Reliance Industries
BSE SENSEX
33,315
S&P CNX
10,322
13 November 2017
Update | Sector: Oil & Gas
CMP: INR875
Latin touch
TP: INR1,077 (+23%)
Buy
Higher refining margins to sustain
We had talked about the worsening refining glut in our thematic report,
The Three
Musketeers,
January 2017.
While we continue to believe capacity addition would
remain strong, especially in low cost condensate splitters, utilization of the Latin
American refineries does not appear to be improving any time soon. This would
enable RIL to continue clocking GRM of ~USD11.5/bbl during FY19-20.
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
6502.0
958/466
2/21/57
5775.4
86.6
12,330
53.8
Additionally, delays in upcoming ethylene crackers in the US are also likely to result
in higher petchem deltas. We expect EBITDA/mt of USD300 for RIL during FY19-20.
RJio’s revised plans are priced ~15% higher, with an average ARPU of INR150 for its
popular unlimited price plans. We expect actions towards ARPU accretion to drive
ARPU of INR156 in FY18 and INR172 in FY19.
Financials Snapshot (INR b)
Y/E March
2018E 2019E 2020E
Net Sales
4,119 5,017 5,202
EBITDA
622
761
821
Net Profit
345
394
455
Adj. EPS (INR)
58.3
66.5
77.0
EPS Gr. (%)
15.3
14.2
15.7
BV/Sh. (INR)
492
542
601
RoE (%)
12.4
12.9
13.5
RoCE (%)
7.8
8.2
8.9
P/E (x)
15.2
13.3
11.5
P/BV (x)
1.8
1.6
1.5
EV/EBITDA (x)
12.0
9.2
7.9
Shareholding pattern (%)
As On
Sep-17 Jun-17 Sep-16
Promoter
46.2
45.0
45.1
DII
11.4
11.1
12.5
FII
26.0
25.6
23.7
Others
16.5
18.3
18.7
FII Includes depository receipts
Stock Performance (1-year)
Reliance Inds.
Sensex - Rebased
1,000
850
700
550
400
Latin touch to refining – margins to remain strong at USD11.5/bbl
Argentina, Mexico, Brazil and Venezuela have all been facing severe under-
utilization of their refining assets. There is a mismatch between domestic crude
availability, refining configurations, and domestic-market product
requirements. Additionally, the refineries have not been upgraded for long,
which results in frequent maintenance requirements and shutdowns.
Utilization in Mexico and Venezuela has been at 40% in the recent months.
Utilization in Argentina at 76% is the lowest since 1996. Utilization in Brazil at
74.3% is also the lowest in six years.
Such lower utilization in these four countries alone, home to 6% of global
capacity, would boost refining margins. Additionally, Africa with another 6% of
global refining capacity, has also been witnessing utilization of below 70% since
2011. Expect USD11.5/bbl of GRM for RIL in FY18-20.
Further delays in US expansions could support petchem margins
A total of 9.7mmtpa of greenfield ethylene expansions in addition to 1.2mmtpa
of brownfield expansions were to come up in the US by 2020. While 3.5mmtpa
of capacity has already come up, few others appear to be delayed.
Only in 2017 and 2018, incremental supply was expected to outgrow
incremental demand globally. Such delays in capacity addition could help in
healthy demand and supply, preventing margins from falling sharply.
Gaining confidence in RJio’s profitability
RJio’s revised plans are priced about 15% higher, with an average ARPU of
INR150 for its popular unlimited price plans. Interestingly, this is above Bharti’s
ARPU of INR145 for 2QFY18.
Swarnendu Bhushan - Research analyst
(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529
Abhinil Dahiwale - Research analyst
(Abhinil.Dahiwale@motilaloswal.com); +91 22 3980 4309
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Reliance Industries
We estimate 181m subscribers in FY18 and 205m subscribers in FY19. This
implies addition of 42m subscribers in 2HFY18 and 24m subscribers in FY19. We
expect actions towards ARPU accretion to drive ARPU of INR156 in FY18 and
INR172 in FY19.
Our DCF-based value for RJio is INR245/share (EV of 10x FY21E EBITDA of
INR278b). The management’s indication of reduced freebies should drive
subsequent ARPU accretion.
Reiterate Buy with a revised target of INR1,077
Global refining peers are trading at 7x FY19E EV/EBITDA and 10-11x FY19E P/E.
We value RIL at a higher multiple of 7.5x (7x earlier) average FY19-20E
EV/EBITDA to factor in higher capacity utilization, better yield management,
crude optimization, and sound risk management.
Global petchem companies are trading at 7x FY19E EV/EBITDA and 10x FY19E
P/E. We value RIL at 7.5x (7x earlier) average FY19-20E EV/EBITDA. The higher
multiple takes into account RIL’s higher level of integration, flexibility in
feedstock, as well as strong growth in the domestic petchem market.
We value RIL using SOTP. We use 7.5x EV/EBITDA for refining and petchem, DCF
for E&P, 1x EV/Sales for Reliance Retail and DCF for RJio. Our target price is
revised from INR1,005 to INR1,077, implying an upside of 21%. We reiterate our
Buy
recommendation.
Exhibit 1:
Reliance Jio – DCF valuation
Values in INR Million
EBITDA
Capex
FCFF (pre tax)
Tax
FCFF (post tax)
Terminal Value
Cashflow after Terminal Value
NPV (INR m)
One year valuation
Terminal growth rate
Enterprise value (INR b)
Net debt (INR b)
Equity value (INR b)
No of shares (b)
Target price (INR)
WACC Calculation
Risk free rate
Beta
Rm
Re
D/E
Rd
WACC
FY18
55,565
220,004
-164,438
-329
-164,767
-164,767
2,858,921
FY19
142,608
198,000
-55,392
0
-55,392
-55,392
FY20
184,140
174,000
10,140
-2,129
8,011
8,011
FY21
277,988
108,000
169,988
-35,698
134,291
134,291
FY22
312,784
108,000
204,784
-43,005
161,779
161,779
FY23-30
3,629,568
768,000
2,861,568
-600,929
3,462,498
5,240,551
8,703,048
4.0%
2,859
1,278
1,581
6.5
245
6.0%
1.1
14.0%
14.5%
50.0%
8.0%
11.0%
Source: Company, MOSL
13 November 2017
2

Reliance Industries
Latin boost to refining
Expect USD11.5/bbl of GRM in FY18-20
Domestic production of Argentina, Brazil, Mexico and Venezuela is mostly heavy
crude. However, due to lack of large investments in the recent past, their
refineries are mostly configured to process lighter crude.
Similarly, product demands have changed while refinery production has not
kept pace with changing product requirements. Consumption of petrol and
diesel has increased by ~5% each in the mix of total petroleum products
consumed during 2000-16.
Lack of investments combined with multiple unplanned shutdowns and lack of
suitable crude has resulted in low utilization for most Latin American refineries.
Both Mexico and Venezuela appear to be running at ~40% utilization. Current
utilization of ~75% in Brazil and Argentina is also at multi-year lows.
Additionally, Africa also seems to be stuck with low refinery utilization of below
70% since 2011 due to lack of investments in adequate upgrades. Africa and
Latin America together account for ~12% of global refining capacity. Persistent
underutilization in the region is expected to keep refining margins strong.
RIL has reported a spread of USD4-5/bbl for the last two years. We believe that
this spread is sustainable considering the flexibility of yield management, crude
optimization and risk management. We build in a GRM of USD11.5/bbl for RIL in
FY18-20, a premium of ~USD5/bbl over Singapore complex GRM.
Exhibit 2:
Petrol and diesel as % of total petroleum products consumed in Latin America
34.5
32.0
29.5
27.0
24.5
22.0
28.9
24.7
31.9
Petrol (%)
32.3
Diesel (%)
34.5
33.8
~5% increase in consumption of
26.4
petrol and diesel
23.7
29.1
24.0
Source: BP Statistical review, MOSL
Exhibit 3:
Refining utilization in Latin America at 40-75%
100.0
90.0
80.0
70.0
60.0
50.0
67.5
80.0
77.7
68.8
61.3
53.5
Mexico
Argentina
95.6
Brazil
Venezuela
97.2
Total
Source: BP Statistical review, MOSL
13 November 2017
3

Reliance Industries
Exhibit 4:
Africa and Latin America facing low utilization (%) in last few years
Global
Asia Pacific
95.0
85.0
75.0
65.0
55.0
Europe
Latin America
Africa
US
Source: BP Statistical review, MOSL
Even 2-4% change in global refinery utilization results in significant impact on
refining margins, as shown in the next exhibit.
The only anomaly seems during 2011-12, where refining margins increased
despite fall in utilization. This is primarily as there were huge capacity additions
in China, which increased the nameplate capacity while effective capacity
remained low due to the time taken to stabilize these new capacities.
Exhibit 5:
Even 2-4% change in global refinery utilization has marked impact on GRMs
Global
87.0
84.0
81.0
78.0
75.0
Huge capacity addition in China
lowers apparent utilization
Singapore complex GRM (USD/bbl)
10.0
7.5
5.0
2.5
0.0
Source: BP Statistical Review, Reuters, MOSL
High complexity gives RIL the flexibility to manage its product yield and crude oil
basket better resulting in higher yield over benchmark.
Hedging of crack spreads also helps in less volatile refining margins for the
company.
Exhibit 6: RIL’s GRM: Average premium of USD4.3/bbl over Singapore complex since 1QFY16
Singapore GRM
10.1
8.3
3.5
4.8
7.3
1.0
6.3
8.6
8.0
6.3
8.0
7.8
1.5
10.4
2.4
10.6
4.3
Premium / (Disc)
11.5
3.5
10.8
3.0
11.5
RIL GRM
10.1
5.0
10.8
4.1
11.5
5.1
11.9
12.0
3.7
8.7
2.9
6.5
5.5
5.8
5.0
5.1
6.7
6.4
6.4
8.3
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18
Source: Company, MOSL
13 November 2017
4

Reliance Industries
Delays in US petrochemical expansions spell ‘boom’
Expect strong petchem margins
In our March 2017 report, we had highlighted that 9.74mmtpa of greenfield
capacity in addition to 1.2mmtpa of brownfield expansion is expected in the US
by 2020.
Over the next few years, only 2017 and 2018 were expected to witness
incremental capacity addition higher than incremental demand. While
3.5mmtpa capacities of Dow, ExxonMobil and Oxychem at Texas have been
completed, Chevron Phillips’ 1.5mmtpa ethylene cracker at Texas has been
delayed to 2018 due to heavy flooding caused by Hurricane Harvey.
Further delays are expected in upcoming plants in the US, which could boost
petrochemical deltas. These delays, we believe, could help sustain higher
petrochemical margins, going forward.
Polypropylene is also expected to witness increase in operating rates, going
forward.
Capacity prior to
expansions (mmtpa)
Capacity
addition (mmtpa)
1.365
0.154
Exhibit 7: RIL’s petchem expansions
Basic petrochem
Ethylene
Propylene
Butadiene
Benzene
Toluene
Polymers
HDPE
LLDPE
LDPE
PP
PVC
PBR
SBR
Polyester
PET
PSF
Fiber fill
PFY
Fiber intermediates
PX
DMT
ACN
PTA
MEG
1.875
2.71 including 0.759 from refining
0.2
0.756
0.197
0.5
0.41
0.205
2.635
0.625
0.75
0.55
0.4
0.135
0.04
0.15
0.648
0.346
0.535
2.47
0.29
0.74
0.04
0.82
1.856
0.03
0.041
2.05
0.73
2.296
0.733
Source: Company, MOSL
13 November 2017
5

Reliance Industries
Exhibit 8:
Upcoming greenfield ethylene projects in the US
Company
Dow Chemical
ExxonMobil
Oxychem/Mexichem
Chevron Phillips
Formosa
Sasol
Axiall/Lotte
Capacity
(ktpa)
1,500
1,500
544
1,500
1,200
1,500
1,000
Location
Texas
Texas
Texas
Texas
Texas
Louisiana
Louisiana
Expansions in the US may
be delayed
Start
up by
2017 (Done)
2017 (Done)
2017 (Done)
2017 (Delayed)
2018
2019
2020
Source: Industry, MOSL
North America, US in particular, is expected to witness highest capacity addition
going forward. This is based on low cost shale gas as feedstock. From 2020,
China is expected to lead capacity addition in petrochem.
Exhibit 9: Global ethylene capacity addition – possible delays in 2017/18 could support PE
deltas
Source: IHS, MOSL
Polypropylene margins are expected to improve further with global utilization
inching higher. Almost 50% of upcoming capacities in China are based on coal.
Due to rising concerns on pollution, we could see delays in most of these
projects.
Exhibit 10: Global polypropylene operating rates to improve
Source: IHS, MOSL
13 November 2017
6

Reliance Industries
Strong product deltas to help margins
We have observed strong product deltas for most of the petrochemical
products. Product deltas for PP, PVC, POY and PSF in FY18 are above last 5-year
average. While PE and PTA deltas have dipped below last 5-year average in
September 2017.
Exhibit 12:
PP - naphtha delta above 5-year average
5 yr range
66
58
50
42
34
Exhibit 11:
PE - naphtha delta below 5-year average
80
65
50
35
20
5 yr range
FY18
FY17
Last 5 yr avg.
FY18
FY17
Last 5 yr avg.
Source: Company, MOSL
Source: Company, MOSL
Exhibit 13:
PVC - naphtha delta above 5-year average
5 yr range
50
38
26
14
2
-10
Exhibit 14:
POY - naphtha delta above 5-year average
5 yr range
72
64
56
48
40
FY18
FY17
Last 5 yr avg.
FY18
FY17
Last 5 yr avg.
Source: Company, MOSL
Source: Company, MOSL
Exhibit 15:
PSF - naphtha delta above 5-year average
5 yr range
68
62
56
50
44
Exhibit 16:
PTA - naphtha delta dipped below 5-year average
5 yr range
42
36
30
24
18
FY18
FY17
Last 5 yr avg.
FY18
FY17
Last 5 yr avg.
Source: Company, MOSL
Source: Company, MOSL
13 November 2017
7

Reliance Industries
Gaining confidence in RJio’s profitability
Reduced freebies should drive subsequent ARPU accretion
RJio’s revised plans are priced ~15% higher, with an average ARPU of INR150 for its
popular unlimited price plans. Interestingly, this is above Bharti’s ARPU of INR145 for
2QFY18.
We estimate 181m subscribers for FY18 and 205m subscribers for FY19. This implies
addition of 42m subscribers in 2HFY18 and 24m subscribers in FY19. We expect actions
towards ARPU accretion to drive ARPU of INR156 in FY18 and INR172 in FY19.
Our DCF-based value for RJio is INR245/share (EV of 10x FY21E EBITDA of INR278b).
The management’s indication of reduced freebies should drive subsequent ARPU
accretion.
‘Era of freebies’ nearing its end
RJio revised its price plans in Diwali. This is the fourth time it has revised its price
plans since the launch of services in September 2016, giving us further confidence
that competitive intensity is reducing for RJio. Being the market maker and the most
aggressive operator, RJio’s price action is likely to improve overall market conditions
and drive ARPU accretion. RJio’s ARPU should improve to INR156 by FY18E on the
back of revised price plans.
ARPU accretion to drive earnings
The previous most popular price plan (INR399 for four months) may keep ARPU at
about INR116 (including Prime subscription fees). However, launch of new price
plans announced during Diwali and JioPhone should change the ARPUs. The three
newly-launched most popular price plans – (a) INR459 for 84 days, (b) INR399 for 70
days, and (c) INR309 for 49 days – offer ARPU of INR150 (ex GST). We have factored
3QFY18E ARPU at INR142 (including Jio feature phone) and expect ARPU to improve
15% to INR163 subsequently in 4QFY18, as the management has indicated that it
will continue to curtail freebies. We model ARPU of INR156 in FY18 and INR172 in
FY19. Subscriber growth should remain high in 3QFY18 on the back of both
smartphone as well as JioPhone subscriber growth. The management has
highlighted that all subscribers are paying subscribers instead of only active (VLR)
subscribers. We expect 42m subscriber addition in 2HFY18; overall subscribers
should reach 181m by March 2018 and 205m by March 2019, up from 139m in
2QFY18. We expect EBITDA breakeven to sustain in FY18 and net profit from FY19.
We expect EBITDA of INR56b for FY18 and INR143b for FY19 on the back of low
network, employee and other expenses.
Capex intensity to reduce
The assets capitalized towards wireless network stand at INR1,450b and CWIP of
INR620b. Capex incurred in 2QFY18 was INR70b v/s INR150b in 1QFY18. In 3QFY18,
it could be higher; however, in the recent analyst meet, the management
highlighted that it may peak in 2-3 quarters. Net debt may not change significantly
beyond the next two quarters. Subsequently, we believe annual capex should
normalize to INR150b-200b beyond the next four quarters, driving free cash flows.
Telecom Analyst:
Aliasgar Shakir
(Aliasgar.shakiri@MotilalOswal.com);
+91 22 6129 1565
13 November 2017
8

Reliance Industries
DCF valuation at INR245/share on ARPU accretion potential
Our DCF-based value of INR245/share is based on 11% WACC and 4% terminal
growth. The implied EV works out to 10x FY21E EBITDA of INR278b. RJio has
delivered high subscriber growth, gaining aggressive market share. However, the
profitability estimates hover around expectations of reducing freebies and
subsequent ARPU accretion. The management has indicated willingness to
progressively shift towards monthly paid subscription, prioritizing revenue market
share and profitability against merely subscriber market share. This could also
support expansion of industry revenue pool. Lower competitive intensity from RJio,
the most aggressive player and the key price maker in the industry, remains positive
for the overall Telecom sector.
Exhibit 17:
Comparison of plans – old v/s new (INR)
Old
Price Plan
GST (%)
Price Plan - Net of GST
Validity (days)
30 day plan
Increase (v/s old plan) (%)
*Compared with INR399 price plan
309
18%
253
56
136
399
18%
338
84
121
509
18%
431
56
231
309
18%
253
49
155
14%
459
18%
389
84
139
15%*
New
399
18%
338
70
145
20%
509
18%
431
49
264
14%
Source: MOSL, Company
Exhibit 18:
Current prepaid plans for Jio Prime customers
MRP (INR)
Validity (days)
Free Voice
Data (gb)*
Daily Limit (gb)
SMS
Jio Apps
52
7
98
14
149
28
309
49
399
70
459
84
499
91
509
49
799
28
999
90
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
0.15
70
0.15
140
0.15
300
1
1
1
1
2
3
-
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
Source: MOSL, Company
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
*Unlimited data signifies Daily Limit at High Speed, followed by unlimited at 64 Kbps.
Exhibit 19:
Current postpaid plans for Jio Prime customers
MRP (INR)
Security Deposit
Validity (days)
Free Voice
Data (gb)*
Daily Limit (gb)
SMS
Jio Apps
309
400
Bill cycle
Unlimited
Unlimited
1
Unlimited
Unlimited
409
500
Bill cycle
Unlimited
Unlimited
-
Unlimited
Unlimited
509
600
Bill cycle
Unlimited
Unlimited
2
Unlimited
Unlimited
799
950
Bill cycle
Unlimited
Unlimited
3
Unlimited
Unlimited
999
1150
Bill cycle
Unlimited
Unlimited
-
Unlimited
Unlimited
*Unlimited data signifies Daily Limit at High Speed, followed by unlimited at 64 Kbps.
Source: MOSL, Company
13 November 2017
9

Reliance Industries
Exhibit 20:
ARPU per SIM understates ARPU per customer
Particulars
Devices in circulation (m)
Average SIM/user (nos)
ARPU per VLR SIM (INR)
Effective ARPU per user (INR)
Smartphone users
263
1.19
277
329
Feature phone users
496
1.28
134
172
Source: Company
Exhibit 21:
ARPU accretion potential
Particulars
Subscribers in 2009 (m)
ARPU in 2009 (INR)
Equivalent ARPU in 2017 (INR, adjusted for nominal per capita income)
Mobile users
392
179
530
Source: Company
Exhibit 22:
Summary of RJio P/L (INR b)
Revenue
Subscribers (m)
ARPU (INR/month)
Operating Expenses
Tower Rental Cost
% of Sales
Spectrum and license costs
% of Sales
Access and Roaming Charge
% of Sales
Employee Expenses
% of Sales
SGA expenses
% of Sales
Total Expenditure
EBITDA
EBITDA margin (%)
* FY18 – 9M figures
FY18E*
214
181
156
52
25%
21
10%
51
24%
14
7%
20
9%
158
56
26%
FY19E
397
205
172
107
27%
44
11%
62
16%
19
5%
22
6%
254
143
36%
FY20E
471
223
184
129
27%
52
11%
63
13%
22
5%
22
5%
287
184
39%
Source: Company, MOSL
Exhibit 23:
Revenue and EBITDA margin to soar
Revenue (INR b)
EBITDA margin (%)
35.9
26.0
39.1
0.0
0
FY17
* FY18 – 9M figures
214
FY18E*
397
FY19E
471
FY20E
Source: MOSL, Company
13 November 2017
10

Reliance Industries
Exhibit 24:
ARPU to get a fillip
Subsribers (m)
156
ARPU (INR/month)
172
184
14.4
9.3
0
109
FY17
181
FY18E
205
FY19E
223
FY20E
109
FY17
72
FY18E
24
FY19E
18
FY20E
Exhibit 25:
Subscriber market share to rise
Subsriber additions (m)
Subscriber mkt share (%)
15.8
16.8
Source: MOSL, Company
Source: MOSL, Company
Exhibit 26:
Capex to sales to reduce
2.3
Capex (INR b)
Capex to sales (x)
Exhibit 27:
Net debt to EBITDA to plunge
23.0
Net Debt / EBITDA (x)
9.4
0.5
483
FY18E
198
FY19E
0.4
174
FY20E
Source: Company, MOSL
FY18E
FY19E
7.5
4.7
3.8
FY20E
FY21E
FY22E
Source: Company, MOSL
Exhibit 28:
Free cash flows to touch new highs
FCF (INR b)
1.4
1.5
1.5
152
17
-23
-176
FY18E
FY19E
FY20E
FY21E
FY22E
Source: Company, MOSL
1.3
1.1
Net Debt / Equity (x)
189
Exhibit 29:
Return ratios to rise
RoE (%)
RoCE (%)
6.9
2.6
1.8
0.4
FY19E
FY20E
FY21E
FY22E
5.0
4.9
RoIC (%)
8.0
5.9
6.1
0.9
0.6
(1.1)
FY18E
1.5
Source: Company, MOSL
13 November 2017
11

Reliance Industries
Exhibit 30:
Reliance Jio – DCF valuation
Values in INR Million
EBITDA
Capex
FCFF (pre tax)
Tax
FCFF (post tax)
Terminal Value
Cashflow after Terminal Value
NPV (INR m)
One year valuation
Terminal growth rate
Enterprise value (INR b)
Net debt (INR b)
Equity value (INR b)
No of shares (b)
Target price (INR)
WACC Calculation
Risk free rate
Beta
Rm
Re
D/E
Rd
WACC
FY18
55,565
220,004
-164,438
-329
-164,767
-164,767
2,858,921
FY19
142,608
198,000
-55,392
0
-55,392
-55,392
FY20
184,140
174,000
10,140
-2,129
8,011
8,011
FY21
277,988
108,000
169,988
-35,698
134,291
134,291
FY22
312,784
108,000
204,784
-43,005
161,779
161,779
FY23-30
3,629,568
768,000
2,861,568
-600,929
3,462,498
5,240,551
8,703,048
4.0%
2,859
1,278
1,581
6.5
245
6.0%
1.1
14.0%
14.5%
50.0%
8.0%
11.0%
Source: Company, MOSL
13 November 2017
12

Reliance Industries
Consolidated net debt to peak out in FY18
Strong margins to continue for some more time
On a standalone basis, free cash flow of INR1.7t would be generated in FY18-20.
RoCE is expected to improve from 9.1% in FY17 to 10.6% in FY19.
In the standalone business, only maintenance capex would be required in
addition to the capex on E&P from FY19. We build in capex of INR75b/100b in
FY19/20 for the standalone entity.
In RJio, we build in capex of INR479b/198b/174b in FY18/19/20. RJio is expected
to deliver EBITDA of INR56b/143b/184b in FY18/19/20.
Adjusted consolidated net debt in FY17 was INR1.4t. We expect it to decline to
INR410b by FY20.
Exhibit 32:
Strong standalone free cash flow generation
Free Cash Flow (INRb)
RoE (%)
12.1 11.9 12.1
Exhibit 31:
Standalone return ratios to improve
RoCE (%)
14.1
12.6
12.1
11.7
11.7 11.6
11.0
Free cash flow
generation of
INR1.7t
264
182
578
662
493
10.6
9.8
9.6
10.7
10.2 10.5
9.2
8.2
8.9
9.1
(54)
FY14
14
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, MOSL
FY15
FY16
FY17
FY18E
FY19E
FY20E
Source: Company, MOSL
Exhibit 33:
Consolidated return ratios
RoCE (%)
13.1
12.2 11.9 11.8
8.8
8.6
13.2
11.3
8.0
RoE (%)
12.7
12.1 12.4
13.3
Exhibit 34:
Consolidated free cash flow generation
Free Cash Flow (INRb)
513
9.6
Free cash flow
generation of
INR852b
417
8.2
7.2
7.2
7.8
8.1
8.8
(84)
(286)
FY15
(271)
FY16
FY17
FY18E
FY19E
FY20E
Source: Company, MOSL
(78)
(167)
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18EFY19EFY20E
Source: Company, MOSL
FY14
Exhibit 35: Consolidated net debt to decline
Net Debt (INRb)
1,361
997
793
402
139
FY13
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
410
1,415
964
13 November 2017
13

Reliance Industries
Valuation and view
Strong margins to continue for some more time
Global refining peers are trading at 7x FY19E EV/EBITDA and 10-11x FY19E P/E.
We value RIL at a higher multiple of 7.5x average FY19-20E EV/EBITDA to factor
in higher capacity utilization, better yield management, crude optimization, and
sound risk management.
Global petchem companies are trading at 7x FY19E EV/EBITDA and 10x FY19E
P/E. We value RIL at 7.5x average FY19-20E EV/EBITDA. The higher multiple
takes into account RIL’s higher level of integration, flexibility in feedstock, as
well as strong growth in the domestic petchem market.
RIL has begun awarding long-lead items for development of R-series. Production
of 12mmscmd is expected from mid-2020. RIL expects to file FDP of MJ and
satellite fields by 2HFY18. These could come into production from 2021-22.
In RJio, we expect EBITDA of INR142b in FY19, with a subscriber base of 205m
and ARPU of INR172. We expect PAT breakeven in FY19. Using WACC of 11%
and terminal growth of 4%, we arrive at a valuation of INR245/share for RJio.
Our SOTP-based target price is now INR1,077, up from INR1,005 earlier.
Reiterate
Buy.
Exhibit 36:
Global refining peers trade at EV/EBITDA of 7.3x FY19E
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
0.0
5.0
10.0
ROE (%)
Source: Bloomberg, MOSL
15.0
20.0
25.0
Average excld Indian
refiners
Idemitsu Kosan Co Ltd
Marathon Petroleum
Corp
JXTG Holdings Inc
Phillips 66
RIL
Esso Thailand PCL
Caltex Australia Ltd
S-Oil Corp
BPCL
Thai Oil PCL
Showa Shell Sekiyu KK
IOCL
Valero Energy Corp
MRPL
SK Innovation Co Ltd
RIL looks
overvalued due
to RJio
13 November 2017
14

Reliance Industries
Exhibit 37:
Integrated player like RIL deserves premium over global peers
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
0.0
5.0
10.0
ROE (%)
15.0
20.0
Source: Bloomberg, MOSL
RIL
Indorama Thai
Dow Chemical
Sumitomo Chemical
PTT Chemical
Hanwha
LG Chemical
Mitsui Chemical
Global Average
Mitsubishi Chemicals
Lotte Chemical
RIL looks
overvalued
due to RJio
Exhibit 38: 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)
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
FY17
67.1
62.0
70.1
113%
5.8
5.2
11.0
7.8
3.4
49
3.2
FY18E
64.6
62.0
70.6
114%
6.8
4.7
11.5
6.1
2.4
55
3.4
FY19E
66.1
62.0
70.0
113%
6.0
5.5
11.5
5.4
2.3
60
3.4
FY20E
67.0
62.0
70.0
113%
6.0
5.5
11.5
4.6
2.0
60
3.4
Source: Company, MOSL
13 November 2017
15

Reliance Industries
Exhibit 39: RIL: Segmental EBIT break-up (INR b)
Segmental EBTI (INRb)
Refining
Petchem
E&P
Total
Segmental EBIT share (%)
Refining
Petrochemicals
E&P
Total
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%
FY17
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%
FY20E
260
169
4
433
60%
39%
1%
100%
Source: Company, MOSL
Exhibit 40: RIL: Sum of the parts valuation (September 2018E TP)
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
3
67
245
1,105
28
1,077
Value
370
355
65
5
6
2
4
(38)
86
Remarks/Methodology
7.5x avg FY19-20 EBITDA
7.5x avg FY19-20 EBITDA
DCF
DCF
USD 5/boe
USD 5/boe
7x EV/EBITDA FY19
USD 5/boe
Book value
1x average FY19-20 sales
As per our telecom analyst
13 November 2017
16

Reliance Industries
Reliance Industries: Story in charts
Exhibit 41:
RIL’s earnings growth momentum on a recovery
track (standalone)
PAT (INRb)
20.7
14.6
227
4.7
220
FY14
FY15
3.3
274
FY16
314
FY17
369
FY18E
403
FY19E
449
FY20E
FY14
9.4
11.3
9.2
8.2
FY15
8.9
9.1
10.3
10.6
10.7
PAT - YoY (%)
17.3
11.7
11.0
Exhibit 42:
Also, return ratios are expected to gradually
recover
(standalone)
RoCE (%)
11.7
11.6
RoE (%)
12.1
12.0
12.0
FY16
FY17
FY18E
FY19E
FY20E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 43:
Refinery throughput to remain at 70mmt in FY19/20; GRM at USD11.5/bbl
Refinery Thr' put (mmt)
10.8
8.1
8.6
11.0
RIL GRM (USD/bbl)
11.5
11.5
11.5
68.1
FY14
67.9
FY15
69.5
FY16
70.1
FY17
70.6
FY18E
70.0
FY19E
70.0
FY20E
Exhibit 44:
Expect petchem EBITDA contribution to increase, going forward
Refining
Petchem
465
9
171
252
E&P
Total
538
436
326
40
110
176
FY14
342
37
118
187
FY15
265
284
280
294
291
28
143
7
270
570
6
290
583
3
FY16
FY17
FY18E
FY19E
FY20E
13 November 2017
17

Reliance Industries
Reliance Industries: Story in charts
Exhibit 45:
Segmental EBIT
break-up
(%) - E&P a dampener,
refining and petchem outshine
100
80
60
40
20
0
Refining
Petrochemicals
E&P
13.8
12.2
8.4
7.8
Exhibit 46:
Expect E&P production to decline, though new
policy can boost long-term production (mmscmd)
Gas Production (mmscmd)
6.1
5.4
4.6
Source: Company, MOSL
Source: Company, MOSL
Exhibit 47:
RIL refining margins to remain USD11.5/bbl in
FY19/20
Singapore GRM
10.8
8.5
2.8
5.6
8.8
2.5
6.4
3.3
5.2
Premium/(disc)
11.0
11.5
4.7
RIL GRM
11.5
5.5
11.5
5.5
Exhibit 48:
We expect petchem EBITDA to improve in
FY18/19/20
Petchem EBITDA (INRb)
252
143
171
270
290
110
7.5
5.8
6.8
6.0
6.0
118
Source: Company, MOSL
Source: Company, MOSL
Exhibit 49:
Dividend payout stabilized in recent years (%)
Dividend payout (%)
15.7
14.9
14.4
13.5
13.3
14.4
14.4
Exhibit 50:
RIL 1-year forward P/E chart (last 10 years)
P/E (x)
Min (x)
38.0
30.0
22.0
14.0
6.0
Avg (x)
+1SD
Max (x)
-1SD
30.2
18.9
14.3
9.8
9.3
15.6
Source: Company, MOSL
Source: Company, MOSL
13 November 2017
18

Reliance Industries
Reliance Jio - Financials and Valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
Tower Rental Cost
Spectrum and License Costs
Access and Roaming Charge
Employees Cost
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 (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
0
NA
1
7
0
32
156
195
NA
-195
NA
34
-228
16
13
-231
0
-231
0
0.0
0
-231
-231
NA
NA
FY16
0
NA
0
16
0
41
157
214
NA
-213
NA
43
-257
14
31
-241
0
-241
-83
34.4
0
-158
-158
-31.7
NA
FY17
0
NA
0
17
0
60
355
432
NA
-432
NA
49
-481
10
12
-479
0
-479
-165
34.5
0
-314
-314
98.5
NA
FY18E*
2,13,560
NA
52,355
20,720
50,865
14,397
19,656
1,57,994
74.0
55,565
26.0
45,532
10,033
20,695
2,136
-8,526
0
-8,526
0
0.0
0
-8,526
-8,526
2,618
-4.0
(INR Million)
FY19E
FY20E
3,96,992
4,71,078
85.9
18.7
1,07,474
1,28,793
43,669
51,819
61,995
62,502
19,246
21,825
22,000
22,000
2,54,384
2,86,938
64.1
60.9
1,42,608
1,84,140
35.9
39.1
98,811
1,05,771
43,797
78,369
43,384
60,846
3,970
4,711
4,383
22,234
0
0
4,383
22,234
1,096
5,558
25.0
25.0
0
0
3,287
16,675
3,287
16,675
LP
407.3
0.8
3.5
(INR Million)
FY19E
FY20E
6,50,000
6,50,000
2,53,404
2,70,080
9,03,404
9,20,080
14,96,140
15,46,140
23,99,544
24,66,220
24,70,279
1,48,205
23,22,074
0
8,729
2,39,051
32,629
1,46,873
59,549
1,70,310
31,362
99,248
39,699
68,742
23,99,544
26,44,279
2,53,976
23,90,302
0
8,729
2,67,441
38,719
1,58,061
70,662
2,00,253
35,376
1,17,769
47,108
67,188
24,66,220
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Capital Employed
FY15
301,250
-508
300,742
296,929
597,671
10,256
1,398
8,858
722,978
7,924
80,392
0
270
80,121
222,480
0
222,298
182
-142,088
597,671
FY16
451,250
-747
450,503
470,078
920,581
11,825
2,428
9,397
1,183,499
8,333
156,037
0
153
155,884
436,685
0
436,286
399
-280,648
920,581
FY17
450,000
258,644
708,644
1,244,490
1,953,134
13,606
3,862
9,744
1,779,776
8,731
210,634
0
268
210,366
55,751
0
55,067
683
154,883
1,953,134
FY18E
6,50,000
2,50,117
9,00,117
13,96,140
22,96,257
22,72,279
49,394
22,22,885
0
8,729
1,58,868
17,553
1,09,281
32,034
94,225
19,479
53,390
21,356
64,643
22,96,257
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
*FY18 – 9M figures ; E: MOSL Estimates
13 November 2017
19

Reliance Industries
Reliance 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
10.0
0.0
0.0
FY16
0.0
0.0
10.0
0.0
0.0
-4.9
0.0
0.0
0.1
0.0
0.0
91
0
0.4
-18.0
1.0
FY17
0.0
0.0
15.7
0.0
0.0
-9.3
-0.1
0.0
0.6
0.0
0.0
365
0
3.8
-47.1
1.7
FY18E
-0.1
0.6
13.8
0.0
0.0
-2.7
-1.1
0.6
0.9
0.1
0.1
30
33
1.7
0.5
1.4
FY19E
0.1
1.6
13.9
0.0
0.0
-0.4
0.4
1.5
1.5
0.2
0.2
30
29
1.4
1.0
1.5
FY20E
0.3
1.9
14.2
0.0
0.0
0.3
1.8
2.6
2.6
0.2
0.2
30
27
1.3
1.3
1.5
NA
NA
NA
0.0
0.0
274
0
0.4
-14.0
1.0
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY15
-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
-239
43
14
3
-43,454
-43,633
-26
-43,659
-176,334
-219,992
-246
78
-176,502
150,000
102,861
-32,740
0
0
220,121
-40
193
153
FY17
-479
49
10
0
-33,637
-34,057
-1
-34,058
-385,398
-419,456
-242
61
-385,579
0
478,037
-58,188
0
0
419,849
212
56
268
FY18E
-8,526
45,532
20,695
0
2,05,799
2,63,500
39,764
3,03,264
-4,78,897
-1,75,633
0
2,197
-4,76,700
2,00,000
1,03,205
-20,695
0
0
2,82,510
1,09,074
207
1,09,281
(INR Million)
FY19E
FY20E
4,383
22,234
98,811
1,05,771
43,384
60,846
-1,096
-5,558
33,493
12,741
1,78,976
1,96,034
-3,970
-4,711
1,75,006
1,91,323
-1,98,000
-1,74,000
-22,994
17,323
0
0
4,032
4,773
-1,93,968
-1,69,227
0
0
1,00,000
50,000
-43,384
-60,846
0
0
0
0
56,616
-10,846
37,653
11,250
1,09,219
1,46,811
1,46,873
1,58,061
13 November 2017
20

Reliance Industries
Reliance 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 (%)
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
1,938,110
83.1
393,470
16.9
85,900
307,570
25,620
78,210
360,160
0
360,160
86,320
24.0
273,840
274,170
20.7
11.8
FY17
2,420,250
3.8
3,220
1,984,470
1,987,690
82.1
432,560
17.9
84,650
347,910
27,230
87,090
407,770
0
407,770
93,520
22.9
314,250
314,250
14.6
13.0
FY18E
3,223,688
33.2
43,320
2,646,909
2,690,229
83.5
533,459
16.5
101,995
431,464
37,418
78,659
472,705
0
472,705
103,995
22.0
368,710
368,710
17.3
11.4
FY19E
3,882,277
20.4
0
3,300,076
3,300,076
85.0
582,202
15.0
118,577
463,624
30,375
84,016
517,265
0
517,265
113,798
22.0
403,467
403,467
9.4
10.4
(INR Million)
FY20E
3,932,485
1.3
0
3,335,653
3,335,653
84.8
596,832
15.2
127,615
469,217
31,500
138,108
575,825
0
575,825
126,682
22.0
449,144
449,144
11.3
11.4
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
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
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
0
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
0
62,580
235,810
3,264,700
FY16
32,400
0
2,507,580
2,539,980
923,200
237,470
3,700,650
2,622,320
1,146,890
1,475,430
1,109,050
1,572,500
659,760
280,340
34,950
68,920
275,550
1,116,090
1,093,730
0
22,360
-456,330
3,700,650
FY17
32,510
0
2,850,620
2,883,130
1,013,030
247,660
4,143,820
2,584,480
1,053,180
1,531,300
1,341,890
1,924,500
669,770
340,180
54,720
17,540
257,330
1,323,640
1,289,780
0
33,860
-653,870
4,143,820
FY18E
65,020
0
3,133,634
3,198,654
650,000
247,660
4,096,314
3,701,320
1,354,822
2,346,498
592,198
1,924,500
996,161
453,108
72,885
179,706
290,462
1,763,042
1,717,942
0
45,100
-766,881
4,096,314
FY19E
65,020
0
3,478,902
3,543,922
700,000
247,660
4,491,582
4,203,820
1,473,399
2,730,421
164,698
1,924,500
1,795,190
545,676
87,775
833,213
328,526
2,123,226
2,068,912
0
54,314
-328,036
4,491,582
(INR Million)
FY20E
65,020
0
3,863,258
3,928,278
700,000
247,660
4,875,938
4,303,820
1,601,014
2,702,806
164,698
1,924,500
2,234,619
552,733
88,910
1,261,548
331,427
2,150,684
2,095,668
0
55,017
83,934
4,875,938
13 November 2017
21

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
FY14
33.8
47.3
317.4
4.3
14.9
FY15
34.9
48.0
348.1
4.5
15.7
25.4
18.5
2.6
2.0
21.0
0.5
2.2
11.0
8.2
13.9
1.4
1.0
41
5
72
1.3
9.8
-0.1
FY16
42.2
55.4
409.0
4.8
13.5
21.1
16.0
2.2
2.8
16.8
0.5
40.6
11.7
8.9
21.1
0.9
0.6
44
5
171
0.6
12.0
-0.3
FY17
48.3
61.4
464.3
5.5
13.3
18.4
14.5
1.9
2.8
15.7
0.6
28.0
11.6
9.1
29.6
0.9
0.6
51
8
195
0.5
12.8
-0.3
FY18E
56.7
72.4
515.1
7.0
14.4
15.7
12.3
1.7
1.9
11.7
0.8
89.0
12.1
10.3
29.8
0.9
0.8
51
8
195
0.6
11.5
-0.5
FY19E
62.1
80.3
570.7
7.7
14.4
14.3
11.1
1.6
1.5
9.7
0.9
101.8
12.0
10.6
24.4
0.9
0.9
51
8
195
0.8
15.3
-0.6
FY20E
69.1
88.7
632.6
8.5
14.4
12.9
10.0
1.4
1.3
8.7
1.0
75.8
12.0
10.7
23.7
0.9
0.8
51
8
195
1.0
14.9
-0.6
0.5
-8.3
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
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
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
278,180
87,890
0
-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
0
-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
0
-86,320
560,590
920,330
110,700
1,031,030
-767,220
263,810
-446,770
-1,213,990
141,380
31,790
-37,000
136,170
-46,790
115,710
68,920
FY17
407,770
84,650
0
-93,520
146,160
545,060
10,190
555,250
-373,360
181,890
-352,000
-725,360
70,638
89,830
-41,738
118,730
-51,380
68,920
17,540
FY18E
472,705
101,995
0
-103,995
275,176
745,881
0
745,881
-167,500
578,381
0
-167,500
0
-363,030
-53,186
-416,216
162,166
17,540
179,706
FY19E
517,265
118,577
0
-113,798
214,662
736,706
0
736,706
-75,000
661,706
0
-75,000
0
50,000
-58,199
-8,199
653,507
179,706
833,213
(INR Million)
FY20E
575,825
127,615
0
-126,682
16,365
593,123
0
593,123
-100,000
493,123
0
-100,000
0
0
-64,788
-64,788
428,335
833,213
1,261,548
13 November 2017
22

Reliance Industries
Reliance Industries - Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
4,344,600
9.4
3,996,610
92.0
347,990
8.0
112,010
235,980
38,360
90,010
287,630
0
287,630
62,150
21.6
550
224,930
224,930
7.7
5.2
FY15
3,754,350
-13.6
3,380,710
90.0
373,640
10.0
115,470
258,170
33,160
86,130
311,140
0
311,140
74,740
24.0
740
235,660
235,660
4.8
6.3
FY16
2,739,990
-27.0
2,322,950
84.8
417,040
15.2
115,650
301,390
36,910
122,890
387,370
0
387,370
88,760
22.9
1,160
297,450
297,450
26.2
10.9
FY17
3,053,820
11.5
2,591,880
84.9
461,940
15.1
116,460
345,480
38,490
93,350
400,340
0
400,340
102,010
25.5
-680
299,010
299,010
0.5
9.8
FY18E
4,119,110
34.9
3,497,450
84.9
621,660
15.1
179,405
442,255
69,264
87,043
460,033
0
460,033
115,874
25.2
-680
344,839
344,839
15.3
8.4
FY19E
5,016,870
21.8
4,256,007
84.8
760,863
15.2
249,387
511,476
84,713
94,234
520,998
0
520,998
127,935
24.6
-680
393,742
393,742
14.2
7.8
(INR Million)
FY20E
5,202,390
3.7
4,381,394
84.2
820,996
15.8
265,508
555,488
103,200
149,067
601,355
0
601,355
146,576
24.4
-680
455,459
455,459
15.7
8.8
(INR Million)
FY20E
59,180
40
3,497,765
3,556,985
29,170
2,664,770
211,980
6,462,905
7,773,393
2,289,830
5,483,563
48,920
188,987
783,900
3,022,114
813,060
124,362
1,470,426
614,266
3,064,578
1,164,914
1,837,004
62,660
-42,465
6,462,905
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Eq. Share Warrants & App. Money
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
FY14
29,400
170
1,957,300
1,986,870
9,590
1,387,610
119,250
3,503,320
2,610,190
1,196,020
1,414,170
0
914,940
606,020
1,353,300
567,200
94,110
379,840
312,150
785,110
608,600
129,150
47,360
568,190
3,503,320
FY15
29,430
170
2,155,390
2,184,990
30,380
1,682,510
129,740
4,027,620
2,844,690
1,324,080
1,520,610
43,970
1,664,620
764,510
1,051,150
532,480
53,150
125,450
340,070
1,017,240
594,070
353,710
69,460
33,910
4,027,620
FY16
29,480
80
2,286,000
2,315,560
33,560
1,947,140
204,940
4,501,200
3,312,450
1,505,890
1,806,560
42,540
2,286,970
840,150
1,013,750
464,860
44,650
110,280
393,960
1,488,770
602,960
855,750
30,060
-475,020
4,501,200
FY17
29,590
40
2,607,460
2,637,090
29,170
2,174,770
211,980
5,053,010
3,564,010
1,627,670
1,936,340
48,920
3,248,370
783,900
1,050,490
534,600
81,770
30,230
403,890
2,015,010
765,950
1,207,860
41,200
-964,520
5,053,010
FY18E
59,180
40
2,854,075
2,913,295
29,170
2,454,770
211,980
5,609,215
6,487,706
1,797,906
4,689,800
48,920
974,674
783,900
1,429,183
614,790
94,036
255,884
464,474
2,317,262
880,843
1,389,039
47,380
-888,078
5,609,215
FY19E
59,180
40
3,147,893
3,207,113
29,170
2,584,770
211,980
6,033,033
7,392,445
2,032,981
5,359,464
48,920
319,935
783,900
2,185,665
707,009
108,141
836,371
534,145
2,664,851
1,012,969
1,597,395
54,487
-479,186
6,033,033
13 November 2017
23

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
FY14
38.0
56.9
335.7
4.7
14.5
FY15
39.8
59.3
369.2
5.0
15.1
FY16
50.3
69.8
391.3
5.2
12.4
FY17
50.5
70.2
445.6
5.5
13.0
17.6
12.6
2.0
2.4
16.0
0.6
-45.8
11.8
8.2
11.6
1.7
1.2
48
8
51
1.7
6.2
0.2
11.3
7.2
12.8
1.3
0.9
52
5
58
1.0
7.8
0.4
13.2
8.0
17.0
0.8
0.6
62
6
80
0.7
8.2
0.4
12.1
7.2
22.8
0.9
0.6
64
10
92
0.5
9.0
0.5
FY18E
58.3
88.6
492.3
5.8
12.0
15.2
10.0
1.8
1.8
12.0
0.7
-13.2
12.4
7.8
14.4
0.6
0.7
54
8
78
0.6
6.4
0.5
FY19E
66.5
108.7
541.9
6.2
11.2
13.3
8.2
1.6
1.4
9.2
0.7
70.5
12.9
8.2
10.0
0.7
0.8
51
8
74
0.8
6.0
0.3
FY20E
77.0
121.8
601.0
7.4
11.5
11.5
7.3
1.5
1.2
7.9
0.8
86.6
13.5
8.9
10.4
0.7
0.8
57
9
82
1.0
5.4
0.1
(INR Million)
FY20E
538,658
256,849
-92,954
-137,255
197,334
762,632
0
762,632
-250,000
512,632
0
141,974
-108,026
0
80,000
-49,020
-52,318
787
-20,551
634,055
836,371
1,470,426
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
287,630
112,010
-20,710
-62,130
110,300
427,100
5,510
432,610
-599,390
-166,780
-158,100
63,030
-694,460
1,880
223,340
-56,190
-31,230
-670
137,130
-124,720
504,560
379,840
FY15
311,140
115,470
-11,970
-64,350
18,150
368,440
-24,700
343,740
-629,620
-285,880
-118,580
65,630
-682,570
3,430
175,210
-61,490
-32,680
-30
84,440
-254,390
379,840
125,450
FY16
387,370
115,650
4,470
-85,820
78,290
499,960
-118,620
381,340
-465,540
-84,200
58,480
42,650
-364,410
2,880
129,880
-92,240
-72,590
-30
-32,100
-15,170
125,450
110,280
FY17
400,340
116,460
8,640
-100,830
154,630
579,240
-83,740
495,500
-766,270
-270,770
92,300
12,250
-661,720
8,110
207,850
-129,200
-530
-60
86,170
-80,050
110,280
30,230
FY18E
425,117
170,236
-64,122
-108,323
149,213
572,120
0
572,120
-650,000
-77,880
0
107,353
-542,648
0
280,000
-43,230
-41,302
714
196,182
225,654
30,230
255,884
FY19E
452,237
235,075
-76,397
-115,234
171,594
667,276
0
667,276
-250,000
417,276
0
123,455
-126,545
0
130,000
-47,059
-43,936
750
39,755
580,487
255,884
836,371
13 November 2017
24

Reliance Industries
NOTES
13 November 2017
25

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock
broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed
public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock
Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited
(CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Pending Regulatory Enquiries against Motilal Oswal Securities Limited by SEBI:
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 requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice and also sought personal
hearing. The matter is currently pending.
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in
the subject company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a)
from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and
earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other
potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s),
as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the
research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have received any compensation from the subject company in
the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL 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. MOSL and / or its affiliates do and seek to do business including investment banking with
companies covered in its research reports. As a result, the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research
Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to,
copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered
true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not
been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice.
The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though
disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Reliance Industries
Disclosure of Interest Statement
Analyst ownership of the stock
Reliance Industries
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary
trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to
subject company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOSL & its group companies to registration or licensing requirements within such jurisdictions.
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 Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any
investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation 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
not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S.
persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). 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:
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person
or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of
offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or
appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations
as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative
products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is
being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would
be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to
certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or
employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this
information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
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