15-11-2012, 05:01 PM
Reliance Industries Limited (RIL)
Company Overview.docx (Size: 19.78 KB / Downloads: 29)
Company Overview
Reliance Industries Limited (RIL) is a conglomerate with business in the energy and materials value chain. The Company operates in three segments: petrochemicals, refining and oil & gas. The petrochemicals segment includes production and marketing operations of petrochemical products namely, polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene, acrylonitrile, caustic soda and polyethylene terephthalate. The refining segment includes production and marketing operations of the petroleum products. The oil and gas segment includes exploration, development and production of crude oil and natural gas. Company’s other segments includes textile, retail business, special economic zone (SEZ) development and telecom / broadband business. During the fiscal year ended March 31, 2012, RIL further increased its interest to 18.53% in EIH Limited.
RIL’S CONTRIBUTION TO INDIA’S ECONOMIC GROWTH
• 14% of India’s total export.
• 5.5% of the Government of India’s indirect tax revenues.
• 7.8% Weightage in the NSE Nifty.
• 9.3% Weightage in the BSE Sensex.
• 4% of the total market capitalisation in India.
Risk and concerns for Reliance Industries Ltd.
• Evaluations of oil & gas reserves involve multiple uncertainties & require exploration & production companies to make extensive judgement.
• Crude oil prices, natural gas prices and foreign exchange rate.
• Reserves and resources data are estimates which solely based on geological and geophysical analysis and appraisal work.
• A majority of the RIL’s borrowings are floating rate debt and hence exposed to upward movement in interest rates.
• Major parts of borrowed funds were in dollar-denominated.
POSITIVE POINT:-
• Alliance with BP and other JV’s to benefit from high technology.
• Crude oil prices may remain stable between $110 - $125 and if it will do cost management than GRM may increase.
• Excess cash on Balance Sheet.
• Govt. may increase the price of diesel.
NEGATIVE POINTS:-
• The International Energy Agency (IEA) estimates global refining capacity addition at 2.4 million barrels per day (mbpd) in 2012 (highest since 1999) and at 1.6 mbpd in 2013. Estimating a 4 mbpd of capacity is expected to be added over the next two years resulting in excess of supply over demand.
• In domestic market, BPCL, Bina adding 120,000 bpd, HPCL, Bhatinda adding 180,000 bpd and additions from Essar, IOC and Nagarjuna, the domestic refining market too will reach a state of glut.
• Contribution from its exploration and production is expected to decline continuously till 2014, as was guided by its partner Niko Resources, who had earlier said that gas production is expected to decline by 13 – 33 per cent.
• Reliance will also have to provide higher depletion, depreciation and amortisation charges (DD&A) which will bring down its profits further. DD&A which is currently at $11.3/boe (barrel of oil equivalent) is likely to rise by $3-5/boe in FY13 due to the steep cut in proved reserves in the producing D6 fields in FY12.
• So, at last Unless GRM and petrochemicals margin improve from the current level it will be difficult for the company to post bottomline growth.