Top Indian Companies: Reliance Industries Limited

Reliance Industries Limited (RIL is an Indian multinational conglomerate company, headquartered in Mumbai. Ril’s diverse businesses include energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles.

Reliance is one of the most profitable companies in India, the largest publicly traded company in India by market capitalisation, and the largest company in India as measured by revenue.

Reliance continues to be India's largest exporter, accounting for 8% of India's total merchandise exports and access to markets in over 100 countries.

Reliance has the top weightage of 10.8% on Nifty 50 index.

Brief History

The company was co-founded by Dhirubhai Ambani and Champaklal Damani in 1960's as Reliance Commercial Corporation. In 1965, the partnership ended and Dhirubhai continued the polyester business of the firm.

In 1966, Reliance Textiles Engineers Pvt. Ltd. was incorporated in Maharashtra. Later in 1973, it became Reliance Industries Limited.

In 1985, the company was rename to Reliance Industries Ltd. In 1993, Reliance turned to the overseas capital markets for funds through a global depository issue of Reliance Petroleum.

In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two largest companies in terms of all major financial parameters. In 2001–02, Reliance Petroleum was merged with Reliance Industries.

In 2002, Reliance announced India's biggest gas discovery (at the Krishna Godavari basin) in nearly three decades and one of the largest gas discoveries in the world during 2002. This was the first ever discovery by an Indian private sector company.

In 2010, Reliance entered the broadband services market with acquisition of Infotel Broadband Services Limited, which was the only successful bidder for pan-India fourth-generation (4G) spectrum auction held by the government of India.

Subsidiaries

On 31 March 2021, the company had 347 subsidiary companies and 150 associate companies.

Jio Platforms Limited, essentially a technology company, is a majority-owned subsidiary of RIL. This new subsidiary holds all the digital business assets including Reliance Jio Infocomm Ltd, which in turn holds the Jio connectivity business

- Mobile, broadband and enterprise and also the other digital assets (JIO Apps, Tech backbone and Investments in other tech entities like Haptic, Hathaway and Den Networks among others.

• Reliance Retail is the retail business wing of the Reliance Industries. In March 2013, it had 1466 stores in India. It is the largest retailer in India.

• Reliance Life Sciences works around medical, plant and industrial biotechnology opportunities. It specialises in manufacturing, branding, and marketing Reliance Industries' products in bio-pharmaceuticals, pharmaceuticals, clinical research services, regenerative medicine, molecular medicine, novel therapeutics, biofuels, plant biotechnology, and industrial biotechnology sectors of the medical business industry.

• Reliance Logistics is a single-window[clarification needed] company selling transportation, distribution, warehousing, logistics, and supply chain-related products.

• Network 18, a mass media company. It has interests in television, digital platforms, publication, mobile apps, and films. It also operates two joint ventures, namely Viacom 18 and History TV18 with Viacom and A+E Networks respectively.

Shareholding Pattern

The Shareholding Pattern page of Reliance Industries Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc.

Holder's Name No of Shares % Share Holding

No of Shares 6765994014 100%

Promoters 3322748048 49.11%

Foreign Institutions 1623307470 23.99%

Banks / Mutual Funds 316233049 4.67%

Central Govt 10940386 0.16%

Others 135602559 2%

GeneralPublic 576609780 8.52%

Financial Institutions 579359536 8.56%

GDR 201193186 2.97%

RIL reported its highest-ever quarterly net profit of Rs.19,299 crore in January-March on the back of stronger earnings from the oil and petrochemicals business and steady growth in retail and telecom operations.

The oil-to-retail-to-telecom conglomerate's consolidated net profit of Rs.19,299 crore, or Rs.28.52 per share, in January-March compares to Rs.16,203 crore, or Rs.23.95 a share, earnings in the same period a year back, according to the company's stock exchange filing and press statement.

A stronger margin from refining crude oil into products like petrol and diesel, resilient fuel exports earnings on lower windfall tax and chemical business witnessing a buoyancy from the use of ethane as feedstock drove oil-to-chemical (O2C) business.

While higher subscriber additions and stable ARPU (average revenue per user) helped boost the telecom segment's earnings, the retail segment was driven by an increased store footprint.

Analysts had forecast a decline in net profit as they saw continued weakness in petrochemicals margins. But using ethane imported from the US helped the company as its prices softened during the quarter.

The total income rose to Rs.2.19 lakh crore from Rs.2.14 lakh crore a year back.

Sequentially, the net profit was up 22 per cent from Rs.15,792 crore in October-December 2022.

For the full fiscal (April 2022 to March 2023), Reliance reported its highest-ever net profit of Rs 66,702 crore on a revenue touching close to Rs 10 lakh crore. The firm had a net profit of Rs 60,705 crore on a revenue of Rs 7.36 lakh crore in the preceding fiscal.

Operationally, all businesses were firing all cylinders. EBITDA at Rs 41,389 crore, was up 22 per cent year-on-year.

The mainstay oil refining and petrochemicals business, called O2C, posted a 14.4 per cent rise in EBITDA to Rs 16,293 crore. While digital services, which includes telecom, EBITDA at Rs 12,767 crore was 17 per cent higher, retail EBITDA was up 33 per cent at 4,769 crore. Oil and gas EBITDA more than doubled to Rs 3,801 crore - an 8-year high.

For telecom, EBITDA was driven by 29 million overall net customer additions. Blended ARPU, whereas, was almost flat at Rs 178.8.

In retail, it increased the number of stores to 18,040 from 17,225 in the preceding quarter. Store footfall soared 41.3 per cent to 219 million.

Reliance said the windfall profit tax on the export of diesel and ATF impacted the profit for the quarter at Rs 711 crore, down from Rs 1,898 crore in the preceding three months.

The government in July 2022 slapped a new tax on the export of petrol, diesel and jet fuel (ATF) as well as on domestically produced crude oil to scoop some of the gain being made by companies from higher global energy prices.

Telecom arm Jio reported a 15.6 per cent rise in net profit to Rs 4,984 crore on a higher customer base of 439.3 million.

Retail business net profit was up 13 per cent to Rs 2,415 crore on the addition of more stores, growth across consumption baskets and rising contribution from digital channels led to a rise in retail segment profits.

The company said its net debt after considering Rs 1,93,282 crore cash balance was lower than annualised EBITDA.

Commenting on the results, Mukesh D Ambani, Chairman and Managing Director, Reliance Industries Ltd, said the firm's initiatives in digital connectivity and organised retail are driving greater efficiencies in the economy and contributing to India's emergence as one of the fastest-growing economies in the world.

"Jio continues to digitally empower millions of citizens across the nation, extending True 5G reach to 2,300+ cities and towns in a short span of 6 months," he said. "Retail business registered excellent growth numbers backed by the expansion of physical and digital footprint and a significant increase in footfall."

Also, the firm continues to expand its product base across consumption baskets, ensuring our customers get world-class products at affordable prices.

"O2C segment posted its highest-ever operating profit despite global uncertainties and disruptions in commodity trade flows. Our oil and gas segment also delivered very strong growth and is now poised to contribute nearly 30 per cent of India's domestic gas production," he said.

Ambani said Reliance has proposed to demerge its financial services arm and list the new entity 'Jio Financial Services Ltd'. "This gives our shareholders an opportunity to participate in an exciting new growth platform from inception."

Implementation of New Energy giga factories at Jamnagar is making significant progress, he noted.

Reliance's annual EBITDA crossed the benchmark of Rs 1.5 lakh crore for the first time; the record-high EBITDA stood at Rs 154,691 crore, up 23.1 per cent year-on-year.

Capital expenditure for the year was Rs 1,41,809 crore. Net debt as of March 31, 2023, was Rs 1,10,218 crore, substantially below the annual EBITDA. EBIDTA and net profit have doubled in last 5 years.

With incremental gas production from the MJ field, along with ongoing production from R Cluster and Satellite Cluster fields, Block KG-D6 production is expected to reach around 30 million standard cubic metres per day in FY24.

Brokerage Outlook

IIFC Securities value the O2C business EV at US$70bn (vs US$75bn stated in the FY19 AGM); IIFL’s telco team values JIO’s EV at US$90bn, which is based on DCF, and assumes RMS of 50% in steady-state.

Also IIFC Securities value RRetail at EV of US$100bn, based on 55x FY23ii Ebitda. R-Retail successfully consummating the acquisition can lead to significant value creation for the overall retail business.

As such, in the base case, we value RIL’s stock at Rs2758/share, which implies 11% upside from CMP. There are a few events which, as and when they unfold, have the potential to boost the base case SoTP.

These include: 1) successful acquisition of Future Group’s retail & logistics assets and improvement in disclosures;

2) further tariff hikes in JIO, over & above our base case assumptions; and

3) faster than expected ramp up in Green Energy business.

ESG & Sustainability Affairs

RIL is adopting a manufacturing approach to net zero emissions with a hyper integrated model spanning solar, battery and hydrogen and a focus on net zero supply chain.

RIL expect solar to drive bulk of the capex related to New Energy business near term followed by batteries as India downstream economics is competitive and RIL has already acquired leading edge technologies.

Their new bottom up India power SD model implies quadrupling of renewable capacity to 400 GW with incremental scale larger than the US and at par with Europe.