23 June 2015
RELIANCE INDUSTRIES FY15
Reliance Industries Ltd’s (RIL) FY15 annual report analysis
highlights its highest ever capex (cash capex of INR634b) led by
its large core and non-core investments. 60% of the past four
year capex is towards telecom and refining segments. Difference
of 29% in balance sheet and cash flow capex primarily due to
unrealized forex gain/(loss), creditors for capex and
consolidation of Network 18 consolidation. Effective income tax
rate stood at a decade high level of ~24%.
n
A
NNUAL
R
EPORT
T
HREADBARE
The
ART
of annual report analysis
WHAT’s NEW IN FY15
n
High capex of INR1t in FY15
n
Decade high tax rate of ~24%
n
Related party payments
continue to remain high,
account for 21% of operating
and admin expenses
n
n
n
Highest ever capex of INR1t in FY15:
RIL’s INR1t capex in FY15
is the highest ever in its history; the allocation was: (i)
INR313b in refining business, (iii) INR158b in Oil & gas
business, and (iii) INR531b in other segments (primarily in
telecom). Of the total capital expenditure of INR2.2t in the
past four years, INR731b (32%) has been incurred on ‘other
segments’ (primarily telecom), INR634b (28%) on ‘oil & gas’
segment, INR554b (24%) on refining segment and INR271b
(12%) in petchem business.
Exposure in subsidiaries and associates at 34% of FY15 net
worth:
Aggregate of loans and investments in subsidiaries and
associates increased 20% YoY to INR743b in FY15 (FY14:
INR621b). Incremental investments have been made in
Reliance Jio Infocomm (INR70.5b), Reliance Industrial
Investments and Holdings (INR11b), and Reliance Prolific
Traders Private Ltd (INR12.4b).
Related party payments high at 21% of operating & admin
expenses:
Related parties continue to account for a
considerable proportion of the operating & administration
expenses (INR62b for FY15 v/s INR57b in FY14).
Deferred tax assets worth INR24b created primarily on
account of carried forward loss in subsidiaries:
RIL created
DTA of INR24.2b during FY15 (FY14: INR12.1b) on account of
losses in subsidiaries, which have been carried forward to be
set-off in future years. Extrapolating this, these assets would
point to losses worth INR71b in the subsidiaries business
during FY15. However, as per the subsidiary details given in
the annual report, the cumulative loss of all the subsidiaries is
only INR33b in FY15 (FY14: INR11b). We believe the difference
is due to consolidation of financial statements on line by line
basis.
Stock Info
Bloomberg
CMP (INR)
Equity Shares (m)
52-Week Range (INR)
M.Cap. (INR b)/(USD b)
1,6,12 Rel. Perf. (%)
Y/E Mar
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
Payout (%)
P/E (x)
P/BV (x)
E: MOSL Estimates
As on
Promoter
DII
FII
Others
2015
3,573
316.0
227.2
77.5
3.4
737.9
11.0
10.5
16.7
14.2
1.3
RIL IN
995
3234
1,063/796
3217.8/50.6
11/9/-15
2016E
2,848
350.4
250.0
85.3
10.0
810.3
11.0
10.6
16.7
12.9
1.2
2017E
3,429
454.4
308.1
103.8
23.2
890.1
12.3
12.4
16.7
10.6
1.1
Standalone financial summary (INR b)
Shareholding pattern (%)
Mar-15
45.2
12.6
22.0
20.2
Dec-14
45.3
12.0
22.2
20.5
Mar-14
45.3
11.3
22.1
21.4
Note: FII Includes depository receipts
Auditor’s name
Chaturvedi & Shah, Chartered Accountants
Deloitte Haskins & Sells LLP, Chartered Accountants
Rajendra & Co. Chartered Accountants
ART will present a threadbare portrait of annual reports - statistical, strategic and structured. We believe ART's wide canvas - from accounting and auditing issues to
operating performance to management insights to governance matters - will help readers paint a clearer picture of the stock's investment worthiness.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 39825432
Aditya Dakh
(Aditya.Dakh@MotilalOswal.com); +91 22 3982 5402
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

ART|
Reliance Industries FY15
ART #1
ACCOUNTING / AUDITING MATTERS
Derived revaluation reserve adjustment improves RoE from 11% to 12%
n
n
n
n
n
RIL carried two major revaluations of fixed assets (INR225b in FY06 and INR129b
in FY09), with consequent increase in the revaluation reserve. It adjusts the
incremental depreciation charge on revalued assets through the revaluation
reserve, in line with the conventional accounting norms. Hence, at the end of
the life of the asset, revaluation reserve should be nil.
Reported revaluation reserves at nil:
However, RIL adjusted the revaluation
reserve of INR191b in FY06 and INR7b in FY11 on account of demerger of coal-
based, gas-based, financial service undertaking and telecommunications venture
This resulted in revaluation reserve being nil in the standalone financial
statements.
...however adjusted for demerger, INR190b still to be depreciated:
Our analysis
suggests that RIL still has ~INR190b of revalued reserves to be adjusted through
depreciation. Now, as the reported revaluation reserve is nil, we understand
that incremental depreciation on revalued assets has been routed through
income statement in FY15.
Hence in our view, the net worth should be adjusted for INR190b, resulting in
book value per share to be lower by INR64/sh to INR678/sh at the end of FY15.
Consequently, adjusted RoEs would improve to 12.4% on average basis—a
110bp increase from the reported RoE of 11.3%.
Exhibit 1:
Standalone financial statements: Movement of revaluation reserve (INR b)
Particulars
FY06
FY07
FY08
FY09 FY10
27.3
46.5
26.5
8.7 117.8
Opening revaluation reserve balance
225.0
-
-
129.0
-
Add: Revaluation of assets
14.5
20.0
17.8
19.9
29.8
Less: Depreciation on revalued amount
-
-
-
-
Less: Utilised on Demerger Adjustments 191.2
-0.05
-0.01
-
-
-
Add/(Less): Others adjustments
46.5
26.5
8.7
117.8
88.0
Closing revaluation reserve balance
Exhibit 2: Consolidated financial statements: Movement of revaluation reserve (INR b)
Particulars
FY06
FY07
FY08
FY09 FY10
27.3
49.8
29.8
12.0 122.3
Opening revaluation reserve balance
225.0
-
-
130.6
2.3
Add: Revaluation of assets
14.5
20.0
17.8
19.9
29.9
Less: Depreciation on revalued amount
-
-
-
-
Less: Utilized on Demerger adjustments 187.9
-0.05
-0.01
-
-0.4
-0.5
Add/(Less): Others adjustments
49.8
29.8
12.0
122.3
94.1
Closing revaluation reserve balance
FY11
88.0
-
26.3
7.0
-
54.7
FY12
54.7
-
23.4
-
-
31.3
FY13
31.3
-
20.7
-
-
10.6
FY14
10.6
-
10.6
-
-
-
FY15
-
-
-
-
-
-
FY11
94.1
0.1
26.3
7.0
-0.03
60.9
FY12
60.9
0.1
23.6
-
0.01
37.4
FY13
37.4
-
20.8
-
0.02
16.6
FY14
16.6
3.5
10.8
-
-0.8
8.5
FY15
8.5
-
0.3
-
0.1
8.3
Exhibit 3: Book value lower by 9% if revaluation reserve adjusted from net worth (INR b)
Particulars
FY11
FY12
Reported net worth (A)
1,541
1,694
Reported book value (INR/sh)
517
569
Reported RoE (Avg, %)
12.2
Revaluation reserve adjustment (B)
198
198
Adjusted net worth (A - B)
1,343
1,496
Adjusted book value (INR/sh)
450
502
Adjusted RoE (Avg, %)
13.9
*
Includes depreciation on revalued assets for FY15 as no separate disclosure available
FY13
1,820
620
11.9
198
1,622
552
13.4
FY14
1,987
676
11.8
190
1,796
611
13.2
FY15
2,185
742
11.3
190*
1,995
678
12.4
Source: Company Annual Report, MOSL
23 June 2015
2

ART
|
Reliance Industries FY15
Line-by-line consolidation makes deferred tax asset reconciliation difficult
n
n
n
n
n
RIL had deferred tax liability (DTL) (net) of INR130b in FY15 (FY14: INR119b). Of
this, INR65.7b in FY15 pertains to deferred tax assets (DTA) created on carried
forward losses of subsidiaries—up from INR41.5b in FY14.
This implies that RIL created DTA of INR24.2b (INR65.7b – INR41.5b) during FY15
(FY14: INR12.1b) on account of losses in subsidiaries, which have been carried
forward to be set-off in future years.
Extrapolating this based on the Indian corporate tax rate of 34% (including
surcharge & cess), these assets would point to losses worth INR71b in the
subsidiaries business during FY15.
However, as per the subsidiary details given in the annual report, the cumulative
loss of all the subsidiaries is only INR33b in FY15 (FY14: INR11b).
We believe the reconciliation is not possible due to consolidation of financial
statements on line by line basis.
Exhibit 4: Our calculation suggests DTA exceeds cumulative losses of subsidiaries (INR b)
Particulars
FY12
FY13
FY14
FY15
DTA on account of c/fd loss of subsidiaries
26.3
29.5
41.5
65.7
24.2
17.3
3.2
12.1
Incremental DTA created during the year
Extrapolating the DTA created to
71
50.9
9.3
35.5
cumulative losses in subsidiaries (assuming
corporate tax rate @ 34%) (A)
Cumulative loss in subsidiaries as per
12.8
11.1
11.0
33.4
annual report (B)
Difference (A-B)
38.1
-1.8
24.5
37.5
Source: Company Annual Report, MOSL
Exhibit 5: Cumulative losses of all subsidiaries at INR33b (INR b)
Particulars
FY12
FY13
Reliance Marcellus II LLC
0.1
0.5
Reliance Holdings USA, Inc.
1.6
3.0
Reliance Marcellus LLC
0.4
1.5
Recron (Malaysia) Sdn Bhd
-
1.2
Reliance Exploration & Production DMCC
3.8
0.3
Reliance Dairy Foods Limited
0.2
0.2
Reliance Fresh Limited
2.7
0.5
Other loss-making subsidiaries
4.0
3.7
Total
12.8
11.1
FY14
1.0
2.9
2.8
1.6
0.6
0.3
-
1.8
11.0
FY15
15.0
5.4
8.9
2.7
0.2
-
-
1.3
33.4
Source: Company Annual Report, MOSL
23 June 2015
3

ART
|
Reliance Industries FY15
ART #2
KEY FINANCIAL INSIGHTS
29% variation in balance sheet and cash flow capex
n
n
On comparing the balance sheet capex with the capex as per cash flow
statement, there exists a difference of INR254b in FY15.
We understand the difference is on account of unrealized foreign exchange
gain/loss, creditors for capital expenditure and adjustments arising on
consolidation of Network18 and its subsidiary TV18 in FY15.
Exhibit 6:
Reconciliation of Capex as per balance sheet and cash flow statement (INR b)
Particulars
Additions during the year (as appearing in the gross block)
Net increase in CWIP
Net increase in ITUD
Capex as per balance sheet
Less: Forex capitalized
Less: Interest capitalized
Adj. Capex as per balance sheet
Less: Cash flow capex
Difference
FY12
FY13
FY14
FY15
267
90
231
251
12
107
315
576
(40)
139
101
174
239
335
647
1,000
79
59
107
69
12
13
18
44
147
263
522
887
(164)
(307)
(601)
(634)
-17
-44
-79
254
Source: Company Annual Report, MOSL
Increased negative free cash flow led by highest ever capex
n
n
n
Out of the total balance sheet capex of INR1t in FY15, INR313b (31%) was
incurred on the refining segment—~80% YoY increase.
The increase in cash capex from INR601b in FY14 to INR634b in FY15 resulted in
negative free cash flow of INR351b in FY15 (FY14: INR224b).
RIL’s cumulative capex for the past four years stands at INR2.2t, INR731b (32%)
on ‘other segments’ (primarily telecom), INR634b (28%) on ‘oil & gas’, INR554b
(24%) on ‘refining’ and INR271b (12%) in ‘petchem’.
Exhibit 7: Cash capex of INR634b in FY15 highest ever by the company (INR b)
Particulars
Cash flow from operations
Finance cost
Cash capex
Free cash flows
FY12
270
-32
-80
158
Standalone
FY13
FY14
330
422
-35
-41
-159
-325
135
57
FY15
353
-34
-427
-108
Subsidiary (Derived)
FY12
FY13
FY14
-25
39
11
-4
-11
-16
-84
-148
-276
-113
-120
-281
Consolidated
FY15
FY12
FY13
FY14
FY15
-9
245
369
433
344
-28
-36
-46
-56
-61
-206
-164
-307
-601
-634
-243
45
16
-224
-351
Source: Company Annual Report, MOSL
23 June 2015
4

ART
|
Reliance Industries FY15
Exhibit 8: ~60% of cumulative capex since FY12 spent on telecom and refining (INR b)
Petrochemicals
Organised retail
Total capex
323
Refining
Others
Oil & Gas
Unallocable
691
1002
246
7
- 31
159 27
22
FY12
-8 58
13738
81
FY13
12
248
(11)
180
176
87
FY14
54
393
158
313
81
FY15
4
Source: Company Annual Report, MOSL
Large CWIP to increase future depreciation
n
n
Of the total fixed assets of INR3.2t as of FY15-end, INR1,665b (~52%) is still
under construction. Depreciation of the company will increase after the
capitalization of these projects.
Intangible assets under development (INR602b) form ~36% of the total Capital
work in progress as of FY15. CWIP pertaining to intangible assets appears to be
on account of shale gas business and telecom segment related licenses.
Exhibit 9: High CWIP to increase depreciation in future (INR b)
Capital Work-in-Progress
Intangible Assets Under Development
Total CWIP
1,665
915
254
65
189
500
172
328
486
428
1,063 602
FY12
FY13
FY14
FY15
Source: Company Annual Report, MOSL
n
CWIP in subsidiaries increased 1.6x—from INR160b in FY14 to INR411b in FY15.
Standalone CWIP doubled to INR651b in FY15 (FY14: INR327b).
Exhibit 11: Capex dominated by refining and oil & gas
segments in the past four years (%)
Segment wise capex over last 4 years (%)
Unallocable
, 4
Others
(Telecom),
32
Petchem,
12
Exhibit 10: Capital WIP in subsidiary increased ~1.6x in FY15
(INR b)
Standalone
Total capital WIP
487
65
37
28
FY12
172
37
135
FY13
160
327
Subsidiary
1,062
411
651
Refining,
24
FY14
FY15
Organised
retail,
(0.35)
Oil & Gas,
28
Source: Company Annual Report, MOSL
5
Source: Company Annual Report, MOSL
23 June 2015

ART
|
Reliance Industries FY15
Capitalized forex (22% of FY15 PBT) to increase future depreciation
n
n
n
n
As per the company’s accounting policy, any foreign long-term liabilities related
to the acquisition of fixed assets are adjusted to the carrying cost of such assets.
Fluctuations arising out of foreign exchange differences are capitalized in Plant
& Machinery, intangible assets and capital work-in-progress.
Addition to fixed assets of INR251b includes ~INR69b (22% of FY15 PBT)
capitalized on account of foreign exchange differences on long-term foreign
currency loan during FY15 (FY14: INR107b, 37% of FY14 PBT).
The capitalization of foreign exchange differences will result in higher
depreciation in the coming years.
Exhibit 12: Forex loss of INR69b capitalized in FY15; equals 22% of FY15 PBT
Forex diff capitalized (INR b)
Forex difference capitalised as a % of PBT
107
79
60
31
23
22
FY14
FY15
37
69
FY12
FY13
Source: Company Annual Report, MOSL
Net debt surges to ~45% of consolidated net worth in FY15
n
n
n
Gross debt increased to INR1.6t at the end of FY15 (FY14: INR1.4t). Of the total
debt, long-term borrowings (INR1.2t) comprised ~75% of the gross debt at FY15-
end (FY14: INR1t).
The change in debt has been more pronounced with decreased current liquid
investments (FY15: INR635b v/s FY14: INR725b) leading to a net debt of
INR973b at the end of FY15 (FY14: INR663b).
Of the total debt, INR121b (7.5% of total debt) is repayable in FY16.
FY14
1,010
328
50
1,388
345
380
663
FY15
1,208
280
121
1,609
510
125
973
Exhibit 13: Net debt position highest till date due to increased capex in FY15 (INR b)
Particulars
FY12
FY13
Long-term borrowings
654
710
Short-term borrowings
173
184
Current maturities of long-term borrowings
98
179
Gross debt
924
1,072
Less: Current investments
272
289
Less: Cash & bank balances
407
505
Net debt
245
279
*We factor only current investments as provided in the balance sheet
Related party payments remain high at 21% of operating & admin expenses
n
Related parties continue to account for a considerable proportion of the
operating & administration expenses. Related-party expenses stood at INR62b
for FY15 v/s INR57b in FY14.
23 June 2015
6

ART
|
Reliance Industries FY15
n
Majority of the related-party payments pertain to sales and distribution
expenses (S&D; 47% of related-party expenses). Almost the entire payment of
S&D has been made to Reliance Ports and Terminals (associate).
Exhibit 14: S&D expenses form the bulk of related-party expenses (INR b)
Particulars
FY12
FY13
Electric power, fuel and water
11.4
13.3
Hire charges
4.1
4.2
Sales & distribution expenses
23.8
28.5
Professional fees
0.4
0.6
General expenses
-
2.8
Donations
2.1
2.2
Total related party expenses
41.8
51.4
As % of operating & admin expenses (%)
23
23
FY14
14.7
5.2
28.9
0.6
2.7
5.3
57.3
22
FY15
15.8
6.2
29.1
3.0
7.4
61.6
21
Source: Company Annual Report, MOSL
Exposure in subsidiaries and associates as a percentage of net worth moves
up from 23% in FY12 to 34% in FY15
n
n
n
n
n
The exposure in subsidiaries and associates as a percentage of net worth
increased from 31% in FY14 to 34% in FY15. This was primarily led by:
Ø
33% increase in Investments in related parties to INR459b in FY15
(FY14:INR345b) and
Ø
3% increase in loans and advances to related parties to INR284b in FY15
(FY14: INR276b).
The company has also given financial guarantees of INR13.2b at FY15-end (FY14-
end: INR13.2b) on behalf of its associates.
Incremental equity investments of INR80b were made in subsidiaries in FY15,
dominated by INR71b invested in Reliance Jio Infocomm Limited.
Incremental investment of INR24.6b were made in debentures of subsidiaries in
FY15, comprising mainly ‘Reliance Industrial Investments and Holdings Ltd’
(INR11b) and ‘Reliance Prolific Traders Private Ltd’ (INR12.4b).
RIL acquired the control of ‘Network18 Media and Investments Limited’ and its
subsidiary ‘TV18 Broadcast Limited’ by investing INR10.8b in FY15 through
‘Independent Media Trust’, of which RIL is the sole beneficiary.
Exhibit 15: Exposure in subsidiaries and associates at 34% of FY15 net worth
Exposure in subsidiaries & associates as a % of net worth
31
34
23
23
FY12
FY13
FY14
FY15
Source: Company Annual Report, MOSL
Note:
Exposure in subsidiaries and associates does not include financial guarantees given; Standalone
exposure in subsidiaries as a percentage of consolidated net worth is considered for analysis.
23 June 2015
7

ART
|
Reliance Industries FY15
Exhibit 16:
Incremental loans and investments in subsidiaries and associates (INR b)
Particulars
Loans & advances to related parties
Investments in related parties
Total
FY14
FY15
% change
276
284
3%
345
459
33%
621
743
20%
Source: Company Annual Report, MOSL
Exhibit 17:
Snapshot of investment in subsidiaries and associates as of FY15 (INR b)
Incremental
investment in
FY15
Particulars
FY14
FY15
In subsidiary companies
Equity shares
Reliance Jio Infocomm Limited
Reliance Retail Ventures Limited of
Reliance Ventures Limited of Rs 10 each
Reliance Ethane Holding Pte. Ltd.
Reliance Gas Pipelines Limited of Rs 10 each
Other subsidiaries
Total
Investment in Corpus of Independent media trust
Preference shares
In Debentures
Reliance Industrial Investments and Holdings Ltd
Reliance Prolific Traders Private Limited
Others
Total
In associate companies
Reliance Gas Transportation Infrastructure Limited
Others
Total
Total
227
57
24
-
-
2
309
-
8
297
57
24
8
2
2
389
11
6
71
-
-
8
2
0.01
80
11
(2)
-
-
7
7
11
12
8
32
11
12
1
25
20
1
21
345
20
1
21
459
-
-
-
114
Source: Company Annual Report, MOSL
EBITDA margin of ‘refining’ and ‘oil & gas’ segments expands 200bp each in
FY15; RoCE highest for the refining segment
n
n
n
n
n
Aggregated revenue on a consolidated basis declined 13.6% YoY to INR3.8t in
FY15 (FY14: INR4.3t).
Revenue from the refining business declined 16% YoY to INR3.3t in FY15
(FY13:INR4t). Petrochemical segment revenue declined ~7% YoY to INR896b in
FY15 (FY14:INR965b).
After a marginal decline in growth in FY14, the oil and gas segment revenue
growth was up 5.5% to INR113b in FY15 (FY14: INR107b).
The retail segment revenue was up 20% YoY to INR175b in FY15 (FY14:
INR145b).
Revenues from ‘other segments’ increased to INR95b in FY15 as against INR58b
in FY14.
23 June 2015
8

ART
|
Reliance Industries FY15
Exhibit 18:
Revenue registers de-growth of 12.5% in FY15 (INR b)
Petrochemicals
4273
- 100
141
3,220
811
FY12
Refining
4816
143
-
110
3,689
874
FY13
Oil & Gas
Organised retail
5297
145 58
107
4,021
Others
4633
175 95
113
3,353
896
FY15
965
FY14
Source: Company Annual Report, MOSL
n
n
EBITDA margin of ‘refining’ and ‘oil and gas’ segments stood at 5% and 28%,
respectively, as at FY15-end—a YoY increase of 200bp each.
The margin of ‘retail’ segment expanded 100bp in FY15 and stood at 2% (FY14:
1%). The petrochemical segment remained constant at 9% in FY15.
Exhibit 19:
EBITDA margin expands for majority of the segments in FY15 (%)
Particulars
Petrochemicals
Refining
Oil & Gas
Organized retail
Others
RIL (Standalone)
FY12
11
3
39
NA
-1
10
FY13
FY14
FY15
8
9
9
3
3
5
33
26
28
NA
1
2
2
6
10
8
8
9
Source: Company Annual Report, MOSL
n
n
Excluding capital work in progress, the RoCE improves significantly by 60bp in
FY15 to 7.9% (FY14: 7.3%). The CWIP primarily comprises the telecom segment
and shale gas capex, operations for which have not yet commenced.
However, the reported ROCE decreased 60bp to 5.1% in FY15 (FY14: 5.7%) due
to higher capex in CWIP.
Exhibit 20:
RoCE (Ex CWIP) improves 60bp in FY15; however, reported RoCE dips
FY12
FY13
FY14
FY15
Particulars
Adj RoCE (Ex CWIP)
7.5
7.0
7.3
7.9
Reported RoCE
6.7
6.0
5.7
5.1
Note: In calculation of ROCE, finance costs and finance income have been adjusted to arrive at the
operating profits of the company
Source: Company Annual Report, MOSL
n
n
The returns on capital employed remained highest for the refining segment at
20% in FY15 (FY14: 20%) despite heavy capex incurred in this segment.
The retail segment registered maximum expansion in returns, with FY15 ROCE of
7% being more than 3x FY14 ROCE of 2%. The ratio remained stable for other
segments in FY15 except for petchem, which reduced by 1% in FY15 and stood
at 18%.
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Reliance Industries FY15
Exhibit 21: RoCE of refining segment flat YoY despite significant dip in crude prices (%)
Particulars
Petrochemicals
Refining
Oil & Gas
Organized retail
Others
Unallocable
RIL (Standalone)
FY12
24
13
11
NA
-0.5
0.2
12
FY13
19
18
8
NA
1
-0.1
12
FY14
19
20
5
2
2
1
11
FY15
18
20
5
7
2
1
11
Source: Company Annual Report, MOSL
Power and fuel expenses jump to 3.5% of revenue in FY15 (FY14: 2.5%)
n
n
n
n
Power, fuel and water expenses jumped from INR109b in FY14 to INR133b in
FY15 (an increase of 22% YoY).
As a percentage of revenue, power and fuel costs have increased from 1.1% of
FY11 revenue to 3.5% of FY15 revenue.
As a percentage of operating expenses (excluding raw material cost), power and
fuel costs have increased from 7% in FY11 to 23% in FY15.
The petcoke gasification project is expected to increase self sufficiency in
energy, thereby reducing the energy costs to a great extent. As per the
management, this will put RIL’s energy and hydrogen costs at par or better than
the refineries in the US.
Exhibit 22: Electricity, fuel and water expenses increased to 3.5% of revenue in FY15
Power, fuel and water exps (as % of revenue)
Power, fuel and water exps (as % of operating exp excluding RM cost)
23
21
17
12
7
1.1
FY11
1.3
FY12
2.0
FY13
2.5
FY14
3.5
FY15
Source: Company Annual Report, MOSL
Other financial highlights
n
Diminution of INR3b pertaining to ‘Investments in EIH Limited’ considered
temporary; market value at INR11.3b as at FY15-end v/s cost of INR14.3b:
Ø
RIL, through its subsidiary Reliance Industries Investment & Holding, holds
18.53% in EIH Limited—a listed company, which owns and operates hotels
under the Oberoi Group.
Ø
These investments have been classified as long term and are carried at cost
of INR14.3b. However, the market value of these investments as on March
31, 2015 is INR11.3b.
Ø
The company has not provided for any diminution in the value of
investments considering the decline in share price to be temporary coupled
with the long-term nature of investments.
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Reliance Industries FY15
Exhibit 23: Market price of EIH is INR107/sh v/s carrying value of INR135/sh (INR m)
Particulars
Investment in EIH Limited (INR m)
Carrying value of invt (INR/share) (A)
Market price as at year end (INR/share) (B)
Difference (C = A- B) (INR/share)
Number of shares held at year end (In m) (D)
Excess of carrying value over market value (C*D)
FY12
FY13
FY14
FY15
14,330
14,330
14,330
14,330
135
135
135
135
84
55
73
107
51
80
62
28
106
106
106
106
5,407
8,473
6,615
2,982
Source: Company Annual Report, BSE, MOSL
n
n
Due to loss in FY15, the debenture redemption reserve of INR4.7b (FY14:
INR3.5b) has not been created for some of the subsidiaries, and will be created
out of future profits.
As per the provisions of the new Companies Act w.e.f FY15, companies have to
form a Corporate Social Responsibility (CSR) Committee and may spend at least
2% of the last three years’ average profits have to be spent on CSR activities. RIL
has spent INR7.6b (3.35% of FY15 PAT) on such activities during FY15 (FY14:
INR7.1b, 3.2% of FY14 PAT).
Exhibit 24: Cash conversion cycle (days)
Particulars
Inventory days
Receivable days
Payable days
Cash conversion cycle
FY12
FY13
FY14
FY15
52
56
56
68
17
12
8
7
47
49
56
75
22
19
8
0
Source: Company Annual Report, BSE, MOSL
n
n
Contingent liabilities as a percentage of net worth
surged to 6.4% in FY15
(FY14: 4.3%), primarily due to guarantees of INR96b in FY15 (FY14: INR14b) to
banks and financial institutions.
The Government of India has proposed to disallow the recovery of certain costs,
which the company is entitled to as per the Production Sharing Contract, for a
particular gas block—KG-DWN-98/3. RIL has referred the matter to arbitration.
Pending decision of the arbitration, the demand from the GoI of USD117m
(INR7.3b) being the Company’s share towards additional Profit Petroleum has
been considered as contingent liability.
Exhibit 25: Contingent liabilities as a % of net worth rises to 6.4% in FY15
Contingent liability (INRb)
5.4
4.7
4.3
140
91
85
85
Contingent liab as a % of Net worth
6.4
FY12
FY13
FY14
FY15
Source: Company Annual Report, MOSL
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Reliance Industries FY15
n
Effective tax rate increased for the third successive year and was up 200bp
YoY—from 22% in FY14 to 24% in FY15.
Exhibit 26: Effective tax rate increases to 24% for FY15
Effective tax rate
24%
22%
20%
22%
FY12
FY13
FY14
FY15
Source: Company Annual Report, MOSL
n
Finance cost was lower at INR33b in FY15 as against INR38b in FY14. Interest
capitalized was higher at INR44b in FY15 as against INR18b in FY14, on account
of ongoing expansion projects in the petrochemicals, refining, US shale gas
businesses and also broadband access project.
Hedging position
n
Exhibit 27: Sizeable increase in forward contracts in recent years (INR b)
Particulars
Forward Contracts
Interest Rate Swaps
Currency Swaps
Options
FY12
252
341
42
251
FY13
FY14
FY15
896
767
959
332
337
700
44
28
24
23
24
65
Source: Company Annual Report, MOSL
Exhibit 28: Commodity hedge position as at FY15-end
FY12
FY13
FY14
FY15
Petroleum
Other Petroleum
Other Petroleum
Other Petroleum
Other
product Feedstock Products product Feedstock Products product Feedstock Products product Feedstock Products
Particulars
(kg) sales(kbbl) (kbbl)
(kg)
sales(kbbl) (kbbl)
(Kg)
sales(kbbl) (kbbl)
(kg) sales(kbbl) (kbbl)
Forward Swaps 16,722
18,842
1,214
7,334
16,575
1,101
16,944
21,321
2,225
40,469
49,460
4,224
Futures
4,809
5,879
-
6,259
5,488
-
6,737
7,066
-
16,186
23,980
-
Spreads
25,193
81,337
-
44,900
50,366
-
35,456
86,016
-
89,290 1,04,653
-
Options
2,720
8,875
-
-
23,895
-
-
36,550
-
12,150 1,30,618
-
Source: Company Annual Report, MOSL
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Reliance Industries FY15
Exhibit 29: Domestic proved reserves estimates downgraded
Particulars
Crude Oil (mmt)
Opening Balance
Transfer to third party
Revision in estimates
Addition/(deletion)
Production
Closing Balance
Natural Gas (bcm)
Opening Balance
Transfer to third party
Revision in estimates
Addition/(deletion)
Production
Closing Balance
Total (Oil + Gas)
In mmtoe
In mmboe
YoY Chg (%)
FY11
11.1
Proved Reserves
FY12
FY13
FY14
8.3
-1.7
-2.6
-0.9
3.1
185.8
-56.6
-12.4
-12.8
104.0
97
712
-45%
3.1
0.0
0.0
-0.6
2.5
104.0
0.0
0.1
-6.7
97.3
90
663
-7%
2.5
FY15
2.5
FY11
8.6
Proved and Developed Reserves
FY12
FY13
FY14
7.7
-1.7
-2.7
-0.9
2.4
107.4
-30.5
-38.8
-12.8
25.2
2.4
0.0
0.0
-0.6
1.8
25.2
0.0
0.0
-6.7
18.5
1.8
0.7
-1.4
-1.4
8.3
211.2
0.5
-0.5
2.5
97.3
-7.2
-5.8
-19.6
185.8
176
1,294
-13%
-3.9
86.2
86
634
-4%
-0.1
-0.5
2.0
86.2
-17.0
-3.4
65.7
61
451
-29%
-3.8
-19.6
107.4
104
769
-17%
0.8
-3.9
15.4
6.8
-3.4
18.8
0.4
-1.4
7.7
130.8
-0.5
2.1
18.5
0.0
FY15
2.1
-0.2
-0.5
1.5
15.4
0.0
25
18
15
18
185
136
107
136
-76%
-26%
-21%
27%
Source: Company Annual Report, MOSL
Proved Developed Reserves
Exhibit 30: Overseas hydrocarbon reserves (shale) improve YoY
Particulars
FY13
Crude Oil (mmt)
Opening Balance
Addition/(deletion)
Production
Closing Balance
Natural Gas (bcm)
Opening Balance
Addition/(deletion)
Production
Closing Balance
Total (Oil + Gas)
In tcfe
In mmtoe
In mmboe
YoY Chg (%)
7.9
7.6
0.8
14.6
12.3
23.0
1.4
33.9
1,857
45
333
Proved Reserves
FY14
14.6
7.0
1.1
20.5
33.9
17.4
2.3
49.1
2,661
65
477
43%
FY15
20.5
4.5
1.5
23.5
49.1
7.5
2.9
53.7
2,953
72
529
11%
FY13
2.2
2.3
0.8
3.6
5.8
6.1
1.4
10.6
542
13
97
FY14
3.6
3.6
1.1
6.1
10.6
9.0
2.3
17.3
FY15
6.1
2.8
1.5
7.4
17.3
5.7
2.9
20.2
894
1,055
22
26
160
189
65%
18%
Source: Company Annual Report, MOSL
23 June 2015
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Reliance Industries FY15
ART #3
MANAGEMENT SPEAK/KEY PLANS
Refining business
During FY 2014-15, R&M business posted record earnings despite volatile market
conditions—driven primarily by good product price realizations, lower energy
costs, superior configuration, asset optimization and trading capabilities.
n
RIL manages high-quality refining assets with advanced design capacity for
processing 1.24 million barrels per day (MMBPD) of crude, fully utilizing the
range of options and flexibility that is built into them.
n
Over 300 fuel retailing outlets were commissioned during the year, with plans to
re-commission the entire network of 1400 outlets by the end of FY16. RIL’s focus
is to ensure consistent and superior customer experience through several
technology-enabled initiatives.
n
Petchem business
Ethylene and propylene are the key petrochemical building blocks used in
manufacturing of polymers like Polypropylene (PP), Polyethylene (PE), Polyvinyl
chloride (PVC) and chemicals like ethylene oxide and ethylene glycols.
n
Global demand for ethylene increased by 3.2% YoY to 137 MMT in 2014. Global
ethylene operating rates, which are indicative of the margin environment,
improved marginally YoY to 87.8% in 2014— above the five-year average of
86.7%.
n
As a part of ‘Make-in-India’ mission, RIL is providing inputs on specifications of PP
Nonwoven Agro textiles to be included in BIS standards to encourage acceptance
of domestically produced PP Nonwoven and, in-turn, facilitate import
substitution.
n
Oil and gas exploration and production
During the year, RIL opted to relinquish two blocks KGDWN- 2003/1 and CY-PR-
DWN-2001/3 as part of the ongoing effort to high-grade its upstream asset
portfolio.
n
Revenues for the domestic oil and gas operations for the year were INR5,507
crore, a YoY decline of 9.2%—largely on account of decline in production and
lower crude oil price realization.
n
EBIT for the year declined 23.1% YoY basis to INR1,250 crore on account of the
lower realizations and no commensurate reduction in cost.
n
RIL signed an MoU with Petroleos Mexicanos (PEMEX) to co-operate for
assessment of potential upstream oil and gas business opportunities in Mexico
and jointly evaluate value-added opportunities in international markets.
n
Retail business
Reliance Retail is committed to achieve the highest levels of operating
efficiencies and effectiveness across all business activities, both customer facing
and internal.
n
Efficient planning, superior processes supported by automation and meticulous
execution driven by operating discipline forms the bedrock of all operations.
n
Reliance Retail business was up 21.2% YoY to reach revenue of INR17,640 crore
as against INR14,556 crore in the previous financial year. EBIT for the year was up
3.5x to INR417 crore.
n
23 June 2015
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Reliance Industries FY15
It continued to grow profitably, achieving earnings before depreciation, finance
cost and tax expenses (EBDITA) of INR784 crore, up 116% YoY. The format sectors
collectively witnessed a five-year CAGR of 31% in revenues.
n
During the year, Reliance Retail undertook a rapid and unprecedented store
opening plan and added 930 stores to further increase its reach in the
underserved markets. A total of 0.9 million square feet area was added during
the year.
n
Jio Infocom
RJIL is the only private player with Broadband Wireless Access (BWA) spectrum in
all the 22 telecom circles of India. It plans to provide reliable fast internet
connectivity through the 20 MHz, contiguous, pan-India BWA spectrum.
n
RJIL also acquired 1800 MHz spectrum across 14 key circles in February 2014.
n
RJIL’s total equivalent spectrum footprint has increased from 597.6 MHz to 751.1
MHz (including uplink and downlink), strengthening its position as the largest
holder of liberalized spectrum.
n
Media and entertainment
Independent Media Trust (IMT; of which RIL is the sole beneficiary) acquired
control of Network18 Media & Investments Limited (Network18), including its
subsidiary TV18 Broadcast Limited (TV18), during the year.
n
This acquisition will differentiate Reliance’s Jio Infocomm business by providing a
unique amalgamation at the intersect of telecom, web and digital commerce via
a suite of premier digital properties.
n
Network18’s operating model is driven by its zeal to provide consumers with the
best-in-class media and entertainment products that set new benchmarks in
creative excellence, fair journalism and audience engagement.
n
Capex and growth plans
RIL started phase-1 PTA capacity of 1150 KTPA and 650 KTPA of PET capacity at
Dahej. Both these plants are expected to stabilize operations in the coming
months and will be well positioned to reap the benefits of integration.
n
RIL has successfully commissioned its new PBR plant. The company also started
150 KTPA of SBR plant during the year; the plant is expected to stabilize in the
coming months.
n
RIL successfully debottlenecked PVC capacity at Dahej during the year,, adding
100 KTPA to PVC capacity.
n
23 June 2015
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Reliance Industries FY15
ART #4
GOVERNANCE MATTERS
All directors attended the meetings regularly
n
n
Seven board meetings were held during FY15 as against the minimum
requirement of four in the Companies Act.
The directors were regular in attending the board meetings during FY15.
Exhibit 31:
All directors attended the board meetings regularly
Name
Mukesh D. Ambani
Nikhil R. Meswani
Hital R. Meswani
P.M.S. Prasad
Pawan Kumar Kapil
Mansingh L. Bhakta
Yogendra P. Trivedi
Dr. Dharam Vir Kapur
Prof. Ashok Misra
Prof. Dipak C. Jain
Dr. Raghunath A. Mashelkar
Adil Zainulbhai
Nita M. Ambani *
Meetings held
Director's
position
FY12
FY13
FY14
FY15
Chairman & MD
6
5
6
7
ED
6
5
6
7
ED
6
5
6
7
ED
4
5
6
7
ED
3
4
5
5
ID
6
5
5
6
ID
6
5
6
7
ID
6
5
6
7
ID
6
5
6
7
ID
5
4
6
7
ID
4
4
6
5
ID
NA
NA
3
7
NENI
NA
NA
NA
5
6
5
6
7
Source: Company Annual Report, MOSL
* Appointed as Director, w.e.f. June 18, 2014. 5 meetings were held during her tenure.
ED
- Executive Director,
NENI
- Non executive non independent director,
ID-
Independent Director
23 June 2015
16

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Reliance Industries FY15
NOTES
23 June 2015
17

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ART
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Reliance Industries FY15
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Motilal Oswal Securities Ltd
23 June 2015
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