Reliance Industries Limited · NSE:RELIANCE
Reliance Industries — FY2002-03 Earnings Presentation
53 slides from Reliance Industries's earnings presentation, Apr 23, 2003
Slide 1: Annual Results Presentation, April 23, 2003
Reliance Industries Limited Annual Results Presentation April 23, 2003 Forward Looking Statements This presentation contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or othe
Slide 2: Contents
Contents Macro-Economic Macro-EconomicOutlook Outlook Performance PerformanceHighlights Highlights Financial FinancialPerformance Performance Business BusinessReview Review Summary Summary 3 Macro-Economic Macro-EconomicOutlook Outlook
Slide 3: A Turbulent Global Environment / India – An Oasis of Calm
A Turbulent Global Environment n Year begins in the aftermath of the 9/11 catastrophe n Geo-political tensions globally further dampen business sentiment n Quick cessation of hostilities in Iraq fails to enthuse industry and markets alike the world over n Deadly SARS epidemic adds to uncertainties,
Slide 4: Indian Economy – Forecasts for 2003-04 / Rupee Appreciation
Indian Economy – Forecasts for 2003-04 FY-04E GDP Growth (%) 5.3 Inflation Rate - CPI (%) 4.3 Short-term Interest Rate (%) 5.2 5 year Interest Rate (%) 5.6 10 year Interest Rate (%) 6.1 Historically low interest rates, increasing forex reserves, a mild inflation rate, and increasing exports provide
Slide 5: Reliance - India’s No. 1 Group
Performance PerformanceHighlights Highlights Reliance - India’s No. 1 Group Rs. Crore US$ bn Rank Sales 78,500 16.5 1 Exports 12,000 2.5 1 Cash Flow 9,100 1.9 1 Net Profit 4,700 1.0 1 Net Worth 37,500 7.9 1 Assets 81,000 17.1 1 Market Cap 45,000 9.5 1 • Reliance Industries is India’s largest private
Slide 6: India’s No. 1 Private Sector Fortune Global 500 Company
India’s No. 1 Private Sector Fortune Global 500 Company US $ bn Fortune Global 500 Rank* Net Profit 0.9 Amongst top 175 Net Worth 6.4 Amongst top 275 Assets 13.4 Amongst top 400 Sales 13.7 Amongst top 400 * Rankings based on the latest available Fortune 2002 listing RIL also ranks amongst the world’
Slide 7: Landmark Events in FY 2002-03
Landmark Events in FY 2002-03 n Completion of merger of RPL with RIL – largest merger in Indian corporate history n Reliance acquired IPCL with management control – India’s largest disinvestment transaction n Reliance discovered natural gas in the Krishna Godavri basin – World’s largest gas discover
Slide 8: A Challenging Environment in 2002-03… Record Performance
A Challenging Environment in 2002-03… Crude Oil Brent (US$ / barrel) Naphtha FOB AG (US$ MT) 35 350 30 300 25 250 20 200 15 150 10 100 1 1 3 Ja 01 2 01 01 Fe 02 ar 3 02 1 2 01 Ap 02 02 ec 2 1 2 ep 1 2 -0 -0 -0 -0 0 -0 -0 -0 -0 -0 0 0 - r- n- n- n- n- g- b- b- l- l- ar ct ec ov ay ay ep Ju Ju Au Ja J
Slide 9: RIL Income Statement for FY 2002-03 / US GAAP Reconciliation
RIL Income Statement for FY 2002-03 FY 2002-03 % Change Rs.crore $ mn Gross Turnover 65,061 13,701 14% EBITDA 9,366 1,972 8% Interest 1,555 328 -15% Depreciation 2,837 597 1% Tax 870 183 -36% Net Profit 4,104 864 45% Cash Profit 7,565 1,593 7% Interest down 15%, from Rs. 1,825 crores (US$ 374 millio
Slide 10: Segment Information for FY 2002-03 / Elements of Sales Growth
Segment Information for FY 2002-03 Rs. crore Petrochemicals Refining Others Segment Revenue 29,190 34,409 1,474 Segment Results (EBIT) 2,929 2,344 598 Capital Employed 12,445 23,666 3,445 Return on Capital 23.5% 9.9% 17.4% Employed (ROCE) Weighted average Return on Capital Employed is significantly
Slide 11: RIL Profitability Ratios / Liquidity Ratios
RIL Profitability Ratios FY 2002-03 FY 2001-02 Operating margin (%) 13% 13.8% Net profit margin (%) 6.3% 5.7% EPS - Rs ($) 29.3($0.60) 23.4($0.50) Cash EPS - Rs ($) 54.0($1.10) 51.0($1.04) The RIL stock price is trading at around 5 times cash earnings, reflecting an earnings yield of 20% per year 21
Slide 12: Strong Performance in Declining Tariffs / India’s Largest Exporter
Strong Performance in Declining Tariffs 1993 1994 1995 1996 2001 2002 2003 Peak Tariff (%) 110 85 65 50 40 35 30 Peak Tariff (%) 110 85 65 45 30 30 25 Reliance Products Net Profit (Rs.crs) 322 576 1065 1305 2646 3243 4104 Reliance has consistently reported higher profits year on year, despite the sh
Slide 13: E&P - Background
Oil Oiland andGas Gas E&P - Background n Petroleum Demand Supply Scenario in India: Oil imports the single largest – Deficit of 83 million tonnes of crude oil per year import item - – Deficit of 30 billion cubic metres of gas per Rs.84000 cr. in annum 2002-03 n Gas Demand Projection: – Current domes
Slide 14: Reliance’s Upstream Assets / Producing Assets – Panna, Mukta & Tapti
Reliance’s Upstream Assets n Reliance holds 30% interest in the producing Panna, Mukta and Tapti oil and gas fields n In addition to one block in Yemen, Reliance has acquired 32 blocks in India in last few years – 2 blocks in pre-NELP round of bidding – 12 blocks in NELP-1 – 4 blocks in NELP-2 – 9 b
Slide 15: Reliance’s Exploratory Thrust
Reliance’s Exploratory Thrust Exploration Portfolio (>288000 Sq.km.) Pre-NELP Blocks 2 NELP I Blocks 12 NELP II Blocks 4 NELP III Blocks 9 Acquired Blocks 5 Total 32 Gas Discovery - KG DWN 98/3 (D6) 29 Reliance’s Exploratory Thrust Prognosticated reserve in the range of 20 billion tonnes – deep wate
Slide 16: Gas Discovery in KG-D6: Huge Potential
Gas Discovery in KG-D6 : Huge Potential n Reliance discovered natural gas in the very first well drilled in Block- D6 in Krishna Godavari basin off Andhra Pradesh coast n The largest gas discovery in the world in 2002 - India’s biggest gas discovery in nearly three decades n Initial estimate of gas
Slide 17: KG-D6: Activities for Development / Gas Business Outlook
KG-D6: Activities for Development n Commerciality for Dhirubhai -1 discovery approved by DGH - GOI notified about the commerciality of this discovery n Development concept being finalized in collaboration with the internationally reputed consultants, Aker Kvaerner n Reservoir development plan under
Slide 18: Gas Pipeline – Options / Domestic Gas vs. LNG
Gas Pipeline – Options BHUTAN UTTAR PRADESH KARACHI BIHAR THIMPU RAJASTHAN PATNA P A K I S T A N GUNA (VIJAIPUR) (HBJ INTERCONNECT) CB ON1 BANGLADESH JHARKHAND GK ON90/2 GUJARAT Jakhau GANDHI NAGAR MADHYA PRADESH GK01 KANDLA BHOPAL RANCHI WEST BENGAL GK OSJ1 AHMEDABAD JABALPUR JAMNAGAR CALCUTTA GK O
Slide 19: Capex Estimates for E&P Business / Human Resources
Capex Estimates for E&P Business n Estimated capex of Rs. 500 crore (US$ 100 million) per year on exploration activities in balance areas n Estimated capex of Rs. 2,500 crore (US$ 500 million) per year for the next 3-4 years on production from discovered fields and setting up of pipeline infrastruct
Slide 20: India – Amongst the World’s Largest Markets
Refining Refining&&Marketing Marketing India – Amongst the World’s Largest Markets Annual Consumption % of MTPA World Total 1 USA 898 25.6 2 Japan 254 7.2 3 China 227 6.4 4 Germany 130 3.7 5 Russian Fed. 124 3.5 6 India 100 2.8 7 France 95 2.7 8 Italy 93 2.7 9 Brazil 84 2.4 10 Mexico 84 2.4 India’s
Slide 21: R & M – Domestic Demand Scenario / Operating Highlights
R & M – Domestic Demand Scenario 15.0% 11.2% 9.4% 10.0% 5.0% 2.4% 0.9% 0.0% -5.0% -4.3% -10.0% -9.1% -15.0% Naphtha SKO HSD ATF MS LPG n MS and LPG continued strong growth rates - HSD also moved to positive zone n Overall demand for petroleum products increased by 1.8% during the year 41 R & M – Ope
Slide 22: R & M – Record Capacity Utilisation / Future Growth Opportunities
R & M – Record Capacity Utilisation 110% 106% 100% 91% 89% 90% 86% 80% 70% 60% N America Europe Asia Pacific Reliance Despite the planned shutdown, Reliance’s refinery has consistently operated at much higher utilisation rates than its global peers – the operating rate touched 116% during Q4 FY2002-
Slide 23: Retail Business Environment / R & M – Key Business Strategy
Retail Business Environment Industry Reliance Industry Position Plans* Position Today No. of ROs 18,500 2,300 20,800 Market Size (mmtpa) 29 6.4 30 Average Sales (mt/RO) 130 230 120 n Reliance targets: 22% market share with 11% of total ROs selling nearly double the industry average n At double the I
Slide 24: R & M – Supply Chain Management / IT Integrated RO
R & M – Supply Chain Management n A state of the art system now under implementation to facilitate an efficient management of supply chain from crude to retail outlet n This system will ensure • Prevention of dry out at any retail outlet • Optimal cost of primary & secondary distribution • Optimal i
Slide 25: Petrochemicals: Huge Potential for Demand Growth
Petrochemicals Petrochemicals Huge Potential for Demand Growth n India - amongst the largest and fastest growing petrochemicals markets in the world n Polyester – India’s per capita consumption 1.4 kg compared to 6.6 kg for China and 3.3 kg for the world n Polymers - per capita consumption at 4 kg i
Slide 26: Reliance – India’s Globally Ranked Player / Leading Petrochemicals Player
Reliance – India’s Globally Ranked player Global Rank Polyester (fibre and yarn) 2 Paraxylene 3 PTA 5 PP 7 PVC 10 Reliance – amongst top 10 global players in major petrochemicals 51 Reliance – India’s Leading Petrochemicals Player n Hazira Cracker - @ 750 Kta is one of the largest multi-feed cracker
Slide 27: Petrochemicals – Leading Market Shares in India
Petrochemicals – Leading Market Shares in India Market share Polyester 51% (PFY, PSF, PET) Fibre Intermediates 83% (PTA, MEG, PX) Plastics 69% (PE, PP, PVC) The IPCL acquisition has further enhanced RIL’s market share 53 Polymers displaying consistently high double digit growth rates Polymer kTSourc
Slide 28: Polymers / Polyester – Production Growth in India
Polymers – Production Growth in India in 2002-03 Production in ‘000 tonnes Industry Reliance 3,700 3,656 1,800 1,769 3,600 1,750 3,500 3,452 1,702 1,700 3,400 3,300 1,650 FY'02 FY'03 FY'02 FY'03 RIL’s polymer production increased 4% during the year, against the industry production growth rate of 6%
Slide 29: Fibre Intermediates Production / Higher Margin Speciality Grades
Fibre Intermediates – Production Growth in India in 2002-03 Production in ‘000 tonnes Industry Reliance 3,948 3,075 4,000 3,100 3,000 3,800 2,882 3,624 2,900 3,600 2,800 3,400 2,700 FY'02 FY'03 FY'02 FY'03 Reliance’s fibre intermediates production increased at 7%, marginally lower than the industry
Slide 30: Slowdown in Global Ethylene Capacity Addition
Slowdown in Global Ethylene Capacity Addition Growth in Ethylene capacity saw significant slowdown in 2002 Ethylene capacity (MTPA) Change Jan-03 Jan-02 MTPA % Asia Pacific 28.3 27.1 1.2 4.4 Eastern Europe /FSU 7.4 7.5 -0.1 -1.3 Middle East / Africa 10.0 9.4 0.6 6.2 North America 35.8 35.4 0.4 1.2 S
Slide 31: Deficits in Polymers by 2004-05 / Future Growth Strategy
Deficits in Polymers will begin to emerge by 2004-05 Net Trade : All Polymers (Kt) 600 515 367 400 266 147 200 0 -200 -44 -400 -600 -384 -440 -550 -540 -800 3* 4* 5* 6* 8 9 0 1 2 /9 /9 /0 /0 /0 /0 /0 /0 /0 97 98 99 00 01 02 03 04 05 19 19 19 20 20 20 20 20 20 Source: CPMA Reliance to exploit these o
Slide 32: Petrochemicals – Acquisition of IPCL / Competitive Advantage
Petrochemicals – Acquisition of IPCL n Reliance has acquired IPCL, India’s 19th largest company in terms of sales and 2nd largest petrochemicals company n Management control acquired effective June 2002 - Board of Directors reconstituted n Reliance’s petrochemicals production of 11.8 million tpa has
Slide 33: Visible Improvements in IPCL / IPCL Income Statement
Visible Improvements in IPCL – Post Acquisition n Feedstock integration – Replacement of IOC and imported naphtha by Reliance naphtha - EDC from IPCL to Reliance n Financing costs reduced 22% from Rs. 379 crore to Rs. 296 crore, by refinancing and prepayment of high cost loans n Significant increase
Slide 34: Reliance Polyester – World-class R&D
Reliance Polyester – World-class R&D n Strategic alliance with DuPont for the state-of-the-art new products n Centre of excellence for Research and Development in polyester homo and co-polymer fibres, filaments and resins n Innovative products in pipeline 67 Power Power
Slide 35: BSES Acquisition / Background
BSES Acquisition n BSES has now become part of the Reliance Group n Reliance Group has an over 58% equity stake in BSES n Reliance has 5 members on the Board of Directors, including Chairman & Managing Director, and Executive Vice-Chairman n BSES will target a leadership role in the creation of worl
Slide 36: Comparison with Peers / Details of Operations
Comparison with Peers n BSES has a leadership position amongst listed Indian private sector power utility companies, including Tata Power, AEC, SEC and CESC, on all major parameters BSES Rank Assets 1 Sales 1 Net Profit 1 Market Capitalisation 1 BSES is the largest private sector power utility in th
Slide 37: Details of Operations / BSES Income Statement
Details of Operations n BSES’ total distribution capacity is nearly 5,000 MW n Aggregate power generation capacity is 885 MW, of which only the 500 MW plant at Dahanu caters to the company’s own requirements of power in Mumbai n The balance requirement of nearly 600 MW in Mumbai is sourced from Tata
Slide 38: Electricity Bill passed by Parliament
Electricity Bill passed by Parliament n Delicensing of thermal generation including captive generation –cumbersome approval processes eliminated n Opening up of distribution sector – open access and setting up of parallel networks allowed n Redefining of regulator’s role in tariff setting – to encou
Slide 39: Reliance Infocomm / Competitive Advantages
Reliance Infocomm n Reliance Infocomm is rolling out the largest infocom infrastructure and services by any new entrant anywhere in the world n Reliance Infocomm’s nationwide terabit bandwidth, optic fiber broadband network is ready to address the entire voice and data telecom market in the country
Slide 40: Capex / Reliance Infocomm – Market Share
Capex n Reliance Infocomm’s capex budget is Rs. 18,000 crore (US$ 3.7 billion) n Expenditure up to March 2003 at Rs. 9,000 crore (US$ 1.8 billion) n Balance capex of Rs. 9,000 crore (US$ 1.8 billion) in next 2-3 years, to be financed from cash accruals, securitisation of receivables, etc. n RIL is t
Slide 41: Reliance Infocomm – Market Share / Progress Report - Wireless
Reliance Infocomm – Market Share Reliance Infocomm’s (RIC) Market Share of Incremental Post-Paid Net Adds Feb-03 Mar-03 Cumm. Mkt.Share GSM Post-Paid 230,387 422,659 653,045 40% RIC 358,000 600,000 958,000 58% WLL Others 20,000 21,000 41,000 2% Total Wireless 588,387 1,022,659 1,652,045 100% Post-Pa
Slide 42: Progress Report - Wireless
Progress Report - Wireless n Mobile Applications: – Applications developed include news, gaming, directories, stock trading – 150+ application groups working on enterprise and consumer applications – Content agreements with leading content providers like ‘Indiatimes’ n Interconnect: – Signed interco
Slide 43: Road Map for 1H FY04 / Reliance Telecom – GSM Business
Reliance Infocomm – Road Map for 1H FY 04 n New Products/Services: – Prepaid service launch planned shortly n Post Dhirubhai Ambani Pioneer Offer(DAPO), New Post-Paid Tariff plans to cater to various market segments n New Handset Models will be made available in May 2003 n Distribution strategy reor
Slide 44: Progress Report – Other Businesses
Progress Report – Other Businesses n Broadband Services: – Fiberization of 200,000 buildings commenced in 67 cities – Building acquisition completed for over 62,000 buildings across 45 cities – Gigabit Ethernet connectivity will provide full suite of voice, multimedia, video and enterprise applicati
Slide 45: Summary: An Integrated Energy Company
Summary Summary An Integrated Energy company, with interests in services businesses Oil & Gas Energy Chain Refining & Marketing IPCL Petrochemicals Power/ BSES Textiles Infocom / Telecom A market of over Reliance Reliance 1 billion Infocomm Telecom consumers A diversified portfolio of manufacturing
Slide 46: Consistent Track Record of Long Term Growth
With a Consistent Track Record of Long Term Growth… CAGR % 3 year 5 year 10 year Turnover 47% 37% 32% Net Profit 20% 20% 29% Cash profit 26% 26% 29% Total Assets 29% 21% 26% Exports 98% 105% 58% Market Cap 5% 19% 24% EPS 9% 11% 16% RIL has recorded 14 consecutive years of consistent profit growth, t
Slide 47: Reliance’s Financial Strength / Growth Model
Reliance’s Financial Strength n Reliance’s total assets have grown from Rs. 6,083 crore (US$ 1.9 billion) to Rs. 63,736 crore (US$ 13.42 billion) over the last 10 years n This has been achieved with the debt:equity ratio being brought down down from 0.84 to 0.6 in the same period, indicating financi
Slide 48: Coverage of Capex by Cash Flow / Stock Price Out-Performance
Reliance’s Changed Profile – Coverage of Capex by Cash Flow….. Capex as % of cash profits 400 243 182 185 104 84 67 49 15 22 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Reliance’s capex has been a small proportion of cash profits in recent years 95 Changed Fundamentals are Reflected in Stock Pric
Slide 49: Valuations Remain Attractive
Valuations remain attractive – compared to petrochemicals companies…. P/E P/CF EV/EBITDA Far Eastern 13.9 10.2 16.4 Dow Chemical 23.1 11.1 9.1 Nan Ya Plastics 9.7 6.3 8.5 Formosa Plastics 7.6 6.3 8.3 Eastman Chemical 13.1 3.9 5.9 Reliance 9.9 5.3 5.5 Reliance’s valuations are still attractive compar
Slide 50: Shareholding Pattern / PE Multiple Trend
Reliance’s Shareholding Pattern Others 19% Promoters 35% Banks / MFs / FIs 13% Foreign Associates / Investors Trust 21% 12% l Reliance shares are widely held by 3.5 million investors - amongst the largest shareholder families in the world l UTI’s stake in Reliance has reduced from 12% to 6% 99 Valua
Slide 51: Weight in Sensex / One Year Beta
Reliance - Weight in Sensex 15% 16% 12% 10% 8% 4% 0% 93 94 95 96 97 98 99 00 01 02 03 19 19 19 19 19 19 19 20 20 20 20 Reliance’s weightage in the Sensex has increased over the last 10 years, reflecting its pre-eminent position in Indian markets 101 Reliance – One Year Beta One Year Rolling Beta 1.8
Slide 52: Summary / Awards and Recognition
Summary n Reliance is a convergent play between the manufacturing and services businesses n A combination of the energy chain and the information and communication businesses n A company at the crossroads of the old and new economy n Reliance’s superior operational and financial performance reflects
Slide 53: Awards and Recognition
Awards and Recognition n Among the world’s 10 most respected energy and chemical companies - PricewaterhouseCoopers survey in Financial Times, January 2003 n Among the World’s Most Respected Companies - PricewaterhouseCoopers survey in Financial Times, January 2003 n No.5 in `Overall Best Managed Co
Reliance Industries — FY2002-03 Earnings Presentation on 6ix