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March 17, 2013Reliance Industries Limited (RIL)
- RIL is an Indian conglomerate company
- Headquartered in Mumbai, Maharashtra India
- RIL is one of the largest publicly traded company in India by market capitalization
- Second largest company in India by revenue after Indian Oil Corporation Ltd. (IOCL)
- India’s largest private sector company by revenue and profit
- Ranked 99th on Fortune Global 500 list of the world’s biggest corporations for the year 2012
Reliance Industries Businesses
Company operates through three business segments:
- Petrochemicals
- Refining and
- Oil and gas
Other divisions of the company include:
- Textiles
- Retail business
- Special economic zone (SEZ) development
- Telecom/broadband business
Reliance Retail
Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Group’s foray into organized retail in the year 2006. RRL since its inception has grown into an organization that caters to millions of customers, thousands of farmers and vendors. Based on its core growth strategy of backward integration, RRL has made rapid progress towards building an entire value chain starting from the farmers to the end consumers.
In optics business company has partnered with Grand Vision to provide Vision Express frames, lenses, contact lenses, sunglasses, solutions and accessories. For kids division, company partnered with Hamleys, which is considered to be the world’s most wonderful toy shop. iStore by Reliance Digital is a one-stop-shop for all Apple products and services. Reliance also partnered with two leading international brands:
- Steve Madden which is a leading fashion designer for clothing, footwear and accessories for women, men and children
- Quiksilver which is a leading outdoor sports lifestyle company with brands ‘Quiksilver’ and ‘Roxy’ under its kitty
Reliance Retail serves over 2.5 million customers every week
Subsidiaries and Divisions
There are various Subsidiaries & division under Reliance Retail. Following is the list of all of them:
- Reliance Fresh – Retail Outlets of fruits, Vegetables & Groceries.
- Reliance Digital – Consumer Electronics retail Store
- Reliance Jewels – Jewellery
- Reliance Time Out – Lifestyle store of Books, Music, Movies, Toys, Gaming, Fragrances, Stationery
- Reliance Trends – Apparel and Clothing.
Reliance Financials
It is needless to say that Reliance Industries is one of the largest companies in India. Company has tons of cash in its balance sheet as can been seen by the table below:
| (in Rs. Crores) | Mar-12 | Mar-11 | Mar-10 | Mar-09 |
| Cash and Cash Equivalents at Beginning of the year | 27135 | 13463 | 22176.53 | 4280.05 |
| Net Cash from Operating Activities | 26974 | 33280 | 20490.22 | 18245.86 |
| Net Cash Used in Investing Activities | -3046 | -20333 | -18204.5 | -24081.96 |
| Net Cash Used in Financing Activities | -11465 | 725 | -10999.6 | 23732.58 |
| Net Inc/(Dec) in Cash and Cash Equivalent | 12463 | 13672 | -8713.88 | 17896.48 |
| Cash and Cash Equivalents at End of the year | 39598 | 27135 | 13462.7 | 22176.5 |
| Mar-12 | Mar-11 | Mar-10 | Mar-09 | |
| Key Ratios | ||||
| Debt-Equity Ratio | 0.44 | 0.47 | 0.56 | 0.57 |
| Long Term Debt-Equity Ratio | 0.32 | 0.39 | 0.51 | 0.49 |
| Current Ratio | 1.15 | 1.03 | 1.07 | 1.06 |
| Turnover Ratios | ||||
| Fixed Assets | 1.63 | 1.22 | 1.16 | 1.21 |
| Inventory | 10.33 | 9.11 | 9.58 | 10.06 |
| Debtors | 18.95 | 17.78 | 24.69 | 27.1 |
| ROCE (%) | 12.77 | 13.63 | 11.89 | 13.21 |
| RONW (%) | 12.97 | 14.78 | 13.37 | 15.69 |
The Company has strong D/E ratio, thanks to its pile of cash. Reliance is one of the most cash rich company having piles of cash under its kitty. The current ratio has improved from the previous years. If we look at the turnover ratios we see that the company’s fixed assets are performing pretty well and also the inventory. The return on the capital employed and net worth has decline though.
| Mar-12 | Mar-11 | Mar-10 | Mar-09 | |
| Price Earning (P/E) | 12.47 | 17.23 | 22.12 | 15.99 |
| Price to Book Value ( P/BV) | 1.5 | 2.35 | 2.74 | 2.09 |
| EV/EBIDTA | 6.88 | 9.31 | 12.12 | 11.49 |
| Market Cap/Sales | 0.72 | 1.33 | 1.75 | 1.64 |
We see a steep decline in the P/E ration of the company from past years, is a matter of concern for the company. The investors’ willingness to pay for the company’s stock has been declining. Also if we see the multiple valuation of the company we see that the company has underperformed in all the three multiples.
| Year End | Dividend(%) | Div Yield(%) |
| 201203 | 85 | 1.14 |
| 201103 | 80 | 0.76 |
| 201003 | 70 | 0.65 |
| 200903 | 130 | 1.71 |
| 200803 | 130 | 1.15 |
The company has been paying continuously so as to boost the confidence of shareholders towards the company and also to help share perform better in the stock market.
Outlook
Global growth in refinery capacity addition is expected to outpace growth in demand and will keep a check on operating rates. Demand in Europe and the US is expected to shrink or at best stay unchanged. European refiners are already facing the brunt of economic slowdown and high oil prices. FY 2011-12 witnessed several refinery closures in Europe and the US. Overall outlook for refining industry continues to remain challenging. Margin is further expected to fall in FY’13.