Financial analysis of Ril & competitors

1. Financial Analysis of Reliance and
its competitors

2. Reliance Industries
 Founded by DhirubhaiAmbani
 Largest private
sector conglomerate company headquartered
at Mumbai, India.
 Products – Oil and Gas,Petroleum
Petrochemicals Polyester, Textiles, Retail,
Insurance, SEZ, Telecom
 Largest by annual turnover of $58.5 billion
and market capitalization of $76.9 billion
(2010-11)
 Ranked at 126th position in the Forbes
Global 2000 list (2010)

3. RIL vs Industry: Current Ratio
1.8
1.6
1.4
1.2
1
RIL
0.8 Industry
0.6
0.4
0.2
0
2010 2009 2008 2007 2006

4. RIL vs Industry: Quick Ratio
0.9
0.8
0.7
0.6
0.5
Quick Ratio of
company
0.4
Quick Ratio of
industry
0.3
0.2
0.1
0
2009 2008 2007 2006 2005 2004 2003 2002 2001

5. RIL vs Industry: Cash Ratio
0.8
0.7
0.6
0.5
0.4 Cash Ratio of
company
Cash Ratio of
0.3 industry
0.2
0.1
0
2009 2008 2007 2006 2005 2004 2003 2002 2001

6. RIL vs Industry: MARKET
400000
CAPITALISATION
350000
300000
250000
RIL
200000 BPCL
HPCL
IOCL
150000
100000
50000
0
2006 2007 2008 2009 2010

7. Competitors
 ESSAR OIL
◦ Indian fully integrated oil & gas company of
international scale
◦ Strong presence across the hydrocarbon value
chain - Exploration, Production and Retail
◦ Revenue Rs 47,249 crore (2010-11)
 BPCL
◦ Indian state-controlled oil refining and marketing
company.
◦ Fortune Global 500 ranked at 272 (2011)
◦ Products: Petrol, Diesel
fuel, Petrochemicals, Lubricant
◦ Revenue Rs 154,475.36 crores (2010-11)

8. Competitors (Contd.)
 HPCL
◦ Indian state-owned oil company
◦ Fortune 500 company, ranked at 336 (2011)
◦ Revenue Rs 139,315.86 crores (2010-11)
 IOCL
◦ Indian state-owned oil and gas company
◦ Fortune 500 company, ranked at 98 (2011)
◦ Accounts for a 47% share in the petroleum
products market, 34.8% share in refining capacity
and 67% downstream sector pipelines capacity in
India.
◦ Revenue Rs 310,625.37 crores (2010-11)

9. Comparative Financial Analysis
with Competitors
 Ratio Analysis
◦ Profitability Ratios
 Profit Margin Ratio
 Asset Turnover Ratio
 Return on Assets
 Earning per share
◦ Solvency Ratios
 Debt - Equity Ratio
◦ Liquidity Ratios
 Current Ratio
 Quick Ratio
 Debtor Turnover Ratio
 Inventory Turnover Ratio
 Trend Analysis

10. Profit Margin Ratio
20
Profit Margin
15
10
5
Percentage
Reliance
Essar
0
IOCL
2002 3 4 5 6 7 8 9 10 11
HPCL
-5
BPCL
-10
-15
-20
Year
Measures amount of profit earned per rupee of revenue.
Inferences
 Reliance has best control over its cost
 Essar – abrupt behavior
 IOCL, HPCL, BPCL - consistent but low

11. Asset Turnover Ratio
7
Asset Turnover
6
5
Percentage
4
Reliance
Essar
3 IOL
HPCL
2 BPCL
1
0
1 2 3 4 5 6 7 8 9 10
Year
Measure of firm’s efficiency in utilizing its assets.
Inferences
 Reliance – most consistent
 Essar – abrupt behavior
 IOCL, HPCL, BPCL – high ‘Asset Turnover’ and low ‘Profit Margin’

12. Return on Assets
• Indicator of how profitable a company is relative to its total assets.
• Gives an idea as to how efficient management is at using its assets to
generate
earnings.
Net Income
800.00 Total Assets
Return on Assets
700.00
600.00
500.00
Reliance
400.00 Essar
IOC
300.00 HPCL
BPCL
200.00
100.00
0.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-100.00

13. Earnings per Share
The portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serves as an indicator
of a company's profitability.
Calculated as: Net income
Weighted average Common Shares
160
Earnings per Share
140
120
100
Reliance
80 Essar
IOC
60 HPCL
BPCL
40
20
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-20

14. Debt – Equity Ratio
Debt to Equity Ratio
4
3.5
3
2.5
Reliance
Ratios
Essar
2
IOL
1.5 HPCL
BPCL
1
0.5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Debt to equity ratio
• Debt to equity ratio = (Secured loans + Unsecured
loans)/Share holder’s Equity
• The long term solvency of a business is affected by the
extent of
debt used to finance the assets of the company

15. Current Ratio
Current Ratio
2
1.8
1.6
1.4
1.2 Reliance
Ratios
Essar
1
IOL
0.8 HPCL
BPCL
0.6
0.4
0.2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Current Ratio
• Current ratio= Current assets / current liabilities
• It’s a indicator of a company’s ability to pay its debt in the
short runl

16. Quick Ratio
Quick Ratio
1.6
1.4
1.2
1
Reliance
Ratios
Essar
0.8
IOL
HPCL
0.6
BPCL
0.4
0.2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Quick Ratio
• Quick Ratio = Quick assets / current liabilities
• A large current ratio by itself is not a satisfactory
measure of
liquidity

17. Debtor Turnover Ratio
100
Debtor Turnover Ratio
90
80
70
60
Reliance
50
Essar
40 IOCL
HPCL
30
BPCL
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year
 Measures the efficacy of a firm’s credit policy & collection
mechanism and shows the number of times each year the debtors
turn into cash.
 Reliance-stable, others- fluctuating

18. Inventory Turn Over Ratio
25
Inventory TurnOver Ratio
20
15
Reliance
Essar
10
IOCL
HPCL
BPCL
5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
 Shows the number of times a company’s inventory is turned
into cash
 Essar-inefficient
 Reliance-good &rest are comparatively better than Essar

19. Thanks
We are open to questions.