17 April 2013
4QFY13 Results Update | Sector: Oil & Gas
Reliance Industries
BSE Sensex
S&P CNX
18,745
5,689
Bloomberg
RIL IN
Equity Shares (m)
3,228.0
M. Cap. (INR b)/(USD b) 2,598/47.7
52-Week Range (INR)
955/674
1, 6, 12 Rel. Perf. (%)
-1/-1/-2
CMP: INR805
TP: INR867
Neutral
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
12.4
1.3
8.6
1.1
11.9
1.2
8.7
1.2
11.2
1.1
8.1
1.2
2013E 2014E 2015E
3,603
308
210
71.9
4.8
619
12.3
11.7
16.1
3,653
302
218
74.2
3.9
682
11.7
11.3
16.4
3,608
323
232
78.7
6.3
747
11.3
11.2
16.2
Reliance Industries' (RIL) EBIT for 4QFY13 was INR59.2b (+23% YoY, -5% QoQ),
lower than our estimate of INR65.8b, primarily due to lower than expected
petchem EBIT. However, PAT was in-line at INR55.9b (+32% YoY, +2% QoQ; our
estimate was INR55b), led by lower depreciation at INR22.4b (v/s our estimate
of INR23.4b) and higher other income at INR22.4b (v/s our estimate of INR18.8b).
Refining - GRM in-line; EBIT impacted by higher opex/lower throughput:
GRM was USD10.1/bbl (+33% YoY, +5% QoQ; v/s estimate of USD10/bbl).
Refining EBIT at INR35.2b (v/s estimate of INR37.7b) was impacted by 8%
QoQ decline in throughput to 16.1mmt, led by CDU maintenance shutdown
and higher opex.
Petchem - Below estimates led by lower volumes:
Petchem EBIT was INR19b,
down 13% YoY and 2% QoQ, despite higher QoQ individual product spreads.
EBIT margin was 8.6% against 8.8% in 3QFY13. The management indicated
that lower petchem EBIT is due to lower volumes. We believe it could also be
due to adverse sales mix.
E&P - meaningful upside 3-4 years away:
KG-D6 production averaged
19.2mmscmd (v/s 24mmscmd in 3QFY13) and production is expected to
stabilize post the workover well drilling / booster compressors, expected in
early FY15. RIL, along with BP has proposed development of additional 4tcf of
gas with an investment of USD5b. If government approvals are received on
time, these new development projects (R-series, satellite fields, etc) will
start production in 3-4 years. Further, NEC- 25 production start is now expected
in mid-2019.
Valuation and view:
In FY14/FY15, we model (a) GRM at USD9/bbl, (b) KG-D6 gas
price at USD4.2/7/mmbtu, and (c) KG-D6 gas volumes at 13/15mmscmd. While
turnaround in the Retail business (EBITDA of INR780m in FY13 v/s loss of INR3.4b
in FY12) is positive, any meaningful earnings addition is expected only in FY16/
17, when its large projects (pet coke gasification/off-gas cracker) commission.
Core business outlook (90% of earnings) remains subdued and we expect RoE to
hover at ~12%. The stock trades at 11.2x FY15E adjusted EPS and at an EV of 8.1x
FY15E EBITDA. Our SOTP-based target price is INR867. Maintain
Neutral.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Kunal Gupta
(Kunal.Gupta@MotilalOswal.com); +91 22 3982 5445
Investors are advised to refer through disclosures made at the end of the Research Report.

Reliance Industries
Segment-wise performance
1Q
Segmental Revenues (INR b)
Petochem
Refining
Oil & Gas
Others
Total
Segmental EBIT
Petrochem
Refining
Oil & Gas
Others
Total
Segmental EBIT Margin (%)
Petrochemicals
Refining
Oil & Gas
Others
Total
Operating Metrics
Refining (USD/bbl)
RIL GRM
Singapore GRM
Premium
Refinery Thr’ put (mmt)
Utilization (%)
Petrochemicals
Total producton (mmt)
Polymer (‘000 MT)
Polyester (‘000 MT)
Polyester Interm. (‘000 MT)
E&P
Gross Oil Production (kbd)
PMT
Yemen
KG-D6
Total
Gross Gas Production (mmscmd)
PMT
KG-D6
Total
Gross Oil +Gas (mmboe)
Net Gas Production (mmscmd)
RIL's share in KG-D6 at 60% from
184
737
39
2
962
22
32
15
0
69
12
4
38
3
7
2Q
211
681
36
5
932
24
31
15
0
70
11
5
43
2
8
FY12
3Q
198
767
28
2
996
22
17
13
0
51
11
2
46
4
5
4Q
214
762
26
3
1,005
22
17
10
0
48
10
2
36
3
5
1Q
218
854
25
2
1,100
18
22
10
0
49
8
3
39
0
4
2Q
221
839
23
2
1,084
17
35
9
0
62
8
4
38
5
6
FY13
3Q
221
866
19
2
1,108
19
36
6
1
62
9
4
31
44
6
4Q
222
779
16
4
1,020
19
35
5
0
59
9
5
29
13
6
4QFY13 (%)
YoY
QoQ
3.5
2.2
-38.8
38.1
1.5
-12.8
107.5
-51.6
585.7
22.7
-15.8
103.1
-21.0
396.6
20.9
0.5
-10.1
-16.9
104.0
-7.9
-2.2
-2.6
-22.0
-37.7
-4.8
-2.6
8.3
-6.2
-69.4
3.5
10.3
8.6
1.7
17.0
109.7
5.5
1,091
411
1,212
10.1
9.1
1.0
17.1
110.3
5.7
1,134
414
1,188
6.8
7.9
-1.1
17.2
111.0
5.5
1,146
415
1,200
7.6
7.5
0.1
16.3
105.2
5.5
1,084
422
1,200
7.6
6.7
0.9
17.3
111.6
5.6
1,101
415
1,203
9.5
9.1
0.4
17.6
113.5
5.5
1,101
420
1,197
9.6
6.5
3.1
17.5
112.9
5.5
1,098
365
1,200
10.1
8.7
1.4
16.1
103.9
5.4
1,100
430
1,170
32.9
16.0
n.a.
-1.2
-1.2
-1.8
1.5
1.9
-2.5
5.2
33.8
-54.8
-8.0
-8.0
-1.8
0.2
17.8
-2.5
33.0
4.3
11.7
49.0
30.4
4.3
15.2
49.9
29.3
4.3
15.2
48.9
10.9
41.0
51.9
35.2
18.3
26.8
3.9
13.2
43.9
10.8
35.5
46.2
31.4
16.2
26.4
5.0
10.4
41.8
9.9
33.0
42.9
29.2
14.9
25.0
5.0
10.3
40.3
9.3
28.5
37.8
26.1
13.2
23.9
-
7.6
31.5
8.9
24.0
32.9
22.4
11.3
20.4
-
7.8
28.2
7.6
19.2
26.8
18.5
9.2
Source:
-23.8
n.a.
-41.0
-35.7
-14.5
n.a.
2.2
-10.5
11.8
11.5
48.6
45.3
60.4
56.8
40.3
38.2
30.0
26.1
Sept-12 (earlier 90%)
-29.3
-14.7
-45.9
-20.1
-42.0
-18.6
-41.2
-17.6
-43.3
-19.0
Company, MOSL
17 April 2013
2

Reliance Industries
Other highlights
D,D&A was down 9% QoQ to INR22b, driven by lower E&P depletion, led by lower
production.
Other income was higher QoQ at INR22b due to higher cash balance and profit on
sale of investments.
Net interest outgo was INR7b (v/s INR7.7b in 4QFY12, INR8.1b in 3QFY13) post
interest capitalization of INR2.2b (v/s INR0.7b in 3QFY13).
Effective tax rate was 21.5% (v/s 22% in 4QFY12 and 19.7% in 3QFY13).
Gross debt stood at INR724b and cash/cash equivalents at INR830b, translating
into net cash of INR105b (v/s net cash of INR87b in 3QFY13) on a standalone basis.
However, on consolidated basis, the company has net debt of INR240b (gross
debt: INR1,070b; cash: INR830b).
Update on new projects
Polyester expansion:
Capacity to start commissioning from FY14.
Petcoke gasification:
Procurement of long lead items is ongoing; could be
completed in 36 months. Management expects GRM addition of USD2.5/bbl.
Off-gas cracker:
Technology suppliers, project management and EPC contractors
finalized; likely to commission by 2016/17.
Reconciling standalone and consolidated EBITDA (INR b)
FY12
FY13 Abs. Chg. %
RIL (Standalone EBITDA)
RHUSA (Shale Gas)
Recron Malaysia
GAPCO
Reliance Retail
Others
Total
* Includes interest income
398.1
9.4
1.5
2.5
(3.4)
(1.1)
407.0
387.9
21.1
(0.9)
1.4
0.8
(1.1)
409.1
(10.3)
11.7
(2.4)
(1.1)
4.2
0.0
2.1
Remarks
Decline in E&P production and weakness
in petchems, partially offset by higher GRM’s
Average Production increased 93% YoY from 5.9 mmscmd in
4QFY12 to 11.9 mmscmd in 4QFY13
Swing in profitability is surprising with reference to the
headline polyester margins
Crossed INR100b in sales, turned EBITDA
positive for the first time
Source: Company, MOSL
E&P EBIT share continues to decline (%)
Profit on sale of investments boosts
other income in 4QFY13
Net cash of INR105b on balance sheet
Source: Company, MOSL
17 April 2013
3

Reliance Industries
Refining: GRM at USD10.1/bbl; premium to Singapore at USD1.4/bbl;
Throughput impacted by shutdown
Refinery EBIT contribution to overall EBIT increased to 59% in 4QFY13, led by higher
GRM (v/s 35% in 4QFY12 and 58% in 3QFY13).
RIL's 4QFY13 GRM at USD10.1/bbl was marginally higher than our estimate of
USD10/bbl and was up 33% YoY and 5% QoQ. RIL reported USD1.4/bbl premium to
Singapore GRM (v/s premium of USD0.1/bbl in 4QFY12 and USD3.1/bbl in 3QFY13).
The QoQ premium decline was partly led by higher LNG costs.
YoY increase in GRM was led by (1) higher auto fuel cracks, and (2) higher Arab
light-heavy differential (USD4.5/bbl in 4QFY13 against USD4/bbl in 3QFY13).
Refinery utilization at 104% was significantly higher than global peers. Throughput
was down QoQ at 16.1mmt (v/s our estimate of 16.5mmt) due to planned 3-week
shutdown of 1 CDU during 4QFY13 in its SEZ refinery.
Apart from the CDU shutdown impact refining EBIT was impacted by higher opex
at USD3.5/bbl in 4QFY13 v/s USD3.1/bbl in 3QFY13. RIL increased CDU capacity by
~3% (~1.5mmt) through debottlenecking.
PDVSA, Venezuela will supply 300-400kbpd of crude to RIL's refinery (24-32% of
capacity) as per the agreement.
Refining outlook:
We expect GRMs to remain range-bound in the medium term
due to (a) weak global oil demand (0.8mmbbl/d in 2013), and (b) additional refining
capacity of >1mmbbl/d coming up with almost nil refinery closures in the last 8-9
months. Resistance by European governments to shut down uneconomical
refineries has contributed to the lower overall utilization, impacting margins.
While the medium-term GRM outlook remains subdued, we expect GRMs to be
volatile (occasional spurts) due to occasional bunching up of shutdowns. We model
GRM of USD9/bbl in FY14/15 for RIL.
Refining EBIT lower QoQ
due to shutdown
4QFY13 GRM at USD10.1/bbl;
premium of USD1.4/bbl
Refinery utilization lower due to CDU
maintenance shutdown
Source: Company, MOSL
17 April 2013
4

Reliance Industries
Meaningful jump in gasoline cracks
on QoQ basis (USD/bbl)
Arab light-heavy spread up
USD0.5/bbl QoQ (USD/bbl)
Auto-fuel cracks decline towards second
half of March 2013 (USD/bbl)
Source: Company, MOSL
Petchem: EBIT below estimate despite higher headline spreads; expect
margins to improve in medium term
RIL's 4QFY13 petchem EBIT margin was 8.6% (v/s 10.2%/8.8% in 4QFY12/3QFY13).
While overall domestic market demand was up, RIL's sales volumes were lower
QoQ. On a YoY basis, domestic polymer demand was up 12% (13% in PP, 10% in
HDPE/LLDPE, 19% in LDPE and 14% in PVC), while polyester demand was up 5%
(4.4% in POY, 4.2% in PSF and 9.8% in PET).
Commissioning of new polyester capacities over the next 2-3 years will add to
earnings. The off-gas cracker commissioning in 2016/17 will be a big earnings
booster for the company.
Petchem outlook:
We believe polymer margins have bottomed out but anticipate
slow recovery. In the medium term, we expect margins to improve, as demand
growth is likely to be higher than incremental capacity additions.
Petchem EBIT margin down,
partly due to adverse sales mix
Individual petchem spreads
improve QoQ (INR/kg)
Petchem volumes decline QoQ (mmt)
Source: Company, MOSL
E&P: KG-D6 production at 19mmscmd in 4QFY13 v/s 24mmscmd in 3QFY13;
Next production growth 3-4 years away; government approvals critical
RIL's 4QFY13 E&P EBIT contribution was the lowest in the last 15 quarters, led by
lower KG-D6 volumes. EBIT was INR4.6b (v/s INR9.5b in 4QFY12 and INR5.9b in
3QFY13). The significant QoQ decline was led by lower KG-D6 production and higher
D,D&A charge. RIL's E&P EBIT is now down to pre-KG-D6 levels.
5
17 April 2013

Reliance Industries
KG-D6 gross volumes averaged 19mmsmcd in 4QFY13 (v/s 36mmscmd in 4QFY12
and 24mmscmd in 3QFY13).
RIL is pursuing various plans with DGH to stem the current production decline as
well as to start production from new fields.
Shale gas volumes encouraging: RIL's share of production stood at 31bcfe in 4QFY13
(+12% QoQ and +99% YoY). Its revenue share (not accounted in standalone) was
USD193m (v/s USD173m in 3QFY13) and EBITDA share was USD155m (v/s USD123m
in 3QFY13) as against its cumulative investment of USD5.7b.
Work program update
RIL, along with BP has proposed development of additional 4tcf of gas with an
investment of USD5b. If government approvals are received on time, these new
development projects (R-series, satellite fields, etc) will start production in 3-4
years.
Clarity on gas price will also be critical for additional investment decisions.
Further, NEC-25 production start is now expected in mid-2019.
According to media articles, the MJ1 well in KG-D6 (drilling ongoing) has found
hydrocarbons. The management is likely to issue an update on the same within a
month.
Update on RIL's key E&P blocks: DGH approval/gas pricing critical for future development
Block
KG-D6
Update / Planned Work Program
Base management of current Fields
- D1/D3 RFDP submitted for workover wells; side track campaigns
and MEG upgrade
- D26 RFDP approved; to drill new well to maximize gas recovery
- Compressor to maximize recovery from all the above
(D1, D3, D26) fields
New projects to exploit new reserves
- Development plan submitted for R-Series
- DoC review for D29, D30, D31 (Satellite) being pursued with MC
Well MJ1 targeting upsides in existing production area underway
NEC-25 (NEC-OSN-97/2)
- Integrated block development plan for D-32, D-40, D-9 and D-10
discoveries submitted to MC. Has proposed phased development
- First gas by mid-2019 subject to timely approvals
CY-D6 (CY-PR-DWN-2001/3)
- Appraisal program for discovery D53 reviewed by MC.
- 3D acquisition completed and appraisal well drilled;
results under evaluation
CY-D5 (CY-DWN-2001/2 )
- DoC for D35 (A1) discovery submitted in March 2010;
await DGH approval.
- Plan to drill additional exploratory location in FY14
KG-V-D3 (KG-DWN-2003/1)
- Revised DoC for D39 / D41 submitted in April 2012;
await DGH approval.
- Phase 1 valid up to Dec’14; new well locations are being identified
CB-10 (CB-ONN-2003/1)
- DoC for 8 discoveries submitted August 2011; await DGH approval
CBM blocks
Sonhat (North): Relinquished block due to poor prospectivity
Sohagpur East & West:
Expect first gas in FY15 subject to gas price
approval; Extension for development phase granted
up to Oct-Dec-14
*MC: Management Committee
Source: Company, MOSL
17 April 2013
6

Reliance Industries
KG-D6 current and planned project schematic
Source: Company
Lower production led to lower E&P
EBIT margin (%)
KG-D6 gross production averaged
19.2mmscmd in 4QFY13
Net hydrocarbon production at
9.2mmboe
Shale gas capex at USD470m;
USD5.7b till date (including carry)
RIL's production share
increased 12% QoQ
More wells drilled with focus on
liquid-rich area
17 April 2013
7

Reliance Industries
Organized retail: Turns EBITDA positive; sales up 42% YoY to INR108b
RIL has invested ~INR100b till date in the Retail business. Of its total Retail sales,
~65% is contributed by 13m loyalty customers.
Its FY13 revenue grew 42% to INR108b (v/s INR73.6b in FY12), driven by same store
sales (SSS) growth of 7-18% across formats.
Retail EBITDA was positive in FY13 at INR780m v/s loss of INR3.4b in FY12.
RIL currently operates 1,466 stores (184 new stores in FY13) in 129 cities and has an
area of 9msf.
RIL's Retail business presence across India
Strong sales growth traction across categories
Source: Company
17 April 2013
8

Reliance Industries
Standalone and Consolidated Profit & Loss
Standalone
FY11
FY12
P&L (INR b)
Net Sales
EBITDA
Depreciation
EBIT
Interest Expenses
Other Income
Exceptional items
PBT
Tax
PAT
Share of profit from assoc.
Minority Interest
PAT after share of associates
& minority interest
2,482
381
136
245
23
31
-
252
50
203
-
-
203
3,299
336
114
222
27
62
-
258
57
200
-
-
200
FY13
3,603
308
95
213
30
80
-
263
53
210
-
-
210
Consolidated
FY11
FY12
2,658
390
141
248
24
26
-9
241
48
193
-1
0
193
3,585
348
124
224
29
61
-3
253
57
196
1
0
FY13
3,971
330
112
218
35
78
-
262
53
208
1
0
197
209
Source: Company, MOSL
Standalone and Consolidated Balance Sheet
FY11
Standalone
FY12
33
1,628
-
586
121
2,368
1,215
540
360
184
396
254
2
1,197
403
137
43
583
2,368
FY13
32
1,768
-
545
122
2,467
1,289
525
427
119
495
325
5
1,371
458
216
43
718
2,467
Consolidated
FY11
FY12
30
1,511
8
800
111
2,460
1,863
216
385
157
301
127
26
996
361
205
50
616
2,460
FY13
Balance Sheet (INR b)
Share Capital
Reserves and Surplus
Minority Interest
Debt
Deferred tax liability
Total Liabilities
Fixed Assets
Investments
Inventories
Trade receivables
Cash and bank balances
Loans and advances
Other Current Assets
Curr. Assets, L & Adv.
Trade payables
Other current liabilities
Provisions
Non-Current Liabilities
Total Assets
33
1,483
-
634
116
2,265
1,549
377
298
174
271
175
2
921
348
187
46
582
2,265
30
29
1,665
1,791
8
9
826
893
116
116
2,644
2,839
1,642
1,834
386
428
467
546
169
98
407
505
165
195
36
18
1,244
1,361
404
497
176
237
48
51
627
784
2,644
2,839
Source: Company, MOSL
17 April 2013
9

Reliance Industries
Valuation and view
In FY14/FY15, we model (a) GRM at USD9/bbl, (b) KG-D6 gas price at USD4.2/7/
mmbtu, and (c) KG-D6 gas volumes at 13/15mmscmd.
While turnaround in the Retail business (EBITDA of INR780m in FY13 v/s loss of
INR3.4b in FY12) is positive, any meaningful earnings addition is expected only in
FY16/17, when its large projects (pet coke gasification/off-gas cracker) commission.
Core business outlook (90% of earnings) remains subdued and we expect RoE to
hover at ~12%.
The stock trades at 11.2x FY15E adjusted EPS and at an EV of 8.1x FY15E EBITDA. Our
SOTP-based target price is INR867. Maintain
Neutral.
Key things to watch: (1) DGH approvals for its E&P program, (2) Clarity on its E&P
arbitration and 7-year income tax holiday for KG-D6 gas (we model tax holiday),
(3) Margin trend in Refining and Petchem, (4) Developments on USD12b capex
plan, and (5) Updates on its BWA and Retail forays.
RIL: Key assumptions
Key Metrics
FY09
Exchange Rate (INR/USD)
45.8
Refining
Capacity (mmt)
33.0
Production (mmt)
32.0
Capacity Utilization (%)
97
GRM (USD/bbl)
Blended GRM
12.3
Singapore GRM
5.8
Premuim to Singapore
6.5
E&P
Gas Production (mmscmd)
Oil Production (kbd)
Pricing
Brent Oil (USD/bbl)
84.8
Wellhead Gas Price (USD/mmbtu)
EPS
49.6
EPS (ex Treasury)
55.0
FY10
47.5
62.0
60.6
98
6.9
3.6
3.3
39.8
10.7
69.7
4.2
49.6
54.8
FY11
45.6
62.0
66.5
107
8.7
5.2
3.5
56.2
18.9
86.5
4.2
62.0
68.4
FY12
47.9
62.0
67.6
109
8.4
8.3
0.1
42.6
13.8
114.5
4.2
61.3
67.7
FY13E
54.5
62.0
69.1
111
9.2
7.9
1.3
26.5
8.8
FY14E
54.0
62.0
69.2
112
9.0
7.5
1.5
13.0
6.5
FY15E
53.0
62.0
69.2
112
9.0
7.5
1.5
15.0
6.0
110.6
110.0
110.0
4.2
4.2
7.0
65.0
67.5
71.6
71.9
74.6
79.1
Source: Company, MOSL
RIL: Segmental EBIT break-up
FY09
Segmental EBIT (INR b)
Refining
Petrochemicals
E&P
Total
Segmental EBIT share (%)
Refining
Petchem
E&P
Total
96
69
23
188
51
37
12
100
FY10
60
86
55
200
30
43
27
100
FY11
92
93
67
252
36
37
27
100
FY12
97
90
53
239
40
38
22
100
FY13E
131
70
30
231
FY14E
126
86
19
231
FY15E
125
101
29
256
57
55
49
30
37
40
13
8
11
100
100
100
Source: Company, MOSL
17 April 2013
10

Reliance Industries
RIL: Sum-of-the-parts valuation
Business
Core business
Refining
Petchem
E&P Initiatives
KG - D6 Gas (KG Basin)
KG - D6 MA1 Oil (KG Basin)
NEC - 25 (Mahanadi basin)
KG-DWN-2003/1 (D3)
Sohagpur East & West (CBM)
PMT
Investment in Shale Gas
Investments
Investments in RGTIL, RIIL
Investments in BWA
Investment in SEZ
Reliance Retail
Less: Net Debt/ (Cash)
Total Base Value
USD b
32
19
13
9
4
0
1
1
1
1
2
3
0
1
0
1
-2
46
INR b Adj. INR/sh
1,746
1,026
720
502
198
17
37
28
46
74
104
162
24
48
21
69
-125
2,535
598
352
246
172
68
6
13
9
16
25
35
55
8
16
7
23
-42
867
Remarks/Methodology
EV @6x FY15E EBITDA, implied USD1126/Nelson complexity bpd
Core business EV @6x FY15E EBITDA
Includes KG-D6, NEC-25, CBM, KG-III-6 and Yemen block
DCF; 60% stake; Plateau of 40mmscmd in FY18; 6tcf cumulative; 4tcf
remaining
DCF; 60% stake; 43mmbbls recovery; (LT Brent - USD95/bbl)
DCF; 60% stake; OGIP of 3tcf, prodn likely in 2019
Prospective resources of 695mmboe as per Hardy; RIL (60%)
DCF; 100% stake; OGIP of 3.65 TCF, assumed 50% recovery
Currently producing; EV @3x FY15E EBITDA
JV with Atlas, Pioneer & Carrizo; valued at 2x equity investment
Includes Reliance Retail, RGTIL, RIIL and SEZ
At book value
BWA Foray
Valued at 0.5x equity investment
100% subsidiary of RIL; 0.7x equity investment
Based on fully diluted equity shares of 2,920m (excl 309m treasury shares)
Source: MOSL
17 April 2013
11

Reliance Industries
Reliance Industries: an investment profile
Company description
Reliance Industries (RIL), a Fortune 500 company, is
India's largest private sector entity, with turnover of
USD66.8b and net profit of USD3.9b. Over the years RIL
has grown through backward integration in energy chain
(textiles, petchem, refining and E&P) and is now moving
into new areas like organized retail and BWA. It operates
one of the largest refining capacity of 1.24mmbbl/d at a
single location and is the largest producer of polyester
fibre and yarn.
new refinery start-ups impacting global utilization/
margins will continue to weigh heavy on the RIL's
refining margin performance. We expect marginal
premium to benchmark Singapore refining margins to
continue in near term.
Petrochemicals - expect margins to improve:
We believe
polymer margins have bottomed out but anticipate slow
recovery. In the medium term, we expect margins to
improve, as demand growth is likely to be higher than
incremental capacity additions.
Key investment arguments
E&P upside now seem back-ended:
Post the reserve
downgrade by RIL and its JV partners, growth from E&P
segment seems to be limited in medium term. Delays in
approvals of development plans for satellite fields and
NEC-25 is further adding to uncertainty. RIL is the largest
exploration acreage holder in the private sector in India.
Post its world-scale gas discovery in 2002 in KG-D6; it has
reported more than 50 discoveries. Global major BP's
stake purchase in RIL's NELP blocks is expected to help
in tackling production issues in KG-D6. It should also help
RIL to enhance chances of new discoveries and obtain
higher recovery from its E&P acreage.
Refining - challenging times ahead:
We expect the
margins to remain range bound over due to uncertain
global economic environment (particularly Europe), and
Key investment risks
Further delays in the KG-D6 gas volume ramp up.
Our estimates could be adversely affected by lower
than expected refining and petchem margins.
Recent developments
RIL has started drilling MJ1 well in KG-D6 block.
Management will update on the results of drilling in
a month's time.
RIL submitted FDP for R-series field in January 2013.
RIL has de-bottlenecked refining capacity at its SEZ
refinery resulting in a ~3% increase in capacity.
Valuation and view
The stock trades at 11.2x FY15E adjusted EPS and at an
EV of 8.1x FY15E EBITDA. Our SOTP-based target price is
INR867. Maintain
Neutral.
EPS: MOSL forecast v/s consensus (INR)
Target Price and Recommendation
Current
Price (INR)
805
Target
Price (INR)
867
Upside
(%)
7.7
Reco.
Neutral
MOSL
Forecast
FY14
FY15
67.1
71.2
Consensus
Forecast
69.8
74.6
Variation
(%)
-3.9
-4.5
Stock performance (1 year)
Shareholding Pattern (%)
Promoter
Domestic Inst
Foreign
Others
17 April 2013
Dec-12
45.4
10.8
21.9
21.9
Sep-12
45.3
10.8
21.8
22.1
Dec-11
44.8
11.3
21.2
22.7
12

Reliance Industries
Financials and Valuation
17 April 2013
13

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