by the ministry /DGH officials," he said.
Referring to discussions held when Jaipal Reddy was the minister, Moily said: "The matter was
discussed by my predecessor in the meeting held on July 13, 2012 wherein it was advised to the
contractor to undertake DST and the contractor expressed its willingness to do so in two weeks,"
he said. The minister said that in the case of three discoveries, there was a delay on part of DGH
in reviewing the declaration of commerciality (DoC) and taking a "categorical stand" that the
contractor must conduct DST.
Airtel, RIL only Indian companies on
Goldman’s most-favoured list of Asian credit
Bloomberg Oct 25, 2013, 04.00AM IST
(The premium investors pay…)
Bonds of companies controlled by Sunil Mittal and Mukesh Ambani, added in August to
Goldman Sachs Group's most-favoured list, helped investors to the biggest gains in 20 months
for India's dollar debt. Notes of the nation's issuers returned 5.6% since August 30, according to
JPMorgan Chase's Asian Credit Index, poised for the best performance since a 7.9% advance in
the first two months of 2012.
The premium investors pay over Treasuries has slid 57 basis points in the period, the biggest
decline after Indonesia and Pakistan among 13 Asian markets. Investors are signalling their faith
in Indian borrowers after the central bank stemmed a rout in the rupee and companies in the
benchmark S&P BSE Sensex surpassed or matched profit forecasts.
Indian debt also rallied on bets the US Federal Reserve will delay tapering its stimulus that has
buoyed emerging-market assets. "There is some positivity after the earnings," said Philipp Good,
who manages $800 million, including Indian debt, in Zurich at Fisch Asset Management.
"Investors are probably of the opinion that impending risks to India and emerging markets have
receded, therefore the bonds become more appealing in the short term." Mittal's Bharti Airtel and
Ambani's Reliance Industries are the only Indian companies on Goldman's "most-favoured" list
of Asian credit, an October 16 report by the US bank shows.
The lender added them on August 26 amid a sell off in emerging market debt triggered by
speculation the Fed will cut its bond purchases. Bharti's 5.125% notes maturing March 2023
have returned 6.5% this month, data compiled by Bloomberg show, the most among 67 Indian
bonds included in JPMorgan's Asian Credit Index. The yield fell to 5.917% on Wednesday from
a record 8.04% on August 22.
Reliance's 5.4% bonds due February 2022 gained 4.3% in October, pushing the yield to 4.93%
from an unprecedented 6.088% on August 22. Net income at nine BSE 30 members, including
Reliance, that have published results for the quarter through September 30, met or beat forecasts,
data compiled by Bloomberg show. About half of them trailed forecasts in April-June quarter.
Reliance Industries, BP promise to invest $10
bn more in oil and gas sector
ET Bureau Oct 19, 2013, 03.16AM IST
(BP CEO Bob Dudley and Reliance…)
NEW DELHI: BP CEO Bob Dudley and Reliance Industries Chairman Mukesh Ambani
promised fresh investment of up to $10 billion in oil and gas but sought the government's support
in tackling regulatory issues and allowing the companies to sell natural gas at market-linked
The two business leaders met Oil Minister Veerappa Moily, Planning Commission's Deputy
Chairman Montek Singh Ahluwalia and Law Minister Kapil Sibal. Dudley who is on his fourth
visit to India, also had a separate meeting with Finance Minister P Chidambaram, in which
Ambani was not present. The finance ministry has been at the forefront of moves to review the
Cabinet's decision to substantially raise natural gas prices.
After meeting ministers, Dudley said India had an enormous need for all forms of energy - oil,
gas, coal and renewable. "BP is hoping to play a significant role in that ... I want to express BP's
commitment to India. We have invested a great deal in India. We are the largest foreign investor
here across many forms. I want to let the PM know about the progress that we are making in
upstream and downstream in India," he said, according to an ET Now report. Dudley also
expressed some concern about regulatory issues but was not directly critical. "We are committed
to invest in India. We have requested the government to pave the way," he told reporters at the
Dudley and Ambani were also expected to meet the prime minister but the meeting could not be
scheduled till late in the evening. On Saturday, they are scheduled to share the dias with BJP
leader Narendra Modi at the convocation of a university in Gandhinagar, where Ambani is the
chairman of the board of governors.
Reliance and BP are concerned about the oil ministry's move to deny higher prices for the
existing fields in the KG-D6 block until it makes up for the shortfall in production. They are also
facing regular criticism from CPI leader Gurudas Dasgupta, who has asked the prime minister to
take action against Reliance and alleged that Moily was bending backwards to help the company.
In his latest communication, Dasgupta has demanded termination of the contract for KG-D6 and
alleged that Moily was shifting out honest and independent bureaucrats from the ministry. Moily
said he was dealing with various issues in accordance with rules and the contract. "There are
some people who are creating fear among people so that nobody will invest in this country, but I
will not act by mere perception," Moily told reporters after the meeting with Ambani and
For Reliance Industries, the rupee propped
ET Bureau Oct 16, 2013,
(The fall in refining margins…)
Reliance Industries (RIL), India's largest company, saw its earnings before interest and taxes
jump 15 per cent from the first quarter to the second, though net profits grew at a far more
modest 2.6 per cent. Part of the reason for this was a sharp, 8 per cent-plus fall in its refining
margins, down from $8.40 per barrel in Q1 to $7.70 per barrel in Q2. This fall happened because
the Asian demand — and, therefore, pricing — of lighter fuels like diesel and petrol was under
pressure, possibly because most major emerging economies are growing slower than they were
For RIL, which exports a large part of its refinery output, the fall in refining margins could have
had a deeper impact on its bottom line had the rupee not depreciated sharply in this period from
Rs 58 to a dollar to Rs 62 per dollar. Refining volumes also grew, with its refineries operating at
114 per cent capacity this quarter, up from 110 per cent in the previous one. The increase in
volumes has helped protect margins in the refining segment as well.
RIL is India's largest single producer of petrochemicals and, expectedly, these played a major
role in propping up its bottom line. Petrochemicals earnings grew 10 per cent to Rs 2,500 crore.
Earnings have improved in polymers and fibre intermediates. With growth in India picking up
momentum, this segment will do better over the following quarters.
For RIL, refining and selling oil and making petrochemicals are not new. Investors understand
these businesses and value them realistically. These are steady, bread-and-butter earners for the
company, especially the petrochemicals business, where RIL is a monopolist or near-monopolist
for several products. But the main uncertainty about the stock lies in the upstream, exploration
and production segment. RIL's production of gas fell 8 per cent quarter-on-quarter and there was
no growth in oil output from the KG D6 basin. This fall in output from its fields is alarming for
investors. They are also spooked by the regulatory tangles that RIL has got into with the
In sum, it is their supposed core competence, of managing the system that is not up to scratch.
On the basis of my study and understanding of the balance sheet of RIL, the
company is doing well. All the ratios suggest there is enough funds with the
company to pay off the liabilities and have a safe margin in hand for future
operations. Even the shares have shown significant growth. According to a lot of
reviews, it is a very aggressive stock and the Economic Times had recommended
it. So my personal understanding says that we can add this share to our