Reliance Industries
BSE SENSEX
29,443
S&P CNX
9,087
14 March 2017
Update
| Sector:
Oil & Gas
CMP: INR1,289 TP: INR1,240 (-4%)
Core volume to grow, but cautious on margins
Upgrading valuation of RJio
Neutral
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
RIL IN
3,240.0
1327 / 926
21/20/8
3,482.9
60.1
3,735
54.9
RJio would end its free services from April 2017, offering instead unlimited voice and
data for INR303/month. The focus appears to be more on profitability now, with
ARPU-accretive price plans.
With the completion of USD18.5b of projects, the core business is expected to
generate USD6.2b of annual free cash flow.
However, in our assessment, profitability of core projects could come under stress in
changed environment.
Increasing valuation of RJio
Our Telecom analyst estimates revenue of INR223b in FY18 and INR319b in FY19,
revised up 7% and 12%, respectively. EBITDA breakeven is expected in FY19 now
(earlier FY20), with contribution of INR27.4b in FY19. Revised equity valuation of
RJio stands at INR110/share, up from INR19/share earlier.
Financials Snapshot (INR b)
Y/E March
2017E 2018E 2019E
Net Sales
2,404.0 2,829.4 2,960.7
EBITDA
428.4 493.6 511.6
Net Profit
295.3 339.2 361.6
Adj. EPS (INR)
100.2 115.1 122.7
EPS Gr. (%)
7.7
14.9
6.6
BV/Sh. (INR)
900.5 999.0 1,104.0
RoE (%)
11.7
12.1
11.7
RoCE (%)
9.2
10.2
10.2
P/E (x)
12.9
11.2
10.5
P/BV (x)
1.4
1.3
1.2
EV/EBITDA (x)
10.2
7.8
6.7
Shareholding pattern (%)
As On
Dec-16 Sep-16 Dec-15
Promoter
45.1
45.1
45.2
DII
12.3
12.5
13.2
FII
24.2
23.7
21.9
Others
18.5
18.7
19.7
FII Includes depository receipts
Stock Performance (1-year)
Reliance Inds.
Sensex - Rebased
1,300
1,200
1,100
1,000
900
Changed macro environment limits potential of petcoke gasifier
LNG prices have fallen from ~USD20/mmBtu in early 2014 to USD6-7/mmBtu
currently. We believe that LNG prices would be structurally low due to large global
supplies and dwindling demand from the largest consumers. This would limit the
benefit from petcoke gasifier to USD0.4-0.5/bbl.
Petchem expansions to help, but benefit may be curbed due to large
expansions in the US
We estimate that a total of 11mmt of ethylene capacity is coming in the US during
2017-20. This would be based entirely on low cost shale gas as feedstock. Due to
these expansions, we believe that global petchem margins would be under
pressure. Nonetheless, due to increase in volume, we expect RIL’s petchem EBITDA
to increase from INR142b in FY16 to INR243b in FY19.
Refining could come under pressure
We expect incremental global supply to outgrow incremental demand by
2.2mnbopd during 2016-21, thereby putting pressure on refining margins. We
expect correction in RIL’s GRM due to decline in crack spreads. We build in a GRM
of USD9.5-10/bbl, including the benefit from petcoke gasifier during FY18-19.
Maintain Neutral; revising target price to INR1,240
The stock is currently trading at 10.5x FY19E standalone EPS of INR123 and 6.7x
FY19E EV/EBITDA. We value RIL using SOTP. Refining and petchem are valued using
6x FY19E EV/EBITDA. We add INR68/share for E&P portfolio, INR110/share for RJio,
and INR59/share for others to arrive at a revised valuation of INR1,240. We
reiterate our
Neutral
rating.
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.
Swarnendu Bhushan
(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529
Abhinil Dahiwale
(Abhinil.Dahiwale@motilaloswal.com); +91 22 3980 4309

Reliance Industries
RJio announces commercial launch from April 2017
All existing RJio subscribers would be able to avail unlimited voice and data services at
INR303/month for 12 months starting April 2017.
RJio’s unlimited plan would be ARPU-accretive for the industry; but it remains a battle
of capacity.
We turn positive on RJio, given the company’s revised focus on profitability, with
ARPU-accretive price plans.
RJio should turn profitable sooner than expected earlier. We now build in EBITDA
breakeven in FY19 against FY20 earlier, and revise our DCF value from INR19/share to
INR110/share.
Our sensitivity analysis indicates that ‘125m plus subscribers and INR250 plus ARPU’
remains the sweet spot for profitability. SG&A and access costs could be lower than
we currently estimate, propelling EBITDA and DCF value further.
Mr Mukesh Ambani, CMD, Reliance Industries announced that free usage period
would end on March 31st
All existing RJio subscribers would be able to avail unlimited voice and data services
at INR303/month for 12 months starting April 2017, provided they subscribe to Jio
prime membership for INR99/year. The announcement has surprised us positively,
as we were expecting highly subsidized price plans of ~INR100/month. Additionally,
existing subscribers would have unlimited access to Jio digital services, such as TV,
videos and songs. New subscribers would get 20% higher data than offered under
competitors’ highest-selling tariff plans. RJio would also launch plans from INR149 to
INR4,999.
RJio’s unlimited plan to be ARPU-accretive for industry, but battle of capacity
persists
RJio’s INR303/month price plan is significantly higher than the current average
industry ARPU. Blended ARPU of the industry stands at INR145 and that for data
subscribers at INR185 (as per latest TRAI filings). Thus,
if the overall industry
migrates to RJio’s benchmarked price plans, it will augment the size of the industry
significantly.
Since there is no variable cost attached with data, an operator offering
incremental data to match RJio’s plan may not see an increase in cost. Having said
that, capacity holds the key, in our view.
If the industry aligns to RJio’s offering, we
believe only those operators with sizeable data coverage and capacity will be able
to protect their market shares and benefit from the industry’s ARPU accretion.
This is in line with our argument in the thematic report released in October 2016.
Bharti, with ~170,000 broadband sites (4G + 3G) v/s our estimate of RJIo’s
~115,000 should be able to match RJio’s capacity.
Vodafone and Idea in individual
capacity have ~90,000-100,000 broadband sites, which may not be sufficient to
match RJio’s capacity. However, we believe the combined entity (Vodafone + Idea),
with ~170,000 sites would have the necessary firepower to compete, provided the
merger is completed over the coming few quarters.
What makes us positive on RJio
RJio has so far maintained a highly aggressive position, compromising ARPU to
acquire subscriber market share. Our workings indicate that the company has been
running monthly operating cost of INR18b-20b, with limited visibility on profit
14 March 2017
2
Telecom Analyst:
Aliasgar Shakir
(aliasgar.shakir@motilaloswal.com);
+91 22 6129 1565
Jay Gandhi
(jay.gandhi@motilaloswal.com);
+91 22 3089 6693

Reliance Industries
outlook. The revised price plan of INR303/month starting April is significantly higher
than the overall market ARPU and data subscribers’ blended ARPU. This gives an
indication that the company is now looking at monetizing its subscribers. This
revised stance should allow the company to garner superior ARPU and to focus on
profitability.
RJio to turn profitable sooner than expected earlier (building EBITDA breakeven in
FY19; DCF value at INR110/share)
Our revenue estimates of INR223b for FY18 and INR319b for FY19 are revised up by
7% and 12%, respectively. This is on the back of 12-13% increase in ARPU for FY17
and FY18 to INR225 and INR240, respectively. We have factored RJio’s ARPU at over
50% higher than the overall industry and over 30% higher than Bharti (currently,
highest ARPU). This is based on RJio’s higher price plans, higher value offerings, and
high data-consuming subscribers that might be partly offset by second SIM users
diluting wallet share. We have built in ~66m subscribers for FY17, factoring churn
out of one-third subscribers, based on (1) how the competition reacts to RJio offers,
and (2) subscribers who may have lower ARPU affordability v/s RJio price plans; this
may propel them to switch back to the primary service operator. For FY18 and FY19,
our subscriber base estimates remain unchanged at 123m and 141m, respectively.
With a high fixed cost structure, the revised revenue estimates should allow RJio to
reach EBITDA profitability by FY19 (at INR27.4b) against our previous expectation of
FY20. This propels our DCF value/share from INR19 earlier to INR110.
Our sensitivity analysis indicates ‘125m plus subscribers and INR250 plus ARPU’
remains the sweet spot for profitability
Given the variability of estimates on the back of changing strategy by each market
participant to protect market share, we have done a sensitivity analysis to work out
a broad framework of subscriber/ARPU metrics that could contribute to
higher/lower profitability from our current estimates. This sensitivity is based on
FY19E variables, which may provide higher operational stability, FY19 being the
second full year of operations. Our workings indicate that subscriber base of over
125m with ARPU of over INR225 remains the sweet spot to turn EBITDA profitable.
At ~150m subscribers and INR250 ARPU levels, RJio can generate over INR60b
EBITDA and DCF value/share of over INR300, with 13% IRR. We believe there are
two incremental cost levers for EBITDA growth – SG&A and access costs could be
lower than we currently estimate. Our SG&A cost (discretionary) estimate is
relatively high at INR77b. Access cost at 18% of revenue (INR56b) is nearly double
the incumbents’, as Rjio should have high interconnect cost on outgoing minutes.
The downward bias in these cost items may propel EBITDA and the DCF value
disproportionately, with changing market scenario.
Exhibit 1: Revenue sensitivity to subscriber base/ARPU
Subscribers
319,181
200
225
250
275
300
100
238,800
268,650
298,500
328,350
358,200
125
268,800
302,400
336,000
369,600
403,200
150
298,800
336,150
373,500
410,850
448,200
175
328,800
369,900
411,000
452,100
493,200
200
358,800
403,650
448,500
493,350
538,200
ARPU
Source: Company, Company, MOSL
14 March 2017
3

Reliance Industries
Exhibit 2: EBITDA sensitivity to subscriber base/ARPU
27,370
200
225
250
275
300
100
(31,699)
(5,729)
20,240
46,210
72,179
125
(17,406)
11,826
41,058
70,290
99,522
Subscribers
150
(3,114)
29,381
61,875
94,370
126,864
175
11,179
46,936
82,693
118,450
154,207
200
25,471
64,491
103,510
142,530
181,549
ARPU
Source: Company, Company, MOSL
Exhibit 3: DCF value/share sensitivity to subscriber base/ARPU
110
200
225
250
275
300
100
(263.1)
(112.4)
35.8
182.2
327.1
125
(141.7)
25.0
190.6
354.9
518.8
Subscribers
150
(24.1)
160.7
344.7
527.6
710.5
175
92.4
296.4
498.4
700.3
902.2
200
208.9
431.1
652.0
873.0
1,093.9
ARPU
Source: Company, Company, MOSL
Exhibit 4: IRR sensitivity to subscriber base/ARPU
7%
200
225
250
275
300
100
-3%
2%
6%
8%
11%
125
1%
5%
8%
11%
13%
Subscribers
150
4%
8%
11%
14%
16%
175
200
7%
9%
10%
12%
13%
15%
16%
18%
18%
20%
Source: Company, Company, MOSL
ARPU
Exhibit 5: RJIO Abridged estimated P&L
Revenue (INR m)
Subscribers (m)
ARPU (INR/month)
Tower Rental Cost
% of Sales
Spectrum and license costs
% of Sales
Access and Roaming Charge
% of Sales
Employee Expenses
% of Sales
Subscriber acquisition/servicing and admin costs
% of Sales
Ad exp
% of Sales
Total Expenditure
Consol EBITDA
EBITDA margin (%)
Depreciation
EBIT
EBITDA margin
FY17E
0
66
0
0
0
0
0
0
0
0
0
0
0
FY18E
222750
99
225
72891
33%
24503
11%
41565
19%
17820
8%
44324
20%
26000
12%
227103
-4353
-2%
104707
-109060
-49%
FY19E
319181
123
240
104600
33%
35110
11%
55726
17%
19246
6%
55130
17%
22000
7%
291811
27370
9%
103254
-75885
-24%
FY20E
398544
141
252
125707
32%
43840
11%
65732
16%
21825
5%
59773
15%
20000
5%
336877
61667
15%
101274
-39607
-10%
FY21E
473253
157.56
264
142817
30%
52058
11%
73481
16%
24042
5%
65760
14%
18000
4%
376157
97096
21%
99143
-2047
0%
FY22E
548445
171.96
277
161190
29%
60329
11%
73346
13%
26485
5%
71508
13%
18900
3%
411758
136686
25%
97469
39218
7%
Source: Company, MOSL
14 March 2017
4

Reliance Industries
Exhibit 7: Incremental analysis of RJIO’s subscriber market
share gain
3.8
18.4
5.8
0.3
0.0
0.3
2.7
12.9
Exhibit 6: Incremental analysis of RJIO’s RMS share gain
7.3
5.5
0.0
0.3
2.4
2.8
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: RJIO’s base case
Subs mkt
share
Base
10%
FY19- 3 years from launch
Data
Voice
EBITDA
revenues
Revenue
319,181
-
27,370
EBITDA Break Even
Margin
3rd year -
9%
FY19
IRRs
7.0%
NPV/share
@ 11%
-213
DCF
110
Source: Company, MOSL
Exhibit 9: RJIO’s base case: Per Share negative NPV of INR213; IRR of 7%/ DCF: 110/sh
Period
Subs mkt Share
Subs base
Voice Revenue
Voice ARPU
Voice RPM
MOU
Voice Traffic
Data Revenue
Data ARPU
Data RPM
Data Usage.user
Data traffic
Total Revenue
Network Cost share
Spectrum and license costs
Access and Roaming Charge
Employee Expenses
Selling and admin costs
Ad exp
EBITDA Margin
NPV @11%
Per Share NPV
IRR
3 years
9.9%
123
-
-
-
331
440,559
319,181
240
0.12
1,984
2,642,355
319,181
33%
11%
17%
6%
17%
7%
9%
5 years
12.0%
158
-
-
-
365
653,223
473,253
264
0.11
2,488
4,457,649
473,253
30%
11%
16%
5%
14%
4%
21%
End of license
period 14 years
15.8%
17.2%
223
250
-
-
-
-
-
-
407
411
1,064,648
1,215,031
825,459
1,009,615
315
341
0.08
0.07
3,752
4,561
9,827,594
13,497,840
825,459
1,009,615
25%
24%
11%
11%
11%
10%
5%
6%
12%
13%
3%
3%
33%
34%
-688,343
-213
7.0%
Source: Company, MOSL
10 years
14 March 2017
5

Reliance Industries
RJio: Story in charts
Exhibit 10: RJio’s subs market share to touch 13% by FY22
Subsriber additions (m)
66.0
8.3
5.8
33.0
9.9
11.0
Subscriber market share
12.0
12.9
225
Exhibit 11: RJio’s subscriber and ARPU trends
Subsribers (m)
240
252
ARPU (INR/month)
277
264
24.0
18.0
16.6
14.4
99
FY18E
123
141
158
172
FY17E
FY18E
FY19E
FY20E
FY21E
FY22E
FY19E
FY20E
FY21E
FY22E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 12: RJio’s estimated data traffic and realization over FY17-22
Data Traffic (b Mb)
0.13
0.12
Data realizations (INR/MB)
0.11
0.11
0.10
149
0.00
FY17E
1,708
FY18E
2,642
FY19E
3,519
4,458
5,510
FY20E
FY21E
FY22E
Source: Company, MOSL
Exhibit 13: RJio to achieve 25% EBITDA margin by FY22
Revenue (INR b)
EBITDA margin (%)
24.9
20.5
15.5
223
0.0
0
FY17E
FY18E
-2.0
319
FY19E
399
FY20E
473
FY21E
548
FY22E
8.6
Exhibit 14: RJio’s cost analysis
Ad expense
Subscriber acquisition/servicing and admin costs
Employee Expenses
Access and Roaming Charge
Spectrum and license costs
Tower Rental Cost
3
4
5
7
12
13
14
15
17
20
5
5
5
6
8
13
16
16
17
19
11
11
11
11
11
29
30
32
33
33
FY19E
FY20E
FY21E
FY22E
FY18E
Source: Company, MOSL
Source: Company, MOSL
14 March 2017
6

Reliance Industries
Exhibit 15: RJio’s capital employed v/s Bharti/Idea
2,000
1,817
987
473
Exhibit 16: Gross block: RJio v/s Bharti and Idea
Bharti
Idea
RJIO
1,948
1,270
2,048
1,846
1,962
1,195
2,000
755
Bharti India
Idea
RJIO
FY16
FY17E
FY18E
Exhibit 17: Data revenue uptick to more than offset voice
revenue decline
16
309
1,927
970
2,572
Exhibit 18: Voice v/s data revenue growth (CAGR, %)
Voice Rev
29%
Data Rev
35%
1%
FY16
Voice Rev
Wireless rev
Data Rev
Non-Voice
FY21
Non-Vas Wireless rev
Rev
-4%
FY14-17
FY17-22E
Exhibit 19: Operator-wise gross revenue market share (%)
Bharti
Idea
Rcom+MTS
Vodafone
Reliance Jio
Others
Exhibit 20: Operator-wise subscriber market share (%)
40.0
30.0
20.0
10.0
0.0
Bharti
Idea
Rcom+MTS
Vodafone
Reliance Jio
Others
40.0
30.0
20.0
10.0
0.0
FY15
FY16 FY17E FY18E FY19E FY20E FY21E FY22E
FY15
FY16 FY17E FY18E FY19E FY20E FY21E FY22E
Exhibit 21: Bharti and RJio hold majority of current spectrum
share
Exhibit 22: Average spectrum/circle (Mhz)
Spectrum Share
21%
19%
12%
12%
44.8
26.3
Avg. spectrum/circle (Mhz)
41.7
24.8
Bharti
Vodafone
Idea
Reliance Jio
Bharti
Vodafone
Idea
Reliance Jio
Source: Company, MOSL
Source: Company, MOSL
14 March 2017
7

Reliance Industries
Exhibit 23: Base case suggests RJio to achieve EBITDA break-even in FY19
EBITDA (INR b)
150
100
50
0
-50
FY17E
FY18E
FY19E
FY20E
FY21E
FY22E
Source: Company, MOSL
RoCE (%)
136.7
2.1
6.0
3.0
0.0
-3.0
-6.0
Exhibit 24: Operator/Band-wise spectrum portfolio (Mhz)
2300 Mhz
116
274
125
470
Bharti
83
182
115
Vodafone
59
206
80
30
Idea
2100 Mhz
1800 Mhz
900 Mhz
800 Mhz
171
-
146
-
600
Reliance Jio
Source: Company, MOSL
Exhibit 25: Exhibit 21: Operator-wise mobile broadband cell
sites (‘000s)
171
Exhibit 26: Operator-wise fiber portfolio (‘000 R-km)
Fiber Portfolio ('000 R-km)
250
190
134
140
115
85
76
224
13
Bharti
Idea
Vodafone Reliance Jio
RCOM
Bharti
Idea
Vodafone
RJIO
RCOM
Source: Company, MOSL
Source: Company, MOSL
14 March 2017
8

Reliance Industries
Core volume to improve
Core projects of USD18.5b have faced delays largely due to complexity and scale. We
expect full benefits of all projects to commence from FY19.
We believe LNG prices would remain structurally weak. We expect the petcoke gasifier
to add USD0.4-0.5/bbl to GRM instead of USD2-3/bbl envisaged originally.
Petrochem EBITDA is expected to increase from INR142b in FY16 to INR243b in FY19,
driven mainly by expansions.
We expect benchmark refining margin to decline. As a result, RIL’s GRM could decline
from USD10.4/bbl in FY17E to USD9.5/bbl, excluding the benefit of petcoke gasifier.
Changed macro environment limits potential of petcoke gasifier
Prior to core expansions, the complex used ~24mmscmd of gas (21mmscmd for
power and fuel, rest for petchem feedstock). Of this, 14mmscmd came from
refinery off gases and 10mmscmd from LNG. Of the 10mmscmd from LNG,
7mmscmd was used in the refinery and 3mmscmd as feedstock for petchem.
Post the expansion, the power and fuel requirement is expected to rise to
31mmscmd and petchem feedstock requirement is expected to rise to
7mmscmd. Of the total 38mmscmd, 14mmscmd would come from refinery off
gases and the rest 24mmscmd from petcoke gasifier.
The petcoke gasifier is designed to replace expensive LNG (10mmscmd –
7mmscmd for refinery and 3mmscmd for petchem) with synthesis gas produced
from petcoke, a byproduct of the refinery. This is used to provide for increased
energy requirements of the expanded capacity as well as supply for 4mmscmd
of additional feedstock demand for petchem.
We build the economics of the petcoke gasifier using (a) replacement cost of
10mmscmd of LNG, and (b) the benefit of almost nil feedstock cost for increased
demand of 4mmscmd for petchem. Using a petcoke price of INR5,000/mt and
LNG FOB price of USD7.5/mmBtu, we expect a saving of USD0.4-0.5/bbl in
refining margin. We further expect a benefit of USD500m in petchem due to
availability of 4mmscmd of feedstock from the petcoke gasifier.
A total of 142mmtpa of LNG liquefaction facilities are under various stages of
construction. Total trade in 2016 stood at ~250mmt. Demand from Japan and
Korea is expected to come off, as they restart their nuclear reactors. As a result,
for a long time to come, we expect LNG prices to remain structurally weak. This
would keep saving potential of petcoke gasifier under pressure.
Exhibit 27: Petcoke gasifier production
Product
Synthesis gas
Composition of synthesis gas
Cogen fuel
Hydrogen
Synthetic NG
Heater fuel
CO
Total
bcm/yr
bcm/yr
bcm/yr
bcm/yr
bcm/yr
bcm/yr
bcm/yr
8.0
5.1
1.3
1.1
0.4
0.2
8.0
natural gas equivalent
24mmscmd considering 330days/yr
Source: Company, MOSL
14 March 2017
9

Reliance Industries
Exhibit 28: Implied benefit on refining margin
Production economics
Petcoke consumed
Petcoke cost
Feedstock cost
Production (NG equivalent)
Output price
Opex
EBITDA
Throughput
Improvement in GRM
Conversions
Exchange rate
LNG
TrBtu/1 bcm of NG
Price buildup of LNG from FOB
FOB
Shipping
Customs
Regas charges
Transmission charges
Gate price
mmt
INR/mt
USD/mt
USD mn
bcm
TrBtu
USD mn
USD/mmBtu
USD mn
USD mn
mmt
USD/bbl
INR/USD
USD/mmBtu
9.8
5,000
71
700
3.3
119
1,131
2.0
238
193
68
0.4
70
9.5
36
7.5
0.8
2.5
0.2
0.6
0.4
9.5
Source: Company, MOSL
USD/mmBtu
USD/mmBtu
%
USD/mmBtu
USD/mmBtu
USD/mmBtu
USD/mmBtu
Exhibit 29: Implied benefit of feedstock cost in petrochemicals segment
Feedstock to ROGC
mmscmd
mmscm
mmBtu
USD mn
mmt
USD/mt
4
1,460
52,560,000
500
1.4
366
Source: Company, MOSL
Saving
ROGC capacity
Saving
Exhibit 30: Estimated benefit of petcoke gasifier in refining
8,000
6,000
4,000
2,000
0
Petcoke price (INR/mt)
Estimated saving (USD/bbl)-RHS
Spot LNG price (USD/mmBtu)-RHS
8.4
9.0
6,340
6.0
3.0
0.3
0.0
(3.0)
Source: Bloomberg, METI, MOSL
14 March 2017
10

Reliance Industries
Exhibit 31: Total of 142mmtpa of LNG liquefaction capacity under construction
Africa
Asia Pacific
Europe
FSU
Latin America
North America
157.9
Middle East
88.8
61.2
15.3
4.2 9.6
1.5
2009
97.3
73.8 68.3
4.2 9.6
19.8
100.8
62.8
4.2
26.1 19.8
2021
62
100.8
1.5
2015
Source: International Gas Union 2016, MOSL
Petchem expansions to drive volume growth…
RIL has been adding a host of projects on the petchem side – refinery off gas
cracker (ROGC) and downstream polyethylene, polyester, intermediates and
polypropylene. It is expected to almost double its petchem capacity post
completion of all the expansions. There have been continuous delays due to the
complexity and scale of the projects. We expect full utilization of all expansions
latest by April 2018.
We expect petchem sales volume net of internal consumption to rise from
7.5mmtpa in FY15 to 12mmtpa in FY19. As a result, we expect petchem EBITDA
to increase from INR118b in FY15 to INR241b in FY19 when all expansions are
running at full utilization.
Prior to expansion
670
153
2,050
290
74
1,883
759
733
190
928
1,830
Addition
395
140
2,296
648
40
150
1,365
154
733
400
550
2,470
Completion by
2QFY18
Completed
Completed
Completed
Completed
Completed
2QFY18
2QFY18
2QFY18
2QFY18
4QFY17
Source: Company, MOSL
Exhibit 32: Petrochemical expansions of RIL
TMTPA
PFY
PTY
PTA
PET
PBR
SBR
Ethylene
Propylene
MEG
LDPE
HDPE/LLDPE
Paraxylene
Exhibit 33: Petrochemical EBITDA more than doubles during FY15-19 post expansions
EBITDA (INR mn)
260,000
220,000
180,000
140,000
100,000
FY15
FY16
FY17E
FY18E
FY19E
Source: MOSL
Sales (mmt)-RHS
242,719
12.0
14
12
10
8
6
14 March 2017
11

Reliance Industries
…but benefit may be curbed due to large expansions in the US
The US currently has 34mmtpa of ethylene capacity. A total of 9.74mmtpa of
greenfield capacity is expected to come up by 2020. Additionally, brownfield
expansions of 1.2mmtpa are expected to come up by 2018. We believe these low
cost feedstock based petchem plants would put pressure on global petchem
margins.
Exhibit 34: Greenfield petrochemical plants coming up in the US
Company
Braskem-Idesa
Dow Chemical
ExxonMobil
Oxychem/Mexichem
Chevron Phillips
Formosa
Sasol
Axiall/Lotte
Capacity (ktpa)
1,000
1,500
1,500
544
1,500
1,200
1,500
1,000
Location
Start up by
Mexico
2016
Texas
2017
Texas
2017
Texas
2017
Texas
2017
Texas
2018
Louisiana
2019
Louisiana
2020
Source: Petrochemical Update, MOSL
Exhibit 35: US gas crackers at lower end of the cost spectrum
US Petrochem
capacity
expanding ~30%
by 2019
Source: MOSL
Ethane project provides flexibility of multiple feedstock options for
petchem
RIL’s 1.5mmt ethane sourcing project (estimated cost of USD1.5b) will give
feedstock flexibility for its gas crackers and replace relatively higher cost
propane and naphtha feedstock. It also plans to convert its naphtha cracker into
dual feed cracker (naphtha or gas).
This project involves (a) tying up for ethane sourcing in the US, (b) tying up of
export terminal in the US, (c) arranging ethane carrier for transportation, and (d)
making import facilities at port.
We estimate that it could result in saving of INR16b annually, if utilized fully.
14 March 2017
12

Reliance Industries
Core refining could come under pressure
Singapore GRM declined from USD7.5/bbl in FY16 to USD5.1/bbl in 1HFY17
before rising to USD6.7/bbl in 3QFY17. Singapore GRMs have corrected to
USD5/bbl in past few days with ME refineries returning from maintenance.
OPEC estimates addition of 7.3mnbopd of new refining capacity over 2016-21.
Additionally, debottlenecking would add 1mnbopd of refining capacity. Closures
are expected at 2.6mnbopd. Against net capacity addition of 5.7mnbopd,
demand is expected to grow only by 3.5mnbopd. This is expected to result in
incremental glut of 2.2mnbopd. Hence, we expect refining margins to decline.
We expect RIL’s GRM to decline from USD10.8/bbl in 9MFY17 to USD9.5-10/bbl
in FY18/FY19. We build in USD0.4/bbl of contribution from petcoke gasifier in
FY19. Utilization, however, is expected to be strong at ~110%.
Exhibit 36:
Refinery capacity addition (million bopd)
Latin
America
Canada
2016
2017
2018
2019
2020
2021
2016–2021
0.4
0.1
0.1
0.1
0
0
0.8
0
0
0.1
0.1
0.1
0.1
0.4
US &
Africa
0
0
0
0.1
0.3
0.2
0.6
Europe
0
0
0.1
0
0
0
0.2
Russia & Middle
Caspian
East
0
0.1
0.1
0.1
0
0
0.3
0.2
0.2
0.1
0.5
0.2
0.5
1.7
China
0.1
0.3
0.3
0.5
0.3
0.3
1.8
Other
APAC
0
0.4
0.3
0.3
0.3
0.2
1.5
World
0.9
1.1
1.1
1.7
1.3
1.4
7.3
Source: OPEC, MOSL
Exhibit 37: Expect decline in GRM along with benchmark
Singapore GRM
8.4
6.9
3.2
3.3
3.6
FY10
5.2
FY11
FY12
FY13
8.3
7.9
8.6
0.3
9.2
1.4
2.8
8.5
Premium/(disc)
8.8
2.5
7.5
10.8
3.3
RIL GRM
10.5
9.5
4.1
9.9
4.5
4.9
5.6
6.4
5.6
5.4
5.4
FY14
FY15
FY16
FY17E
FY18E
FY19E
Source: Company, MOSL
E&P remains a laggard
Production from currently producing fields in KG D6 is only expected to decline,
going forward. The workover program, water injections and side tracks are only
expected to decrease the rate of decline. We expect gas production to decline
to 5.7mmscmd by FY19.
Declaration of commerciality has been reviewed by the management committee
for D55, D29 and D30 discoveries at KG D6, D32 discovery at NEC25.
Development plans are expected to be submitted by the end of 2017. Tender
evaluation for long lead items for development of R cluster is ongoing. However,
production from any of these is not expected before 2020.
14 March 2017
13

Reliance Industries
Return ratios for core business unlikely to improve
With the expansions, the contribution of the petchem segment in standalone
EBITDA is expected to rise from 33% in FY16 to 49% in FY19. Refining
contribution to EBITDA is expected to decline from 61% in FY16 to 50% in FY19.
E&P’s contribution is expected to be insignificant in FY19.
Led by increased contribution from the petchem segment, we expect
standalone PAT to grow from INR274b in FY16 to INR361b in FY19.
Exhibit 38: Segmental contribution of standalone EBITDA
100
80
60
40
20
0
Refining
Petrochemicals
E&P
Source: Company, MOSL
Exhibit 39: Standalone PAT to grow to INR362b in FY19E
24.9
PAT (INRb)
PAT - YoY (%)
20.7
14.9
4.8
(1.2)
203
FY11
200
FY12
210
FY13
220
FY14
227
FY15
274
FY16
295
FY17E
339
FY18E
362
FY19E
4.7
7.7
3.3
6.6
Source: Company, MOSL
Exhibit 40: Standalone return ratios to improve
14.1
12.6
12.1
RoCE (%)
11.7
11.0
RoE (%)
12.0
11.7
12.1
11.7
10.6
9.8
9.6
9.2
8.2
FY15
8.9
9.2
10.2
10.2
FY11
FY12
FY13
FY14
FY16
FY17E
FY18E
FY19E
Source: Company, MOSL
14 March 2017
14

Reliance Industries
Shale gas and retail segments – improvement evident
The shale gas business has started to show improvement in realization. However, the
implied return on capital employed is still 1.3%.
Reliance Retail has grown to become India’s largest retailer.
Realization improves for shale assets, but still low
Due to recent increase in oil prices, realization has started to pick up in shale
assets in the US as well. Realization has increased from USD2/mscfe in 4QFY16
to USD2.9/mscfe in 3QFY17. Increase in realization is also expected to result in
production ramp-up. However, debt outstanding on shale assets is INR380b. On
a cumulative capex of ~USD9b, it generated annualized EBITDA of USD120m in
3QFY17, implying a low return of 1.3%. At 7x EV/EBITDA also, we value the shale
segment at loss of INR46/share due to high debt of INR380b.
Exhibit 41: Improving realizations for shale assets
220
170
120
70
20
EBITDA (USD mn)
Avg realisation (USD/mcfe)-RHS
8
6
2.85
30
4
2
0
Source: Company, MOSL
Exhibit 42: Exhibit: Valuation of shale gas segment
EV/EBITDA (x)
EV (USD mn)
EV (INR mn)
Debt (INR mn)
Valuation (INR/share)
7
3,628
244,863
380,000
(46)
Source: Company, MOSL
Reliance Retail grows to become India’s largest retailer
It has opened 3,553 retail outlets across 686 cities in India, with total retail
space of 13.25msf. Revenue in FY16, including sale of retail petroleum products
from own stores, was INR216b, with EBITDA of INR8.9b. Revenue CAGR during
FY12-16 has been a strong 29%.
We expect strong growth, going forward, led by fashion & lifestyle, digital, value
formats, and
petro
products.
Total Revenues (INR m)
EBITDA
Exhibit 43: Exhibit: Revenue and EBITDA growth for Reliance Retail
400,000
300,000
200,000
100,000
0
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
363,968
24,000
17,735
16,000
8,000
0
-8,000
Source: Company, MOSL
14 March 2017
15

Reliance Industries
Maintain Neutral; revising target price to INR1,240
RIL is in the midst of executing its largest ever capex plans in core and non-core
businesses. Key things to watch out for: (1) telecom launch (INR1.71t capex till date)
and subscriber ramp-up, (2) progress in undeveloped discoveries, and (3) progress of
core capex plan of ~USD18.5b.
For FY17/FY18/FY19, we model GRM at USD10.5/9.5/9.9/bbl.
We expect changed macro environment of low LNG prices to adversely impact
originally envisaged savings from petcoke gasifier. Large petchem expansions in the US
based on low cost shale gas as feedstock are also expected to bring petchem margins
under pressure.
Recent announcement of INR303/month unlimited voice and data plan has been a
positive surprise. Our Telecom analyst now expects EBITDA breakeven in FY19 against
FY20 earlier. We have revised our target price for RJio from INR19 to INR110 based on
the recent announcement.
RIL is currently trading at 10.4x FY19E standalone EPS of INR123 and 6.7x FY19E
EV/EBITDA. We value RIL using SOTP. Refining and petchem businesses are valued
using 6x FY19E EV/EBITDA. We add INR68/share for its E&P portfolio, INR110/share
for RJio, and INR59/share for others to arrive at our revised valuation of INR1,240. We
reiterate our Neutral rating.
Exhibit 44:
RIL: Key assumptions
Key Metrics
Exchange Rate (INR/USD)
Refining
Capacity (mmt)
Production (mmt)
Capacity Utilization (%)
GRM (USD/bbl)
Singapore GRM
Premium/(disc)
RIL GRM
E&P
Gas Production (mmscmd)
Oil Production (kbd)
Pricing
Brent Oil (USD/bbl)
Wellhead Gas Price (USD/mmbtu)
FY10
47.6
62.0
60.6
98%
3.6
3.3
6.9
39.8
10.7
70
4.2
FY11
45.6
62.0
66.5
107%
5.2
3.2
8.4
56.2
18.9
87
4.2
FY12
47.9
62.0
67.6
109%
8.3
0.3
8.6
42.6
10.9
114
4.2
FY13
54.5
62.0
68.1
110%
7.9
1.4
9.2
26.5
9.1
111
4.2
FY14
60.5
62.0
68.1
110%
5.6
2.8
8.5
13.8
6.4
109
4.2
FY15
61.2
62.0
67.9
110%
6.4
2.5
8.8
12.2
6.6
86
4.2
FY16
65.4
62.0
69.5
112%
7.5
3.3
10.8
8.4
4.9
48
4.2
FY17E
67.4
62.0
69.6
112%
5.6
4.9
10.5
7.8
3.3
FY18E
70.0
62.0
68.0
110%
5.4
4.1
9.5
6.7
2.9
FY19E
72.0
62.0
68.0
110%
5.4
4.5
9.9
5.7
2.5
49
60
60
3.2
3.4
3.4
Source: Company, MOSL
Exhibit 45:
RIL: Segmental EBIT break-up (INRb)
Segmental EBTI (INRb)
Refining
Petchem
E&P
Total
Segmental EBIT share (%)
Refining
Petrochemicals
E&P
Total
FY10
60
86
54
200
30%
43%
27%
100%
FY11
92
94
67
253
36%
37%
26%
100%
FY12
96
90
53
239
40%
38%
22%
100%
FY13
128
73
30
231
55%
32%
13%
100%
FY14
132
86
20
238
55%
36%
8%
100%
FY15
155
86
16
257
60%
33%
6%
100%
FY16
233
103
4
340
69%
30%
1%
100%
FY17E
246
121
4
371
66%
33%
1%
100%
FY18E
254
133
7
394
64%
34%
2%
100%
FY19E
261
159
7
427
61%
37%
2%
100%
Source: Company, MOSL
14 March 2017
16

Reliance Industries
Exhibit 46: RIL: Sum of the parts valuation (on FY19E basis)
Core business
Refining
Petchem
E&P
KG D6
PMT
NEC-25
CBM
Shale
KG basin exploratory upside
Investments
RGTIL
Reliance Retail
RJio
Total
Net debt / (cash)
Target price
7
68
110
1,256
15
1,240
Book value
.7x FY19 sales
As per our telecom analyst
Value
508
496
68
10
13
4
8
(46)
78
DCF
DCF
USD 5/boe
USD 5/boe
7x EV/EBITDA FY19
USD 5/boe
Remarks/Methodology
6x FY19 EBITDA
6x FY19 EBITDA
14 March 2017
17

Reliance Industries
Reliance Industries: Story in charts
Exhibit 47:
RIL’s earnings growth momentum on a recovery
track
24.9
PAT (INRb)
PAT - YoY (%)
20.7
14.9
4.8
(1.2)
203
200
210
220
227
274
295
339
362
4.7
7.7
3.3
6.6
10.6
9.8
9.6
9.2
8.9
9.2
10.2
10.2
Exhibit 48: Also, return ratios are expected to gradually
recover
RoCE (%)
14.1
12.6
12.1
11.7
11.0
12.0
11.7
12.1
11.7
RoE (%)
8.2
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
Source: Company, MOSL
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
Source: Company, MOSL
Exhibit 49:
Refinery throughput to remain at 68mmt in FY18/19; GRM to stabilize
Refinery Thr' put (mmt)
8.4
8.6
9.2
8.6
RIL GRM (USD/bbl)
10.8
10.5
9.9
9.5
8.1
66.6
FY11
67.6
FY12
68.5
FY13
68.1
FY14
67.9
FY15
69.5
FY16
69.6
FY17E
68.0
FY18E
68.0
FY19E
Exhibit 50:
Expect petchem EBITDA contribution to increase, going forward, followed by refining
Refining
389
307
104
111
92
FY10
117
131
FY11
141
Petchem
E&P
Total
436
353
101
112
140
FY12
326
58
96
172
FY13
326
40
110
176
FY14
342
37
118
187
FY15
265
268
231
FY18E
248
28
143
450
10
171
240
481
10
243
497
6
FY16
FY17E
FY19E
14 March 2017
18

Reliance Industries
Reliance Industries: Story in charts
Exhibit 51:
Segmental EBIT
break-up
(%) - E&P a dampener,
refining and petchem outshine
100%
80%
60%
40%
20%
0%
Refining
Petrochemicals
E&P
Exhibit 52:
Expect E&P production to decline; though new
policy can boost long-term production (mmscmd)
56.2
39.8
42.6
26.5
13.8 12.2
8.4
7.8
6.7
5.7
Gas Production (mmscmd)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 53:
RIL refining margins
improved in FY16
(USD/bbl)
after staying flat in recent years
Singapore GRM
8.4
6.9
3.2
3.3
3.6
5.2
8.6
0.3
8.3
9.2
1.4
Premium/(disc)
10.8 10.5
8.5 8.8
3.3
4.9
2.8 2.5
5.6
6.4
7.5
5.6
RIL GRM
9.5
4.1
9.9
4.5
Exhibit 54:
We expect petchem EBITDA to improve in
FY18/19
Petchem EBITDA (INRb)
171
240
143
243
111
5.4
5.4
117
112
7.9
96
110
118
Source: Company, MOSL
Source: Company, MOSL
Exhibit 55:
Dividend payout stabilized in recent years (%)
20
16
12
8
Dividend payout (%)
Exhibit 56:
RIL 1-year forward P/E chart (last 10 years)
26
21
16
11
6
8.9
11.7
13.4
11.5
PE (x)
Median(x)
Peak(x)
Min(x)
Avg(x)
26.5
Source: Company, MOSL
Source: Company, MOSL
14 March 2017
19

Reliance Industries
Reilance Jio - Financials and Valuations
Reliance Jio - Income Statement
Y/E March
Total Income from Operations
Change (%)
Tower Rental Cost
Spectrum and License Costs
Access and Roaming Charge
Employees Cost
Subscriber Acquisition/Servicing Costs
Other Expenses
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 (%)
PAT
Change (%)
Margin (%)
FY15
0
NA
0
7
1
32
0
156
195
n.m.
-195
n.m.
34
-228
16
13
-231
0
-231
0
0.0
-231
NA
n.m.
FY16
0
0.0
0
16
0
41
0
157
214
n.m.
-213
n.m.
43
-257
14
32
-239
0
-239
0
0.0
-239
3.3
n.m.
FY17E
0
-100.0
10,125
0
3,742
4,125
15,548
0
33,540
NA
-33,540
NA
16,455
-49,994
74,197
0
-124,192
0
-124,192
0
0.0
-124,192
51,906.6
NA
FY18E
222,750
NA
72,891
24,503
41,565
17,820
44,324
26,000
227,103
102.0
-4,353
-2.0
104,707
-109,060
110,197
2,228
-217,030
0
-217,030
0
0.0
-217,030
74.8
-97.4
FY19E
319,181
43.3
104,600
35,110
55,726
19,246
55,130
22,000
291,811
91.4
27,370
8.6
103,254
-75,885
114,197
3,192
-186,890
0
-186,890
0
0.0
-186,890
-13.9
-58.6
FY20E
398,544
24.9
125,707
43,840
65,732
21,825
59,773
20,000
336,877
84.5
61,667
15.5
101,274
-39,607
120,197
3,985
-155,819
0
-155,819
0
0.0
-155,819
-16.6
-39.1
(INR Million)
FY21E
473,253
18.7
142,817
52,058
73,481
24,042
65,760
18,000
376,157
79.5
97,096
20.5
99,143
-2,047
122,197
4,733
-119,512
0
-119,512
-29,878
25.0
-89,634
-42.5
-18.9
FY22E
548,445
15.9
161,190
60,329
73,346
26,485
71,508
18,900
411,758
75.1
136,686
24.9
97,469
39,218
122,197
5,484
-77,495
0
-77,495
-19,374
25.0
-58,121
-35.2
-10.6
Reliance Jio - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Deferred Payment Liabilities
Capital Employed
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: MOSL Estimates
FY15
FY16
301,250
451,250
-508
-747
300,742
450,503
296,929
477,466
73,880
145,596
597,671
927,969
10,256
11,825
1,398
2,428
8,858
9,397
722,978 1,183,499
7,924
8,333
80,392
0
270
80,121
222,480
0
222,298
182
-142,088
597,671
FY17E
751,250
-124,939
626,311
1,377,466
0
2,003,777
2,000,000
18,883
1,981,117
0
8,333
FY18E
901,250
-341,969
559,281
1,377,466
0
1,936,748
2,048,000
123,590
1,924,410
0
8,333
FY19E
901,250
-528,859
372,391
1,477,466
0
1,849,857
2,096,000
226,844
1,869,156
0
8,333
FY20E
901,250
-684,678
216,572
1,527,466
0
1,744,039
2,120,000
328,118
1,791,882
0
8,333
(INR Million)
FY21E
901,250
-774,312
126,938
1,527,466
0
1,654,405
2,158,000
427,262
1,730,738
0
8,333
FY22E
901,250
-832,433
68,817
1,527,466
0
1,596,283
2,196,000
524,731
1,671,269
0
8,333
156,037
18,462
109,966
120,058
124,847
127,347
159,401
0
0
18,308
26,234
32,757
38,898
45,078
153
18,462
58,245
45,947
32,308
17,462
32,056
155,884
0
33,413
47,877
59,782
70,988
82,267
429,297
4,135
105,961
147,690
181,023
212,014
242,720
0
4,135
27,999
35,977
41,533
46,376
50,765
428,898
0
55,688
79,795
99,636
118,313
137,111
399
0
22,275
31,918
39,854
47,325
54,844
-273,260
14,327
4,004
-27,632
-56,176
-84,667
-83,320
927,969 2,003,777 1,936,748 1,849,857 1,744,039 1,654,405 1,596,283
14 March 2017
20

Reliance Industries
Reilance Jio - Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
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
6.7
0.0
0.0
FY16
0.0
0.0
10.0
0.0
0.0
-4.9
-0.1
0.0
0.1
0.0
0.0
91
0
0.4
-18.0
1.0
FY17E
-2.8
-2.4
13.9
0.0
0.0
-24.5
-23.1
-3.4
-5.8
0.0
0.0
NA
NA
4.5
-0.7
2.2
FY18E
-4.8
-2.5
12.4
0.0
0.0
0.0
-36.6
-5.4
-5.7
0.1
0.1
30
46
1.0
-1.0
2.3
FY19E
-4.1
-1.9
8.3
0.0
0.0
0.0
-40.1
-3.8
-4.1
0.2
0.2
30
41
0.8
-0.7
3.8
FY20E
-3.5
-1.2
4.8
0.0
0.0
1.2
-52.9
-2.0
-2.3
0.2
0.2
30
38
0.7
-0.3
6.9
FY21E
-2.0
0.2
2.8
0.0
0.0
2.3
-52.2
0.1
-0.1
0.2
0.3
30
36
0.6
0.0
11.8
FY22E
-1.3
0.9
1.5
0.0
0.0
2.9
-59.4
2.1
1.8
0.2
0.3
30
34
0.7
0.3
21.6
NA
NA
NA
0.0
0.0
274
0
0.4
-14.0
1.0
Reliance Jio - 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
-231
34
16
0
-27,827
-28,009
-8
-28,017
-95,351
-123,368
-5,338
70
-100,619
70,530
71,513
-13,453
0
0
128,590
-45
315
270
FY16
FY17E
-239 -124,192
43
16,455
14
74,197
3
0
-43,454 -269,278
-43,633 -302,818
-26
0
-43,659 -302,818
-176,334 -804,676
-219,992 -1,107,494
-246
0
78
0
-176,502 -804,676
150,000
300,000
102,861
900,000
-32,740
-74,197
0
0
0
0
220,121 1,125,803
-40
18,309
193
153
153
18,462
FY18E
-217,030
104,707
107,970
0
50,106
45,753
0
45,753
-48,000
-2,247
0
2,228
-45,773
150,000
0
-110,197
0
0
39,803
39,783
18,462
58,245
FY19E
-186,890
103,254
111,006
0
19,338
46,708
0
46,708
-48,000
-1,292
0
3,192
-44,808
0
100,000
-114,197
0
0
-14,197
-12,298
58,245
45,947
FY20E
-155,819
101,274
116,212
0
14,906
76,573
0
76,573
-24,000
52,573
0
3,985
-20,015
0
50,000
-120,197
0
0
-70,197
-13,639
45,947
32,308
(INR Million)
FY21E
-119,512
99,143
117,465
29,878
13,644
140,618
0
140,618
-38,000
102,618
0
4,733
-33,267
0
0
-122,197
0
0
-122,197
-14,847
32,308
17,462
FY22E
-77,495
97,469
116,713
19,374
13,247
169,308
0
169,308
-38,000
131,308
0
5,484
-32,516
0
0
-122,197
0
0
-122,197
14,595
17,462
32,056
14 March 2017
21

Reliance Industries
Reilance Industries - Financials and Valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
Purchases
Manufacturing and Other Expenses
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 (%)
FY13
3,602,970
9.2
-28,150
3,323,980
3,295,100
91.5
307,870
8.5
94,650
213,220
30,360
79,980
262,840
0
262,840
52,810
20.1
210,030
210,030
4.8
5.8
FY14
3,901,170
8.3
9,360
3,584,150
3,592,400
92.1
308,770
7.9
87,890
220,880
32,060
89,360
278,180
0
278,180
58,340
21.0
219,840
219,840
4.7
5.6
FY15
3,290,760
-15.6
90,770
2,883,970
2,974,740
90.4
316,020
9.6
84,880
231,140
23,670
87,210
294,680
0
294,680
67,490
22.9
227,190
227,190
3.3
6.9
FY16
2,331,580
-29.1
84,120
1,853,990
1,930,190
82.8
401,390
17.2
95,660
305,730
24,540
75,820
357,010
0
357,010
82,840
23.2
274,170
274,170
20.7
11.8
FY17E
2,404,008
3.1
-5,040
1,980,644
1,975,604
82.2
428,404
17.8
105,938
322,466
43,280
99,428
378,614
0
378,614
83,295
22.0
295,319
295,319
7.7
12.3
FY18E
2,829,401
17.7
0
2,335,780
2,335,780
82.6
493,621
17.4
123,259
370,362
37,125
101,607
434,845
0
434,845
95,666
22.0
339,179
339,179
14.9
12.0
(INR Million)
FY19E
2,960,666
4.6
0
2,449,113
2,449,113
82.7
511,553
17.3
134,543
377,010
30,375
116,994
463,629
0
463,629
101,998
22.0
361,631
361,631
6.6
12.2
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Eq. Share Warrants & App. Money
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
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
FY13
32,540
250
1,767,410
1,800,200
724,050
121,930
2,646,180
2,131,540
1,034,060
1,097,480
191,160
525,090
1,371,380
427,290
118,800
495,470
329,820
538,930
495,450
43,480
832,450
2,646,180
FY14
32,320
170
1,938,420
1,970,910
854,810
122,150
2,947,870
2,225,650
1,131,590
1,094,060
417,160
894,620
1,269,990
429,320
106,640
332,240
401,790
727,960
686,290
41,670
542,030
2,947,870
FY15
32,360
170
2,129,230
2,161,760
976,170
126,770
3,264,700
2,360,620
1,214,990
1,145,630
757,530
1,125,730
948,960
365,510
46,610
115,710
421,130
713,150
650,570
62,580
235,810
3,264,700
FY16
32,400
80
2,369,360
2,401,840
1,071,300
131,590
3,604,730
2,622,320
1,308,220
1,314,100
1,068,790
1,520,590
673,720
280,340
34,950
68,920
289,510
972,470
945,880
26,590
-298,750
3,604,730
FY17E
32,400
0
2,622,080
2,654,480
1,000,000
131,590
3,786,070
3,098,320
1,414,158
1,684,162
802,030
1,520,590
940,548
207,415
34,050
421,355
277,728
1,161,261
1,114,108
47,153
-220,712
3,786,070
FY18E
32,400
0
2,912,333
2,944,733
650,000
131,590
3,726,323
3,557,650
1,537,416
2,020,234
452,700
1,520,590
1,095,390
237,242
40,075
604,700
213,373
1,362,590
1,309,937
52,654
-267,201
3,726,323
(INR Million)
FY19E
32,400
0
3,221,799
3,254,199
700,000
131,590
4,085,789
3,707,650
1,671,959
2,035,691
352,700
1,520,590
1,603,151
266,083
41,935
1,067,781
227,352
1,426,343
1,370,818
55,524
176,808
4,085,789
14 March 2017
22

Reliance Industries
Reilance Industries - Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
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
FY13
71.5
93.6
613.1
9.0
14.6
FY14
74.8
95.2
670.4
9.5
14.9
FY15
77.2
96.4
734.5
10.0
15.7
16.7
13.4
1.8
1.4
14.7
0.8
4.9
11.0
8.2
13.9
1.4
1.0
41
5
72
1.3
9.8
-0.1
FY16
93.0
114.1
814.7
10.5
13.5
13.9
11.3
1.6
2.1
12.0
0.8
118.8
12.0
8.9
21.2
0.9
0.6
44
5
148
0.7
12.5
-0.2
FY17E
100.2
123.8
900.5
12.4
14.4
12.9
10.4
1.4
1.8
10.2
1.0
108.1
11.7
9.2
25.3
0.8
0.6
31
5
169
0.8
7.5
-0.4
FY18E
115.1
142.7
999.0
14.2
14.4
11.2
9.0
1.3
1.4
7.8
1.1
197.5
12.1
10.2
26.4
0.8
0.8
31
5
169
0.8
10.0
-0.5
FY19E
122.7
153.1
1,104.0
15.1
14.4
10.5
8.4
1.2
1.2
6.7
1.2
157.8
11.7
10.2
25.6
0.8
0.7
33
5
169
1.1
12.4
-0.6
0.7
66.9
12.1
9.6
11.8
1.7
1.4
43
12
50
2.5
7.0
-0.2
0.7
-18.4
11.7
9.2
12.7
1.8
1.3
40
10
64
1.7
6.9
-0.2
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
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
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY13
262,840
94,650
-52,810
59,460
364,140
710
364,850
-168,520
196,330
14,991
-153,529
-40,040
-41,040
-30,750
-111,830
99,491
395,979
495,470
FY14
278,180
87,890
-58,340
-51,630
256,100
220
256,320
-310,470
-54,150
-369,530
-680,000
-16,450
309,580
-32,680
260,450
-163,230
495,470
332,240
FY15
294,680
84,880
-67,490
174,450
486,520
4,620
491,140
-476,820
14,320
-231,110
-707,930
-750
36,600
-35,590
260
-216,530
332,240
115,710
FY16
360,160
85,900
-85,900
550,750
910,910
4,820
915,730
-565,630
350,100
-394,860
-960,490
2,820
32,150
-37,000
-2,030
-46,790
115,710
68,920
FY17E
378,614
105,938
-83,295
126,658
527,914
0
527,914
-209,240
318,674
0
-209,240
-80
76,440
-42,599
33,761
352,435
68,920
421,355
(INR Million)
FY18E
434,845
123,259
-95,666
229,833
692,270
0
692,270
-110,000
582,270
0
-110,000
0
-350,000
-48,926
-398,926
183,345
421,355
604,700
FY19E
463,629
134,543
-101,998
19,072
515,246
0
515,246
-50,000
465,246
0
-50,000
0
50,000
-52,164
-2,164
463,081
604,700
1,067,781
14 March 2017
23

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compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.
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in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
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Pending Regulatory inspections against Motilal Oswal Securities Limited:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry
and adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have
requested to SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection.
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Disclosure of Interest Statement
Analyst ownership of the stock
No
Served as an officer, director or employee -
No
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For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures
Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has
an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of
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of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not
conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
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This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors
and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
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Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
14 March 2017
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