Reliance Industries
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31 July 2020
1QFY21 Results Update | Sector: Technology
CMP: INR2,100
TP: INR2,250 (+7%)
Buy
O2C and retail businesses suffer due to COVID-19 lockdowns
Sta
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E march
2020 2021E
Net Sales
5,959 4,882
EBITDA
881
885
Net Profit
431
427
Adj. EPS (INR)
67.9
67.4
EPS Gr. (%)
8.1
-0.8
BV/Sh. (INR)
715.1 775.5
Ratios
0.6
0.6
Net D:E
RoE (%)
10.2
9.0
RoCE (%)
8.5
8.4
Payout (%)
11.6
9.2
Valuations
P/E (x)
30.9
31.2
P/BV (x)
2.9
2.7
EV/EBITDA (x)
18.1
18.1
EV/Sales (x)
2.7
3.3
Div. Yield (%)
0.3
0.3
RIL IN
6,339
13881.6 / 184.4
2199 / 867
16/55/79
23384
2022E
6,115
1,269
706
111.4
65.3
877.7
0.4
13.5
11.2
8.3
18.8
2.4
12.1
2.5
0.4
Reliance Industries’ (RIL) 1QFY21 consolidated/standalone business EBITDA were
down 21%/48% YoY due to weak performance in refining and petchem businesses,
followed by shutdown of Reliance Retail stores due to the lockdown.
RJio’s revenue was up 11.6% QoQ (8.5% beat) on the back of healthy ARPU
growth. This could be attributed to the price hike taken in Dec’19 along with
subscriber addition.
Reliance Retail’s revenue declined 17% YoY due to 50% of its stores being shut and
29% operating partially during the lockdown. However, grocery and the
connectivity businesses showed resilience.
During the quarter, RIL operated refinery and petrochemical units at ~90% despite
much lower utilization rates of other Indian peers, enjoying the benefits of its
integrated Oils-to-Chemicals (O2C) business model. However, RIL’s guidance for
the O2C business highlights near-term caution amidst challenges in terms of
demand recovery (especially for refining) and the huge supply glut (especially for
petchem), which are likely to keep margins under pressure.
Using SOTP, we value refining and petrochemical segment at 7.5x to arrive at a
valuation of INR545/share for the standalone. We have ascribed an equity
valuation of INR1,125/share to RJio and INR580/share to Reliance Retail. Reiterate
Buy with target price of INR2,250/share.
1QFY21 snapshot – EBITDA miss on both consol. and standalone
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-20 Mar-20
49.2
48.9
13.5
13.6
26.6
25.9
10.8
11.6
Jun-19
46.2
11.6
26.2
16.0
FII Includes depository receipts
Reliance Industries’ (RIL) 1QFY21 consolidated business EBITDA was down
21% YoY to INR168.8b (19% below our est.) due to weak performance in
refining/petchem businesses, followed by shutdown of Reliance Retail stores
due to the lockdown. PBT (before exceptional) declined 43% YoY to
INR82.2b. The company has recognized exceptional gain of INR49.7b
(consol.) related to its deal with BP for the Petro Retail business. Tax rate for
the quarter was lower at 2% (v/s est. 25%) due to planned restructuring of
the O2C business in the current year. Reported PAT came in at INR132.5b
while adj. PAT (for exceptional item) stood at INR83.8b (v/s est. -16% and -
17% YoY).
Standalone EBITDA was down 48% YoY to INR71.3b (v/s est. -38%) due to
lower GRMs (at USD6.3/bbl) and petchem margins (implied EBITDA/mt
declined 55% YoY to USD64). PBT before exceptional was down 64% YoY to
INR43.9b. The company has recognized exceptional gain of INR44.2b
(standalone) related to its deal with BP for the petro-retail business. RIL has
recognized deferred tax credit during the quarter (tax rate at -10.8%) with
reported PAT at INR97.5b. Adj. PAT (for exceptional item) stood at INR48.6b
(v/s est. -19% and -46% YoY).
RIL has revised useful life of the O2C expansion assets to 50 years from the
respective dates of commissioning with effect from 1
st
Apr’20.
Swarnendu Bhushan- Research analyst
(Swarnendu.Bhushan@MotilalOswal.com)
Aliasgar Shakir – Research analyst
(Aliasgar.Shakir@motilaloswal.com)
Sarfraz Bhimani - Research Analyst
(Sarfraz.Bhimani@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
Reliance Industries
RJio –
ARPU hike gains with eyes on new growth engines
Gross/net subscriber adds stood at 15.1m/10.8m (v/s 23.9m/17.5m in 4QFY20).
This decrease in pace of subscriber addition could be attributed to the
nationwide lockdown in Apr’20, which gradually eased in May-Jun’20.
EBITDA increased 13.4% QoQ (8% beat) with margin expansion of 70bp to
42.3%. Incremental margin stood at 48% for 1QFY21, lower than the typical 65-
70% margin benefit due to a steep 15% rise in network operating cost.
Our workings indicate that ARPU increase for smartphone customers could be
even higher at ~10%. We expect additional 5% benefit of price hike to accrue in
2QFY21. We expect robust revenue/EBITDA CAGR of 27%/49% over FY20-22E on
the back of improving ARPU and continued growth in subscribers.
Reliance Retail – Grocery/connectivity/online channel cushions COVID-19
impact
Reliance Retail’s revenue declined 17% YoY to INR316b. This was due to 50% of
its stores being closed and 29% operating partially during the lockdown. EBITDA
plunged 47% YoY to INR10.8b while EBITDA margins stood at 3.8%, aided by
grocery and the connectivity businesses.
Lifestyle/Consumer Electronics sales plummeted 71%/69% YoY, while grocery
revenues grew 5% YoY, driven by Jiomart and initiatives in the online and
delivery space. Jiomart further expanded with the launch of consumer durables,
and apparel and footwear categories in 2QFY21.
We value Reliance Retail’s core business at 30x FY22E EV/EBITDA and petro-
retail/connectivity at FY22E 4x EV/EBITDA to arrive at an enterprise value of
INR3.8t and target price of INR580/share. Our premium valuation underscores
Reliance Retail’s aggressive footprint addition and the recent Jiomart led online
opportunity, which could offer huge growth potential over time.
Refining – GRM at USD6.3/bbl (lowest in last decade)
1QFY21 was caught right in the center of the global pandemic (COVID-19) and
saw huge volatility in crude prices. SG GRM for the quarter declined, primarily
due to huge demand destruction in the transportation fuels, declining Gasoil,
Gasoline and ATF cracks. This led the quarterly average for SG GRM into
negative territory – the lowest in the last two decades. While these three cracks
saw the most impact during the first half of the quarter, they recovered a bit as
lockdowns eased globally and demand for auto fuels saw an uptick.
RIL reported GRM of USD6.3/bbl, which is the lowest since 2QFY10, primarily
due to shrinking of product cracks and Lt-Hv crude differential. The premium
over SG GRM stood at USD7.2/bbl as RIL used flexibility in its refining
configuration to manage yields.
Refining throughput was 6% higher (v/s est. 16.6mmt and -5% YoY, -9% QoQ), as
the company enjoys huge benefit from its petrochemical integration, which
translated into higher utilization despite lower demand during the lockdown.
Refining EBIT was down 38% YoY to INR27.2b owing to weak GRMs.
31 July 2020
2
 Motilal Oswal Financial Services
Reliance Industries
Petchem – implied EBITDA/mt declines 55% YoY to USD64
RIL’s petrochem production was 14% higher than est. at 8.9mmt (+2% YoY, -9%
QoQ), owing to better product mix, feedstock flexibility and leveraging of its
integration with refining unit.
However, margins suffered a big blow due to weak demand and lower export
realizations in 1QFY21. Thus, Implied EBITDA (USD/mt of total petrochem
production) was 55% lower YoY at USD64/mt (-24% QoQ) – the lowest ever.
RIL managed the slowdown in the domestic markets by boosting exports – from
80%/20% domestic/exports to 20%/80% – by leveraging its global reach and
rapidly switching to multimodal logistics.
Segmental EBIT declined 55% YoY to INR33.3b due to significant price volatility
and collapse in demand, resulting in lower realizations.
Valuation and view
RJio enjoys market leadership position in a 4-player industry with stretched
balance sheet of competitors. Thus, it could leverage its position as a price
maker to drive ARPU. Furthermore, the company is in the process of
transforming from a telecom player to a digital company with an ability to
expand revenue stream to multiple categories. Thus, we assign an EV/EBITDA
multiple of 15x on Sep’22E EBITDA to arrive at TP of INR1,125 (earlier INR905).
The higher multiple captures the digital revenue opportunity, expected gains
from any potential tariff hikes, growing market share and possible
rationalization of tax levies for the sector, which are not built into our estimates.
Jio Platforms has raised INR1,520.6b across 13 investors with RIL holding
~66.48% equity stake on fully diluted basis. Of the total funds raised, INR229.8b
would be retained in Jio Platforms while the rest would be used for optionally
convertible preference share (OCPS).
We value Reliance Retail’s core business at 30x FY22E EV/EBITDA and petro-
retail/connectivity at FY22E 4x EV/EBITDA to arrive at an enterprise value of
INR3.8t and a target price of INR580. Our premium valuation underscores
Reliance Retail’s aggressive footprint addition and the recent Jiomart led online
opportunity, which could offer huge growth potential over time.
RIL is further planning to streamline its O2C integration business and focus on
expanding its fuel marketing business.
Factoring in the huge miss during the quarter, we have revised down our
FY21/FY22E standalone EBITDA by -13%/-2% (with GRMs at USD7.6/11/bbl and
Petchem EBIDTA/mt of USD80/99/mt). Also, note that for every 10% change in
petchem margins or refining GRMs, EBITDA sensitivity stands at 5-6% on
standalone and 3% on consolidated basis.
Currently, chemical conversion stands at 24% for RIL. In FY20, RIL’s EBITDA from
refining stood at USD6.6/bbl v/s ~USD15.6/bbl in petrochemical. According to
our estimate, a 10% rise in chemical production from the current slate and
improvement in EBITDA for the refinery-cum-petrochemical complex could be
as much as USD476m or 6%/3% of the standalone/consol. FY22E EBITDA.
Using SOTP, we value refining and petrochemical segment at 7.5x to arrive at a
valuation of INR545/share for the standalone. We have ascribed an equity
valuation of INR1,125/share to RJio and INR580/share to Reliance Retail.
Reiterate Buy with a target price of INR2,250/share.
3
31 July 2020
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 1:
RIL SoTP valuation (INR/share)
7.5x FY22 EBITDA
Equity value
Standalone
1,125
580
288
2,250
368
Refining
404
Petchem
62
E&P
INR/share
Reliance
Retail
RJio
Net debt / Target price
(cash)
Quarterly Earning Model
Y/E March
Net Sales
YoY Change (%)
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT before EO expense
Extra-Ord expense
PBT
Rate (%)
Reported PAT
Adj PAT
YoY Change (%)
Margins (%)
Key Assumptions
Refining throughput (mmt)
GRM (USD/bbl)
Petchem EBITDA/tonne
(USD/MT)
Petchem production (mmt)
1Q
882.6
-3.2
136.4
15.5
21.8
27.0
33.5
121.1
0.0
121.1
25.4
90.4
90.4
2.4
10.2
17.5
8.1
141.6
8.7
FY20
2Q
871.4
-9.4
136.7
15.7
23.2
27.2
36.3
122.6
0.0
122.6
20.8
97.0
97.0
9.5
11.1
16.7
9.4
128.3
9.9
3Q
863.8
-13.7
129.6
15.0
25.5
25.2
38.7
117.5
0.0
117.5
18.5
95.9
95.9
7.4
11.1
18.1
9.2
102.7
9.9
4Q
741.8
-11.4
115.7
15.6
26.9
41.6
37.2
84.4
42.5
42.0
38.5
25.8
51.9
-39.4
7.0
18.3
8.9
84.6
9.8
1Q
474.6
-46.2
71.3
15.0
21.7
47.8
42.1
43.9
-44.2
88.1
-10.8
97.5
48.6
-46.2
10.2
16.6
6.3
64.0
8.9
FY21
2Q
504.7
-42.1
113.2
22.4
24.7
49.5
41.3
80.3
0.0
80.3
25.2
60.1
60.1
-38.1
11.9
17.5
8.0
75.0
10.0
3Q
546.3
-36.8
123.6
22.6
24.7
49.5
41.3
90.7
0.0
90.7
25.2
67.9
67.9
-29.2
12.4
17.5
8.0
90.0
10.0
4Q
556.4
-25.0
125.2
22.5
27.7
51.1
40.4
86.8
0.0
86.8
25.2
65.0
65.0
25.2
11.7
17.5
8.0
90.0
10.0
FY20
3,359.8
-9.6
518.5
15.4
97.3
121.1
145.4
445.6
42.5
403.2
23.3
309.0
335.1
-4.7
10.0
70.6
8.9
114.3
38.3
FY21E
2,082.0
-38.0
433.2
20.8
98.8
197.8
165.0
301.6
-44.2
345.8
16.0
290.4
241.5
-28.0
11.6
69.1
7.6
79.8
38.9
FY21
1QE
550.2
-37.7
114.4
20.8
25.8
48.3
40.1
80.4
0.0
80.4
25.2
60.1
60.1
-33.5
10.9
15.6
9.0
95.0
7.8
Var v/s
Est. (%)
-14%
-38%
-16%
-1%
5%
-45%
10%
62%
-19%
6%
-30%
Consol. - Quarterly Earning Model
Y/E March
Net Sales
YoY Change (%)
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT before EO expense
Extra-Ord expense
PBT
Rate (%)
MI & Profit/Loss of Asso. Cos.
Reported PAT
Adj PAT
YoY Change (%)
Margins (%)
1Q
1,569.8
21.9
213.2
13.6
50.1
51.1
31.5
143.4
0.0
143.4
29.5
-0.3
101.4
101.4
6.9
6.5
FY20
2Q
3Q
4Q
1,493.0 1,531.8 1,364.9
4.2
-2.4
-1.6
221.5 226.3 220.3
14.8
14.8
16.1
53.2
55.5
63.3
54.5
54.0
60.6
36.1
34.1
38.8
150.0 150.8 135.2
0.0
1.8
42.7
150.0 149.1
92.5
24.7
20.9
28.9
-0.5
-0.6
0.3
113.5 118.4
65.5
113.5 119.8
95.8
18.9
15.5
-8.1
7.6
7.8
7.0
1Q
882.5
-43.8
168.8
19.1
63.1
67.4
43.9
82.2
-49.7
131.9
2.0
-3.2
132.5
83.8
-17.4
9.5
FY21
FY20 FY21E
2Q
3Q
4Q
1,198.3 1,253.5 1,547.3 5,959.5 4,881.6
-19.7 -18.2
13.4
4.7
-18.1
218.3 238.3 259.2
881.3
884.6
18.2
19.0
16.8
14.8
18.1
64.4
66.7
67.8
222.0
262.0
64.7
64.7
62.1
220.3
258.8
44.1
44.1
46.0
140.5
178.0
133.3 150.9 175.3
579.4
541.7
0.0
0.0
0.0
44.4
-49.7
133.3 150.9 175.3
535.0
591.4
25.5
25.1
23.7
25.7
19.6
0.1
0.5
1.9
-1.1
-0.7
99.1 112.5 131.8
398.8
475.9
99.1 112.5 131.8
430.5
427.2
-12.7
-6.1
37.6
8.1
-0.8
8.3
9.0
8.5
7.2
8.8
(INR B)
FY21 Var v/s
1QE Est. (%)
1,192 -26%
-24.1
208 -19%
17.4
59
7%
59 15%
43
2%
133 -38%
0
133
-1%
25.0
0
100 33%
100 -16%
-1.5
8.4
31 July 2020
4
 Motilal Oswal Financial Services
Reliance Industries
Digital services – Moving from telecom to digital play
Robust growth in weak market conditions
RJio delivered strong 11.6%/13.4% revenue/EBITDA QoQ growth, led by 7.4% ARPU
increase to INR140 and 10.8m net subscriber addition to 398.3m. The ~7% ARPU
increase (despite an estimated 2-3% COVID-19 related impact) underscores the
~10% benefit of the tariff hike taken in 3QFY20.Thus, of the overall ~20% price
increase, an additional ~5% is yet to accrue. Incremental EBITDA margin in 1QFY21
stood at 48% despite robust revenue growth due to sharp 15% increase in network
cost. This could possibly be attributed to increased capex intensity to manage the
11% data volume growth in 1QFY21 to 14.2b GB and increase in data
usage/subscribers to 12GB/month.
Transforming into a digital play
With RJio’s wireless business ranked #1, the company through its holding company –
Jio Platforms – is now looking to expand across multiple digital products and
services. Given its estimated pool of over 275m smartphone subscribers, some of
the products launched across (a) entertainment (Jio TV+, Saavn, etc), (b)
audio/video conferencing (Jiomeet), (c) home/enterprise broadband (Jiofiber) and
other few offerings have already started seeing strong traction and could provide
enormous growth opportunity.
Aliasgar Shakir
aliasgar.shakir@motilaloswal.com
Multiple levers of growth
RJio remains in an enviable position being the dominant market leader. This offers it
monetization opportunity through various means. With a scale of 398m subscribers,
a largely contracted market structure with merely four telecom players and a highly
leveraged balance sheet, RJio can act as a price maker, driving healthy ARPU
improvement. Subscriber growth too continues as management is targeting a lion’s
share of the 350-400m feature phone market. It also plans to leverage its
capabilities to increase subscriber wallet share by offering additional services such
as entertainment, payments, healthcare, education, etc., which could provide huge
growth opportunity. Given the better-than-expected ARPUs, we have revised
upwards our EBITDA by 3%/10% for FY21/FY22E. We have factored in 11%/21%
ARPU/subscriber growth over FY20-22E. Subsequently, we expect revenue growth
of 37%/17% and EBITDA growth of 61%/37% over FY21/FY22E.
31 July 2020
5
 Motilal Oswal Financial Services
Reliance Industries
RJio Analyst Meet Takeaways
Building new digital products and services:
(a) Jio TV - Linear and non-linear
content app with OTT agnostic characteristics, (b) Jiomeet - the audio/video
conferencing app, (c) Jiohaptik - AI based automated chatbox, (d) Jiofiber -
broadband services, and (e) EasyGov -Governance app among many others.
Creating in-house capabilities to drive technology upgrade
toward 5G and
leverage the capabilities to (a) build new AI and IOT-based new product
solutions for consumers and enterprises, and (b) export technology to other
telcos globally.
India digital society plan:
There are 4 key elements of digital society such as (a)
connectivity, (b) business platform, (c) consumer platform, and (d) disruptive
technologies.
Connectivity:
RJio has created pan-India 4G LTE network for data and the
largest voice network on VoLTE globally. Additionally, it has launched
narrow band LTE with minimal investments.
Business platform:
It has sizeable mass of subscribers – both retail and
business customers. Management believes that wireline and wireless
network can be integrated to provide better services.
Consumer platform:
RJio is looking to provide high quality/value solutions
to its customers and has already prepared media solutions for this
purpose. It is now exploring the commerce sector. Further, management is
looking to extend these solutions to healthcare, IoT, etc. For instance, its
Jio TV+ can be used across platforms with a single login, thus, offering
inter-operability.
Disruptive technology:
Cloud services, automation products and natural
languages’ processing could be new technologies.
Next frontier:
The world has begun increasing the pace of 5G adoption for
incremental capacity and to augment other digital services. Management
believes that India can lead the way forward in this segment.
Internally built capability:
Unlike partnering with others for 4G, the company is
preparing the 5G stack internally. Further, it is looking to deploy the technology
initially in India and could later scale it to sell globally.
Cloud native 5G capabilities:
RJio has end-to-end suite of 5G technologies with
cloud enablement.
Jiophone production:
RJio has gained good expertise in hardware and is now
planning to develop and produce Jiophone internally.
RJio digital plans for India
5G/Jiophone capabilities
New products and services
Jiomeet:
The app has end-to-end encryption and supports unlimited
participants with cloud-ready architecture. It has gained a large set of
customers in a short period of time since its launch. It is a highly scalable and a
feature-rich product.
Jiohaptik:
This is an AI-based automated chat-box and was used in ‘MyGov
Corona Helpdesk’. It has been used by >30m citizens over the last 3 months.
EasyGov:
This app provides various schemes of central and state government
on a single platform. It contains information of 350 central/state government
welfare schemes.
31 July 2020
6
 Motilal Oswal Financial Services
Reliance Industries
Jio e-learning:
RJio has launched 65 educational channels on JioTV with both
national and state content.
Jiofiber:
The company is aggressively rolling out last mile fiber and has set up
capacity/home pass for faster rollout. Further, it is creating a platform to ramp
up capacity. These would enable integration of home IOT, smart home
solutions, AI-based automation and IOT devices like energy metering, smart
solutions and would be a key differentiator.
Financial and operating metrics
Fund raise:
Jio Platforms has raised INR1.52t via stake sale of 66.48% to 13
investors. Of the total fund, INR223b would be retained by Jio Platforms.
EBITDA:
RJio’s EBITDA was up 55% YoY to INR72.3b (including other income)
with margin of 44%.
The company did not lose revenue in the lockdown due to digital enablement
of recharges.
Subscriber:
The company added 15.1m gross subscribers with lowest industry
level churn.
ARPU:
RJio reported strong ARPU of INR140.
Data usage:
RJio’s wireless data traffic was up 30% YoY to 14.2 Exabyte. Data
usage/subscriber stood at 12.1GB with 14.2b GB quarterly traffic.
Valuation and view
We have revised our TP to INR1,125 (earlier TP INR905) on account of the earnings
revision, assigning 15x to our Sep’22E EBITDA, translating into an enterprise value of
INR7.6t. RJio has evolved from merely a telecom player to a digital company,
delivering on its strategy of launching an array of digital products and services. With
healthy subscriber/usage traction and ownership of large base of 4G subscribers, it
has the ability to expand its revenue stream into multiple categories. Our higher
multiple (Bharti India mobile valued at 12x EV/EBITDA) captures the digital revenue
opportunity, expected gains from any potential tariff hikes, growing market share
and possible rationalization of tax levies for the sector, which are not built into our
estimates.
Exhibit 2:
RJio – EV/EBITDA based valuation on Sep’22E
Particulars
EBITDA
EV/EBITDA (x)
EV
Debt
Equity Value
Value Per Share
(INRb)
499
15
7,597
465
7,132
1,125
Source: Company, MOFSL
31 July 2020
7
 Motilal Oswal Financial Services
Reliance Industries
Quarterly Earning Model
Y/E March
Net Revenue
YoY Change (%)
Total Expenditure
EBITDA
Margins (%)
Depreciation
Finance Cost
Other Income
PBT
Tax
Rate (%)
PAT
Margins (%)
YoY Change (%)
(INR B)
FY21
Variance
1QFY21E
(%)
745
153
8.5
37.2
30.7
398
88
8.9
347
65
7.9
46.6
42.5
-22
124
23
18.4
47
7
74.0
5
1 153.8
182
36
-6.6
46
10
25%
27%
136
26
-4.4
18.2
17
144%
NA
1Q
117
NA
70
47
40.0
17
17
0
14
5
35%
9
7.6
NA
FY20
2Q
131
42.1
80
51
39.1
18
19
0
15
5
35%
10
7.5
NA
3Q
140
28.3
84
56
40.0
18
20
0
19
5
27%
14
9.7
0.6
4Q
148
33.6
87
62
41.6
22
11
0
29
6
20%
23
15.7
1.8
1Q
166
41.8
96
70
42.3
27
12
3
34
9
25%
25
15.2
NA
FY21
2Q
180
37.1
101
79
44.0
30
12
1
38
10
25%
29
15.9
NA
3Q
194
38.6
105
89
45.8
32
12
1
46
12
25%
34
17.6
1.5
4Q
206
38.9
97
109
53.0
34
12
1
64
16
25%
48
23.1
1.0
FY20
543
39.9
327
216
39.7
74
66
1
76
21
27%
56
10.2
88%
Exhibit 3:
QoQ financial performance (INR b)
(INR b)
Revenue from operations
Operating expenses
EBITDA
EBITDA margin (%)
Depreciation and amortization
EBIT
EBIT margin (%)
Finance Costs
Other income
Profit before Tax
Tax
Tax rate (%)
Profit after Tax
Adjusted Profit after Tax
1QFY20
117
70
47
40.0
17
30
25.8
17
0
14
5
34.9
9
9
4QFY20
148
87
62
41.6
22
40
27.0
11
0
29
6
19.6
23
23
1QFY21
166
96
70
42.3
27
43
25.8
12
3
34
9
25.3
25
25
YoY%
41.8
36.3
50.0
232bps
65.2
41.6
-3bps
-29.6
1625.0
146.5
78.9
-958bps
182.8
182.8
QoQ%
11.6
10.3
13.4
68bps
26.3
6.5
-124bps
3.1
961.5
16.4
50.3
571bps
8.1
8.1
1QFY21E
153
88
65
42.5
23
42
27.4
7
1
36
10
27.1
26
26
Var (%)
8.5
8.9
7.9
-22bps
18.4
2.2
-160bps
74.0
153.8
-6.6
-12.7
-177bps
-4.4
-4.4
Source: MOFSL, Company
Exhibit 4:
RJio: KPI comparison
Key Operating Metrics
Subscriber base (mn)
Net subs adds
Gross sub adds
Churn per mth (%)
ARPU (INR/sub/month)
Total wireless Data traffic (cr GB)
Wireless Data traffic per sub (GB/mth)
Voice on Network (b min)
Voice consumption per sub (min/mth)
1QFY20
331.3
24.6
34.2
1.0%
122
1,090
11.4
786
821
4QFY20
387.5
17.5
23.9
0.6%
131
1,284
11.3
876
771
1QFY21
398.3
10.8
15.1
0.5%
140
1,420
12.0
889
755
YoY%
20.2
-56.1
-55.9
-51bps
15.0
30.3
5.8
13.2
-8.1
QoQ%
2.8
-38.3
-36.8
-11bps
7.4
10.6
6.6
1.5
-2.2
1QFY21E
372.5
-15.0
Var (%)
6.9
-172.0
134
1,824
16.0
879
771
4.8
-22.2
-24.7
1.2
-2.2
31 July 2020
8
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 5:
ARPU reconciliation
Subscriber category
Smartphone Subs
Jiophone Subs
Prime Subscription
Total
Revenue
(INR b)
1,33,175
28,776
3,421
1,65,372
Average
Subscribers (m)
278.6
114.3
138.2
392.9
1QFY21 ARPU
(INR)
159
84
8
140
4QFY20 ARPU
(INR)
144
84
8
131
Growth (%)
10.7%
0.0%
0.0%
7.4%
Exhibit 6:
Subscriber working (m)
Subscribers gr. drivers
Subscribers
Net Adds
Churn
Subs churn
Gross Subscriber adds
Smartphone adds
Jiophone Subs adds
1QFY20
331.30
24.60
0.97%
9.64
34.24
23
11.7
2QFY20
355.20
23.90
0.74%
7.89
31.79
23
9.3
3QFY20
370.00
14.80
2.1%
22.30
37.1
18
19.1
4QFY20
387.50
17.50
0.57%
6.40
23.9
7
16.5
1QFY21
398.30
10.80
0.46%
4.30
15.1
5
10.0
Source: MOFSL
Exhibit 7:
RJio: Net subs add pace reduced due to lockdown
Net subs adds (m)
42.0
27.8 27.9 30.5
Gross subs adds (m)
Exhibit 8:
RJio: EBITDA margins expanded 70bp QoQ
Revenue (INR b)
EBITDA margins (%)
37.1
32.9 33.2 34.2 31.8
23.9
15.1
23.5
61
41.6 42.3
38.2 37.8 38.8 38.7 37.2 39.0 40.0 39.1 40.0
15.2
21.5 26.5 28.7 37.0 27.8 26.6 24.6 23.9 14.8 17.5 10.8
69
71
81
92 109 111 117 131 140 148 166
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 9:
RJio virtually turned debt free post stake sale (INR b)
247
2,354
460
1,055
182
230
Exhibit 10:
Jio Platforms consol. financials for 1QFY21
Particulars (INR b)
Gross revenue
Operating revenue
EBITDA
1QFY21
202.77
172.54
73.32
42.5%
27.76
45.56
11.7
33.86
25.2
Source: MOFSL, Company
180
EBITDA margin (%)
Depreciation & Amortization
EBIT
Finance cost
PBT
Net Profit
Source: MOFSL, Company
31 July 2020
9
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 11:
RJio: Voice traffic grew 1% in 1QFY21
27%
Voice traffic (b min)
20% 21% 19% 19%
QoQ growth (%)
Exhibit 12:
RJio: Data traffic up 11% due to surge in demand
Data traffic (b GB)
27%
14%
17%
20%
12% 11% 14% 10%
0%
6%
11%
QoQ growth (%)
14%
9%
3%
2%
6%
1%
246 311 372 449 534 634 724 786 813 826 876 889
3.8 4.3 5.0 6.4 7.7 8.6 9.6 10.9 12.0 12.1 12.8 14.2
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 13:
ARPU increased 7% QoQ to INR140 along with 2.8% subscriber growth
Subscribers (m)
156
154
137
135
132
130
126
ARPU (INR)
122
128
128
131
140
138.6
160.1
186.6
215.3
252.3
280.1
306.7
331.3
355.2
370
387.5
398.3
Source: MOFSL, Company
31 July 2020
10
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 14:
Jio: Summary of estimate change
FY21E
Revenue (INR b)
Old
Actual/New
Change (%)
EBITDA (INR b)
Old
Actual/New
Change (%)
EBITDA margin (%)
Old
Actual/New
Change (bp)
Net Profit (INR b)
Old
Actual/New
Change (%)
EPS (INR)
Old
Actual/New
Change (%)
MoU (min)
Old
Actual/New
Change (%)
ARPU (INR)
Old
Actual/New
Change (%)
Subs (m)
Old
Actual/New
Change (%)
436
454
4.1
466
484
3.9
142
148
3.7
147
155
5.7
793
793
0.0
793
793
0.0
3.4
3.0
-12.1
4.9
5.6
14.7
154
136
-12.1
219
251
14.7
47.8
46.6
-121bps
54.4
54.6
16bps
336
347
3.3
432
476
10.3
703
745
6.0
793
872
10.0
FY22E
Exhibit 15:
RJio: EBITDA margin to expand
Revenue (INR b)
38.9
EBITDA margin (%)
39.7
46.6
54.6
33.4
202
388
FY18
FY19
543
FY20
745
FY21E
872
FY22E
Source: MOFSL, Company
31 July 2020
11
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 16:
ARPU to reach INR155 in FY22
Subscribers base (m)
144
ARPU (INR/month)
148
155
Exhibit 17:
FCF to turn positive in FY21 (INR b)
131
130
177
123
0
109
FY17
187
FY18
307
FY19
388
FY20
454
FY21E
484
FY22E
-322
-372
-342
FY18
FY19
FY20
FY21E
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 18:
RJio: Return ratios to rise (%)
16.0
12.0
8.0
4.0
0.0
RoE (%)
RoCE (%)
RoIC (%)
Exhibit 19:
RJio: to turn cash positive in FY22
21.1
Net debt / EBITDA
9.2
1.7
0.0
-0.2
FY18
FY19
FY20
FY21E
FY22E
FY18
FY19
FY20
FY21E
FY22E
Source: Company, MOFSL
Source: Company, MOFSL
31 July 2020
12
 Motilal Oswal Financial Services
Reliance Industries
Reliance Retail: Strong focus via online channel
Reliance Retail’s revenue declined 17% YoY to INR316b. This was due to 50% of its
stores being closed and 29% operating partially during the lockdown. Footfalls were
down 57% YoY during the quarter; however, Jun’20 saw some recovery, but footfalls
were still down 39%. EBITDA plunged 47% YoY to INR10.8b while EBITDA margins
stood at 3.8%, primarily aided by the grocery business.
Sales of Lifestyle/Consumer Electronics plummeted 71%/69% YoY. However, sales of
the grocery segment grew 5% YoY, driven by strong business push across grocery
stores, JioMart and initiatives in the online and delivery space. Lower footfalls were
partly offset by higher bill values across grocery and electronics stores. Only 3% of
Reliance’s grocery stores were non-operational during 1QFY21. However, 52%/65%
of electronics and fashion stores were non-operational during the quarter with
65%/90% drop in footfalls.
Grocery segments continue to shine
Jiomart went operational during the lockdown and spread its services across 200
cities, mostly supplying groceries and other staples from its own grocery stores
(SMART and Fresh-format stores). It is also in the process of connecting
kirana
stores to cater to last mile connectivity. The aim is to connect nearly 30m
neighboring
kirana
stores to the online platform. It is targeting to launch the
consumer durables and apparel/footwear category in 2QFY21 and has created a
hyper-local model linking its stores to the digital platform for inventory fulfillment.
Golden opportunity for Jiomart
The current lockdown phase boosted shopping of essential items and grocery
shopping via the online medium. We believe this trend is likely to continue due to
customers developing a habit for convenience-based shopping. Jiomart is already
providing staples at sharp point prices and discounts to attract customers along with
free home deliveries in the launch phase. Additional synergies are expected to come
in the form of Reliance Retail pushing its private label products, which are margin
accretive. Further, the company aims to strengthen its supply chain, logistics and
focus highly on home delivery services, including
kirana
tie-ups that could provide
an efficient last mile delivery model.
We value Reliance Retail on an SOTP basis, valuing its core business at 30x FY22E
EV/EBITDA and petro and connectivity at FY22E 4x EV/EBITDA to arrive at an
enterprise value of INR3.8t with a target price of INR580. Our premium valuation
captures Reliance Retail’s aggressive footprint addition and the recent Jiomart led
online opportunity. The online business is a long gestation/cash-burn business.
However, with deep pockets and wide network, Reliance Retail has huge potential
to create an efficient hyper local model.
Riding the online consumption spree during lockdown
Valuation and view
31 July 2020
13
 Motilal Oswal Financial Services
Reliance Industries
Other Operating Highlights
Reliance Retail’s total store count stood at 11,806 (added net 22 stores in
1QFY21) and total retail area stood at 28.7msf.
Core revenue plunged 43% YoY in 1QFY21 to INR122b.
Total EBITDA fell 47% YoY to INR10.8b while margins stood at 3.8%.
Fashion and Lifestyle
revenue dropped 71% YoY to INR9b.
Consumer Electronics’
revenue declined 69% YoY to INR32b. However, on
easing of the lockdown, sales of laptops, tablets and productivity devices were
up 2.5x and sales of dishwashers, other home appliances, gaming and tech
accessories increased 2x.
Food and Grocery
revenues grew 5% YoY to INR80b.
Petro retail
revenue fell 34% YoY to INR25b.
Connectivity
revenue grew 30% YoY to INR169b while EBITDA grew 24% to
INR3.4b. Margins stood at 2%.
Exhibit 20:
Quarterly performance (INR b)
Revenue from operations
a) Core Revenue
- Grocery
- Consumer Electronics
- Fashion and Lifestyle
b) Connectivity
c) Petro Retail
EBITDA
EBITDA margin (%)
1QFY20
382
215
76
106
32
130
37
20
6.0%
4QFY20
382
195
100
62
33
152
35
26
7.5%
1QFY21
316
122
80
32
9
169
25
11
3.8%
YoY%
-17.2
-43.1
5.2
-69.5
-70.7
30.3
-33.7
-47.1
-214bps
QoQ%
-17.2
-37.5
-20.1
-47.7
-71.5
11.5
-28.7
-57.6
-362bps
31 July 2020
14
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 21:
Summary of estimate changes (INR b)
(INR b)
Revenue
Old
Actual/New
Change (%)
EBITDA
Old
Actual/New
Change (%)
EBITDA margin (%)
Old
Actual/New
Change (bp)
Net Profit
Old
Actual/New
Change (%)
EPS (INR)
Old
Actual/New
Change (%)
FY21E
1508
1578
5
76
81
6.5
5.7
5.8
10
51
54
7.3
10.2
10.9
7.3
FY22E
1835
2027
10
114
136
18.6
6.2
6.7
46
79
95
20.2
15.8
19.0
20.2
Exhibit 22:
Reliance Retail – revenue fell 17% YoY, impacted by store closures
Total Revenue (INR b)
134% 124% 121%
116%
89%
74% 81%
YoY growth
52% 48%
367
382
27% 27%
412
453
316
4%
382
-17%
116
146
188
242
259
324
356
Source: Company, MOFSL
Exhibit 23:
Reliance Retail – EBITDA supported by grocery segment
EBITDA (INRb)
5.3%
4.8% 5.3%
EBITDA margin (%)
6.7%
5.9% 6.0% 6.3%
7.5%
3.4% 3.0% 3.2%
4
4
6
4.5%
3.8%
11
12
14
17
19
20
23
27
26
11
Source: Company, MOFSL
31 July 2020
15
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 24:
Reliance Retail store revenue contribution (INR b)
Grocery
Consumer Electronics
37.47
110.282
32.01
Fashion and Lifestyle
Connectivity
Petro Retail
24.85
169.39
106.18
76.33
1QFY20
32.43
80.27
1QFY21
9.39
Exhibit 25:
Fashion and electronics store remained closed for most period in lockdown
Format stores
Consumer Electronics
Fashion & Lifestyle
Grocery
Total
%age of non operational stores
Drop in Footfalls
20-Apr 20-May 20-Jun
Overall 1QFY21
1QFY21
90%
45%
20%
52%
-65%
100%
76%
37%
65%
-90%
4%
3%
2%
3%
-45%
79%
51%
24%
50%
-57%
Source: Company, MOFSL
Exhibit 26:
Area under coverage steady during 1QFY21
Total Stores (000s)
19
20
21
Retail area (mn sqft)
22
23
24
26
28.7 28.7
14
14
15
18
3.6
3.7
3.8
7.6
8.5
9.1
9.9
10.4 10.6 10.9 11.3 11.8 11.8
Source: Company, MOFSL
Exhibit 27:
FY22 SOTP Valuation
FY22 Valuation
Core EBITDA
Petro and Connectivity
Total
Less Net Debt
Equity Value
No of Shares (in b)
Target price (INR)
EBITDA
121
20
Multiple
30
5
EV (INR b)
3,676
101.7
3,778
100
3,678
6.3
580
Source: MOFSL, Company
31 July 2020
16
 Motilal Oswal Financial Services
Reliance Industries
Key highlights
Key Highlights
Reliance Retail Analyst Concall Takeaways
COVID-19 impact:
50% of total stores remained shut while 29% were operating
partially. Grocery stores remained operational with logistics challenges. Footfalls
were down 57% YoY but Jun’20 has started seeing recovery. Commissioning of
over 250 stores halted due to the pandemic.
JioMart:
It is looking to expand with launch of electronics, apparels and
footwear categories in 2QFY21. Further, it is looking to widen the rollout in
more cities from current 200 cities. It is leveraging existing store network and
kirana
tie-ups to improve supply chain and delivery timelines.
Grocery:
Despite challenges, revenue grew 5% as the business comes under
essential items. Alternate channels like online also aided growth.
Supply chain improvement:
It is
looking
to improve supply chain to handle
home delivery and has already converted some Reliance market stores, partly
for consumers.
Fashion and Lifestyle:
Reliance Retail is leveraging the AJio platform to drive
revenue.
Operational stores:
50% of total
stores
remained shut and 29% were operating
partially. Consumer Electronics, Fashion and Lifestyle businesses were not
operational in Apr’20 and partially in May-Jun’20. Grocery stores remained
operational with logistics challenges.
Impact on footfalls:
Footfalls were down 57% YoY (-39% Jun’20). Furthermore,
grocery stores also saw lower footfalls.
Delay in store opening:
Reliance Retail opened 69 new stores and SIS sections;
>250 stores could not be commissioned due to the prevailing situation.
Gross revenue:
Overall revenue declined 17%, however, the company still
remains ahead of peers. Furthermore, the company delivered EBITDA of
INR10.8b in 1QFY21.
Better gross margin:
Gross margin improved due to better realization and full
price sell through.
Cost saving initiatives:
Reliance Retail has started an ambitious cost savings
program that reduces the impact on profitability.
Healthy recovery:
The company witnessed healthy recovery in Jun’20 post
reopening of the electronics stores due to pent-up demand. Also, it saw a pickup
in jewelry sales in Jun’20.
New commerce launch: The company has
made steady progress – both Jiomart
and Ajio ramped up with reliance digital activation.
Hyper local model:
The company started hyper local model
for
quick
turnaround
of
inventory with order delivery in six hours.
COVID-19 impact
Business performance
New initiatives
31 July 2020
17
 Motilal Oswal Financial Services
Reliance Industries
Grocery
Growth despite challenges:
Despite the operational constraints, grocery
revenues grew 5% YoY. Growth was led by essential and processed foods.
Sales through additional channels:
The company served customers through
multiple channels in addition to stores such as ‘Store on Wheels’ to serve 3,000
societies. Further, it took orders through online, telephone, Whatsapp and
NetMeds.
Leveraging JioMart:
It leveraged JioMart to accelerate speed of home delivery.
Last mile fulfillment: It leveraged
offline stores and inventory for last mile
fulfillment.
Leveraging AJio:
The company is recognizing the fashion trend as per WFH
requirement and is recreating its portfolio accordingly. It is utilizing AJio to drive
Trends’
revenues. Without AJio, performance would have been very weak.
Strengthens capacity:
Reliance Retail has built capacity to handle scale-up of
orders and to deliver service within SLAs.
Launch in Lifestyle and Consumer durables:
It is looking to launch JioMart in the
consumer electronics category and apparel and footwear category in 2QFY21.
Accelerated roll out:
Management’s key priority is to accelerate the roll out of
JioMart.
Expansion of categories:
Planning to expand JioMart across categories,
including pharmaceuticals. Partnership model with
kirana
stores are well
underway.
Home delivery:
The company is looking to bolster supply chain/fulfillment
capacity to handle home delivery. Currently, solutions for 200 cities are ready.
Leveraging Reliance Market stores:
It has partly converted many Reliance
Market stores into consumer stores to improve supply to customers.
Backward integration:
The benefit of backward integration with farmers has
seeped in as it allows the company to manage its supply chain.
Focus on reopening:
It is looking to scale up digital commerce and to ramp up
the offline expansion and supply chain infrastructure.
Fashion & Lifestyle
JioMart
Focus on improving supply chain
31 July 2020
18
 Motilal Oswal Financial Services
Reliance Industries
Standalone Business – Near-term outlook challenging
Refining and marketing: Better feedstock optimization leads the path
The COVID-19 impact during the quarter was unprecedented as the pandemic
impacted global economic growth and oil demand. Oil demand destruction of
~15-20mnbopd was expected in Mar’20, which we reckon has further expanded
to 25-30mnbopd in Apr-May’20.
Demand destruction was primarily due to the
complete halt in transportation fuel demand, while Lt-Hv differential also
shrank (to USD0.4/bbl from USD1.8/bbl in 1QFY20) amidst various production
cuts and cargo restrictions.
At the start of the quarter, the lack of co-operation among OPEC+ countries
resulted in Brent slumping to ~USD20/bbl.
However, with lifting of lockdowns
across the world, demand is once again seeing an uptick.
On the supply side,
production cuts, both intentional (OPEC++) and unintentional (due to weak
economies/bankruptcies), led the upward movement in prices.
During the quarter, Gasoline cracks averaged USD0.4/bbl (v/s USD4.9/bbl in
4QFY20), ATF cracks averaged nil (v/s USD8.6/bbl) , after touching an all-time
low and even Diesel cracks faced demand issues averaging lower at USD4.5/bbl
(v/s USD9.7/bbl in 4QFY20) – the lowest in the last 18 years. FO cracks remained
most volatile, averaging ~USD1.5/bbl (up from -USD7.1/bbl in 4QFY20) as
supplies for heavy crude oil decreased.
However, the company is better placed with flexibility in feedstock input along
with maximization of middle distillate yields. Last year, RIL already launched
niche grades in middle distillates and VLSFO to meet the changing market
requirements. The company has been increasing capacity of crude de-salter. It is
also boosting capacity of DTA coker by 30%.
RIL used flexibility in its refining configuration to swing significant production of
ATF into Diesel and other products as ATF demand was severely impacted due
to air travel restrictions.
RIL was also able optimize its crude basket by sourcing
the highest number of competitive feedstock in a quarter.
Outlook: RIL expects global demand recovery to remain capped in the near term
with concerns over high inventory and further delayed recovery in Jet fuel
demand. Also, China is likely to export more with an increase in its refinery
throughput, deepening the supply glut and enhancing the pressure on product
margins.
Counter measures by RIL includes focus on its deep petrochemical integration
and to expand its fuel marketing business (currently, MS/HSD demand recovery
in India is ~90% of Jan levels). RIL also believes that the global driving activity
recovery is robust. The US and China’s demand for MS/HSD recovered to ~90%
of Jan levels in 1QFY21, which could aid auto fuel refining margins in the coming
months.
Our model builds in GRM of USD8/bbl for the next three quarters of FY21 and
USD11/bbl for FY22E, with strong refining capacity utilization of 111%/113%,
respectively.
Petrochem: better product mix to aid weaker margins
RIL was able to maintain sustainable petchem production during the quarter,
however, margins suffered a big blow due to weak demand and lower export
31 July 2020
19
 Motilal Oswal Financial Services
Reliance Industries
realization during the quarter. Integrated polyester chain margins declined
sharply YoY, with weak fiber intermediate margins. However, headline margins
for Polymers were positive.
During the quarter, domestic petrochemical demand from consumer
discretionary sectors like automobile and durables led the weakness. Although,
demand from key essential sectors like Hygiene and Medical, Food and
Beverage Packaging, Milk Packaging and Agri was healthy.
Outlook – Supply glut to continue
Polymer chain: New ethylene capacity addition in the US and North-East Asia is
likely to keep margins under pressure. However, improving demand for PE and
PP across the essential sector (mentioned above) would provide some support
to demand, and thus, to margins. Resumption in construction activities with the
onset of monsoons is also likely to aid PVC demand as well.
Polyester chain: Continued capacity addition in China is likely to keep global
market well supplied; however, demand should improve with the onset of the
festive season in the latter part of year, further boosting demand from the
textile segment.
In the current challenging operating environment, RIL’s ability to optimize
between feedstock and sales mix provides an edge in improving its
performance.
We believe that strong cost position and demand recovery
would support operating rates and margins of RIL further.
US, China and EU retail sales are back to near normal levels: The
US’ clothing is
up >100% and electronics are up >30% MoM in Jun’20. China mobile phones
garnered 19% YoY and home appliances grew +10% YoY in Jun’20. While, India
FMCG demand is back to pre-COVID level Jun’20.
We build in petchem EBIDTA/mt of USD 75/90/90/mt over the next three
quarters of FY21 and a 10% increase (to USD99/mt) in FY22E with production of
~39/40mmt.
E&P: KG D6’s – R cluster project progress
Despite the COVID-19 related lockdown and constraints (of workforce and
material transportation, etc.), the company is planning to commission the
project in 2HFY21 (v/s earlier target of mid-2020).
Currently, all wells and subsea installations are completed and pre-
commissioning work of mobilization of critical resources from global locations,
etc. is pending.
Exhibit 28:
Standalone - Estimates change table
(INR m)
EBITDA
% change
PAT
% change
FY21
4,33,237
-13%
2,41,451
-11%
FY22
6,53,462
-2%
3,90,768
-4%
FY21
4,98,737
2,71,214
FY22
6,70,138
4,07,946
31 July 2020
20
 Motilal Oswal Financial Services
Reliance Industries
Exhibit 29:
RIL segment-wise performance snapshot (standalone)
FY19
In INRb
Segmental Revenues
Petchem
Refining
Oil & Gas
Others
Total
Segmental EBITDA
Petchem
Refining
Oil & Gas
Total
EBITDA Margin (%)
Petchem
Refining
Oil & Gas
Total
Segmental EBIT
Petchem
Refining
Oil & Gas
Total
EBIT Margin (%)
Petchem
Refining
Oil & Gas
Total
1Q
390
814
8
3
1,214
90
60
2
153
23.1
7.4
31.0
12.6
77
52
-2
128
19.9
6.4
-32.5
10.5
2Q
430
815
7
5
1,257
95
61
4
160
22.0
7.5
52.3
12.7
80
52
-2
130
18.5
6.3
-25.3
10.3
3Q
453
889
6
4
1,352
96
58
5
160
21.2
6.6
84.7
11.8
80
49
1
131
17.6
5.6
19.7
9.7
4Q
414
688
5
5
1,113
91
48
3
142
21.9
7.0
53.5
12.7
78
40
1
120
18.9
5.9
18.5
10.7
1Q
362
766
5
3
1,136
86
51
3
139
23.7
6.6
54.7
12.2
74
44
1
120
20.4
5.8
23.9
10.6
2Q
374
765
4
5
1,148
89
57
1
147
23.9
7.4
28.6
12.8
75
49
1
125
20.0
6.4
13.4
10.9
FY20
3Q
359
782
5
5
1,152
72
68
1
141
20.2
8.7
11.8
12.3
58
59
1
117
16.1
7.5
10.3
10.2
4Q
314
678
2
5
999
60
66
0
126
19.1
9.7
26.9
12.6
46
57
0
104
14.6
8.4
5.0
10.4
FY21
1Q
242
398
1
3
644
43
36
0
79
17.9
9.1
-7.5
12.3
33
27
0
61
13.8
6.8
-46.3
9.5
31 July 2020
21
 Motilal Oswal Financial Services
Reliance Industries
REFINING: Weak GRM, sustainable production throughput
GRM at USD6.3/bbl v/s benchmark GRM of -USD0.9/bbl
Exhibit 30:
RIL’s premium over benchmark stood at USD7.2/bbl in 1QFY21
2.9
2.5
2.9
2.6
2.9
2.6
RIL's GRM premium over SG
2.9
2.3
2.2
1.5
1.6
(0.1)
2.3
3.0
3.2
2.5
Brent less Dubai
2.3
-
2.2
1.4
Arab L-H
1.8
1.5
1.5
0.7
2.3
1.3
3.1
0.4
(0.1)
(0.1)
0.9
0.5
0.9
(0.2)
6.5
5.0
4.1
5.1
5.5
3.7
4.3
4.0
4.5
3.4
4.6
5.0
4.6
2.9
7.6
7.7
7.2
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
Exhibit 31:
Standalone refining EBIT declined 39% YoY and 52% QoQ
Refining EBIT (INRb)
EBIT Margins (%)
13.4
11.4 11.5
9.8 10.8 11.0 9.5
7.5
6.4
6.3
5.9
5.8
5.6
6.4
7.5
8.4
6.8
66
1QFY17
59
61
3QFY17
63
64
1QFY18
65
61
3QFY18
56
52
1QFY19
52
49
3QFY19
40
44
1QFY20
49
59
3QFY20
57
27
1QFY21
Exhibit 32:
1QFY21 GRM at USD6.3/bbl; premium of USD7.2/bbl
11.5
6.5
5.0
10.1
5.0
5.1
10.8
4.1
6.7
11.5
5.1
6.4
11.9
5.5
6.4
12.0
3.7
8.3
11.6
4.3
7.3
11.0
4.0
7.0
10.5
4.5
6.0
9.5
3.4
6.1
8.8
4.6
4.2
9.4
2.9
6.5
7.6
1.6
7.7
1.2
9.2
8.9
6.3
7.2
(0.9)
1QFY21
8.2
5.0
3.2
8.1
4.6
3.5
Singapore GRM
1QFY17
3QFY17
Premium / (Disc)
1QFY18
3QFY18
RIL GRM
1QFY19
3QFY19
1QFY20
3QFY20
Exhibit 33:
Refinery throughput was down 5% YoY at 16.6mmt, utilization at 107%
Refinery Thr' put (mmt)
116
108
115
117
113
113
114
108
107
103
16.8
1QFY17
18.0
17.8
3QFY17
17.5
17.5
1QFY18
18.1
17.7
3QFY18
16.7
16.6
1QFY19
17.7
18.0
3QFY19
16.0
17.5
1QFY20
16.7
18.1
3QFY20
18.3
16.6
1QFY21
114
Utilization (%)
116
113
108
107
117
118
Source: Company, MOFSL
31 July 2020
22
 Motilal Oswal Financial Services
Reliance Industries
PETROCHEM: EBIT margin takes a big hit owing to weak Petchem realizations
Standalone petrochem EBIT down 55% YoY
Exhibit 34:
Standalone EBIT down 55% YoY and 27% QoQ, with margin contracting YoY to 13.8%
Petchem EBIT (INRb)
14.9
16.3
15.5
16.5
13.7
18.3
17.4
17.2
19.9
EBIT Margins (%)
18.5
17.6
18.9
20.4
20.0
16.1
14.6
13.8
29
1QFY17
35
34
3QFY17
35
40
1QFY18
49
57
3QFY18
63
77
1QFY19
80
80
3QFY19
78
74
1QFY20
75
58
3QFY20
46
33
1QFY21
Exhibit 35:
Petrochem production volume up 2% YoY and down 9% QoQ
Petchem production (mmt)
6.1
6.4
6.2
6.2
6.9
7.9
8.4
9.2
9.2
9.4
9.7
9.4
8.7
9.9
9.9
9.8
8.9
1QFY17
3QFY17
1QFY18
3QFY18
Petrochem
1QFY19
Refining
E&P
3QFY19
Others
1
1
34
1QFY20
3QFY20
1QFY21
Exhibit 36:
Petchem share in 1QFY21 expanded to 54% in standalone EBIT
1
37
0
39
0
50
0
55
2
44
68
62
65
64
62
57
52
48
41
40
38
30
1QFY17
37
35
3QFY17
35
39
1QFY18
43
48
3QFY18
55
61
62
61
65
61
60
49
3QFY20
44
54
1QFY19
3QFY19
1QFY20
1QFY21
Exhibit 37:
RIL production up 42% YoY, down 4% QoQ (RIL’s share, bcfe)
44.5
41.4
37.5 39.1 34.7
33.5 32.4 34.7
Shale gas vol, net (bcfe)
23.9 26.3 25.3
23.8 21.2
20.9 18.9
17.8 19.9
31 July 2020
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 Motilal Oswal Financial Services
Reliance Industries
Exhibit 38: Standalone business to generate FCF of ~INR211b in FY21-22
INR bn
Free Cash Flow
1,009
455
182
-84
480
264
14
-269
Exhibit 39: RIL standalone- Key assumptions
Key Metrics
Exchange Rate (INR/USD)
Refining
Capacity (mmt)
Production (mmt)
Capacity Utilization (%)
GRM (USD/bbl)
Singapore GRM
Premium/(disc)
RIL GRM
Petchem
Net Production (mmt)
EBITDA/mt (USD)
FY15
61.2
FY16
65.4
62.0
69.5
112%
7.5
3.3
10.8
24.7
88
FY17
67.1
62.0
70.1
113%
5.8
5.2
11.0
24.9
102
FY18
64.5
62.0
70.0
113%
7.3
4.4
11.6
32.4
122
FY19
70.0
62.0
68.3
110%
4.9
4.4
9.3
37.7
141
FY20
70.9
62.0
70.6
114%
3.2
5.7
8.9
38.3
114
FY21E
74.9
62.0
69.1
111%
3.5
4.1
7.6
38.9
80
FY22E
75.8
62.0
70.0
113%
6.0
5.0
11.0
40.0
99
62.0
67.9
110%
6.4
2.5
8.8
22.0
87
Source: Company, MOFSL
Exhibit 40: RIL: Segmental EBITDA break-up (INR b)
Segmental EBITDA (INRb)
Refining
Petchem
E&P
Total
Segmental EBITDA share (%)
Refining
Petrochemicals
E&P
Total
FY15
187
118
37
342
55
35
11
100
FY16
265
143
28
436
61
33
6
100
FY17
284
171
10
465
61
37
2
100
FY18
277
256
11
544
51
47
2
100
FY19
228
372
14
614
37
61
2
100
FY20
241
307
5
553
44
56
1
100
FY21E
179
261
(7)
433
41
60
(2)
100
FY22E
311
341
(9)
643
48
53
(1)
100
Source: Company, MOFSL
31 July 2020
24
 Motilal Oswal Financial Services
Reliance Industries
Reliance Industries: Story in charts
Exhibit 41:
RIL’s standalone earnings
Exhibit 42:
Return ratios
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 43: FY21 refinery throughput snapshot
Source: Company, MOFSL
Exhibit 44: Expect Petchem EBITDA contribution to increase going forward
Source: Company, MOFSL
31 July 2020
25
 Motilal Oswal Financial Services
Reliance Industries
Reliance Industries: Story in charts
Exhibit 45:
Segmental EBITDA
break-up
(%) – E&P a
dampener, refining and petchem outshine
Exhibit 46:
Expect E&P production to decline (mmscmd)
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 47:
RIL refining margins to improve in FY22E
Exhibit 48:
Expect petrochem EBITDA to improve in FY22E
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 49: Dividend payout
Source: Company, MOFSL
31 July 2020
26
 Motilal Oswal Financial Services
Reliance Industries
Reliance Jio Infocomm: Financials and valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT after EO Exp.
Total Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
0
NA
0
NA
0
NA
0
0
0
0
0
0
0.0
0
0
NA
NA
FY16
0
0.0
0
NA
0
NA
0
0
0
0
0
0
34.4
0
0
-31.7
NA
FY17
0
-50.0
0
NA
0
NA
0
0
0
0
0
0
34.5
0
0
98.6
NA
FY18
202
NA
134
66.6
67
33.4
36
32
20
0
11
4
34.8
7
7
LP
3.6
FY19
388
92.7
237
61.1
151
38.9
64
87
41
0
46
16
34.9
30
30
310.0
7.6
FY20
543
39.9
327
60.3
216
39.7
74
142
66
1
76
21
27.2
56
56
87.7
10.2
FY21E
745
37.2
398
53.4
347
46.6
124
223
47
5
182
46
25.3
136
136
143.8
18.2
(INR b)
FY22E
872
17.0
396
45.4
476
54.6
114
362
47
21
336
85
25.3
251
251
85.0
28.8
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Capital Employed
FY15
301
-1
301
239
539
10
1
9
723
8
80
0
0
80
281
0
281
0
-201
539
FY16
450
-78
372
884
1,257
12
2
9
1,061
8
197
0
0
197
19
0
19
0
178
1,257
FY17
450
259
709
1,244
1,953
14
4
10
1,780
9
211
0
0
210
56
0
55
1
155
1,953
FY18
450
579
1,029
1,438
2,468
1,595
40
1,555
700
10
272
9
7
256
70
31
34
5
202
2,468
FY19
450
-46
404
1,399
1,803
1,444
104
1,340
346
13
259
7
4
247
155
33
121
1
104
1,803
FY20
450
1,260
1,710
470
2,179
1,772
138
1,634
213
25
545
16
75
454
238
47
190
1
308
2,179
FY21E
450
1,625
2,075
470
2,545
2,274
301
1,973
0
11
856
41
453
362
296
49
232
14
561
2,545
(INR b)
FY22E
450
1,876
2,326
470
2,796
2,492
415
2,077
0
11
1,013
48
550
415
306
49
240
17
707
2,796
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOFSL Estimates
31 July 2020
27
 Motilal Oswal Financial Services
Reliance Industries
Reliance Jio Infocomm: Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY15
0.0
0.0
10.0
0.0
0.0
FY16
0.0
0.0
8.3
0.0
0.0
-4.9
-0.1
NA
NA
0.0
0.0
274
0
0.3
-14.0
0.8
FY15
0
0
0
0
-28
-28
0
-28
-95
-123
-5
0
-101
71
72
-13
0
0
129
0
0
0
0.0
0.0
7.7
0.0
0.0
913
0
10.3
-18.0
2.4
FY16
0
0
0
0
-43
-44
0
-44
-176
-220
0
0
-177
150
103
-33
0
0
220
0
0
0
FY17
0.0
0.0
15.7
0.0
0.0
-9.3
-0.1
0.0
-0.2
0.0
0.0
3,650
0
3.8
-47.2
1.7
FY17
0
0
0
0
-34
-34
0
-34
-385
-419
0
0
-386
337
141
-58
0
0
420
0
0
0
FY18
0.2
1.0
22.9
0.0
0.0
-7.2
0.8
0.9
2.1
0.1
0.1
17
56
3.9
1.5
1.4
FY18
11
36
20
-2
-29
36
0
36
-358
-322
-1
0
-359
313
102
-85
0
0
330
7
0
7
FY19
0.7
2.1
9.0
0.0
0.0
-8.3
4.1
2.7
3.5
0.3
0.2
7
31
1.7
2.1
3.4
FY19
46
64
41
-10
-75
66
0
67
-438
-372
0
0
-438
0
460
-92
0
0
368
-3
7
4
FY20
1.2
2.9
38.0
0.0
0.0
-7.6
5.3
5.2
6.2
0.3
0.2
11
32
2.3
2.1
0.2
FY20
76
74
66
-12
-37
168
-2
166
-508
-342
-9
-160
-677
1,250
-538
-103
0
-20
588
75
0
75
FY21E
3.0
5.8
46.1
0.0
0.0
3.9
7.2
7.2
8.5
0.3
0.3
20
24
2.9
4.8
0.0
FY21E
182
124
47
-46
110
416
10
427
-250
177
14
9
-227
230
0
-47
0
0
183
383
71
453
FY22E
5.6
8.1
51.7
0.0
0.0
2.7
11.4
10.7
12.5
0.3
0.3
20
20
3.3
7.7
0.0
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Eq/Pref.Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
(INR b)
FY22E
336
114
47
-85
-50
362
-21
341
-218
123
0
25
-193
0
0
-47
0
0
-47
101
449
550
31 July 2020
28
 Motilal Oswal Financial Services
Reliance Industries
Reliance Retail : Financials and valuations
Income Statement
Y/E March
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
26.9
95.1
8
4.9
161
153
FY16
13.8
95.0
9
5.0
183
174
FY17
44.2
95.6
12
4.4
264
253
FY18
94.6
95.4
24
4.6
19
515
491
1019
960
FY19
98.1
94.2
59
5.8
53
1304
1212
FY20
FY21E
(INR b)
FY22E
27.9
93.0
91
7.0
1402
1321
7.5
2027
1891
44.6
93.3
136
6.7
128
3
2
1
0
4
4
5
3
1
0
0
5
5
6
4
1
0
0
8
7
8
4
1
0
0
6
6
6
1
0
11
80
94.2
81
5.8
74
6
4
2
0
7
4
2
0
19
19
48
48
74
74
9
3
0
73
73
127
127
31.1
3
3
-9.4
1.7
1
38.2
3
3
9.9
1.6
2
43.6
4
4
40.4
1.6
3
33.7
12
12
192.8
2.4
34.9
31
31
NA
3.1
17
25.4
55
55
NA
4.2
19
25.2
54
54
NA
3.9
18
25.2
95
95
NA
4.7
32
Balance Sheet
Y/E March
Equity Share Capital
Eq. Share Warrants & App. Money
Preference Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY15
50
0
0
2
17
-6
63
52
FY16
50
0
0
11
61
FY17
50
0
0
18
68
FY18
50
0
0
41
34
-6
53
21
41
5
32
91
FY19
11
-10
62
60
0
-9
119
128
0
254
126
50
0
0
76
FY20
50
0
0
131
181
FY21E
(INR b)
50
0
0
186
236
FY22E
50
0
0
280
330
228
47
0
280
44
0
76
39
88
5
37
375
44
0
88
46
88
5
42
33
13
21
35
14
20
40
17
23
98
26
25
36
113
43
3
52
41
48
0
90
211
72
114
33
88
6
180
82
4
5
5
5
7
8
39
2
2
8
13
4
0
34
63
17
51
52
2
0
9
28
5
0
32
62
33
64
51
7
3
9
39
9
0
22
60
48
70
105
22
2
28
116
156
41
119
82
33
0
128
93
25
3
58
57
71
0
199
82
29
86
160
86
1
149
280
247
396
255
106
85
111
205
111
1
239
375
317
557
121
254
52
228
31 July 2020
29
 Motilal Oswal Financial Services
Reliance Industries
Reliance Retail: Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY15
0.6
1.2
10.4
0.0
0.0
5.3
5.4
6.7
4.8
2.6
88
5
29
3.0
3.3
0.2
FY16
0.6
1.3
12.3
0.0
0.0
5.3
5.3
7.0
5.3
3.0
105
4
55
2.0
5.0
0.1
FY17
0.9
1.6
13.7
0.0
0.0
6.6
6.7
9.6
6.6
4.4
70
10
54
1.5
10.3
-0.2
FY18
2.5
3.4
18.2
0.0
0.0
15.7
13.5
22.8
9.7
4.3
74
16
58
1.4
19.1
0.3
FY19
6.3
7.5
25.2
0.0
0.0
29.0
18.7
26.6
10.4
4.0
40
16
15
2.3
8.7
0.7
FY20
11.1
13.3
36.3
0.0
0.0
36.1
25.7
37.5
11.4
5.7
26
7
16
1.4
9.3
0.2
FY21E
10.9
12.2
47.2
0.0
0.0
26.1
22.5
38.6
18.4
5.0
52
21
42
1.6
20.9
0.0
FY22E
19.0
20.5
66.2
0.0
0.0
33.5
29.7
54.2
23.0
5.4
46
19
37
1.8
36.0
-0.1
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY15
4
3
1
-1
-4
FY16
5
3
1
-1
2
FY17
8
4
1
-1
11
FY18
19
4
1
-5
-15
FY19
48
6
-1
-10
-33
FY20
74
11
-2
-11
84
FY21E
73
6
4
-18
-72
FY22E
127
7
4
-32
-34
4
0
10
0
22
1
4
1
11
6
156
9
-7
-2
71
-2
4
-4
11
-4
22
-8
5
-48
17
-47
165
-67
-9
38
70
-12
0
1
1
6
0
0
14
-3
0
-43
3
-4
-30
-7
0
98
18
2
29
0
2
57
0
2
-1
0
23
-2
0
-25
-5
0
-6
-1
0
0
-11
0
-8
-1
0
0
-49
10
34
-1
0
0
-54
4
94
-6
0
-23
-48
0
-81
-9
0
-27
40
0
-2
-4
0
0
-10
0
0
-4
0
0
-3
-1
2
-7
-1
2
-9
2
0
43
-1
3