Reliance Industries Limited

Last modified by Asif Farooqui on 2021/01/12 04:04

Overview

Reliance Industries Limited (NSE:RELIANCE) is India’s largest and most profitable private sector company. RIL is a significant global player in the integrated energy value chain while establishing leadership positions in the retail and digital services business in India. The company secure 106th ranked in the Fortune Global 500 list of the world's biggest corporations as of 2019. Reliance Industries known as wealth creator for investors.

Plant location

Petrochemicals 1

  • Allahabad,Uttar Pradesh, India
  • Barabanki,Uttar Pradesh,India
  • Dahej,Vagra,District Bharuch, Gujarat, India
  • Jamnagar,Gujarat, India
  • Hazira,Surat,Gujarat, India
  • Hoshiarpur,Punjab,India
  • Nagothane,Roha Taluka, District Raigad,Maharashtra, India
  • Nagpur, Maharashtra, India
  • Patalganga,District Raigad,Maharashtra, India
  • Silvassa,Union Territory of Dadra and Nagar Haveli, India
  • Vadodara,Gujarat, India

Refining & Marketing

  • Jamnagar,Gujarat,India
  • Jamnagar SEZ Unit,Gujarat,India

Oil & Gas

  • KG D6 Onshore Terminal,District Gadimoga,Andhra Pradesh,India

Textiles

  • Naroda,Ahmedabad,Gujarat, India

Research and Technology Development

The company's state-of-the-art R&D facilities are headquartered in Navi Mumbai, with regional R&D Centres spread across India. With a total area of 300,000 square feet including 120,000 square feet of laboratory space, its R&D centres are among the best equipped in the country. An impressive array of advanced equipment is available to more than 800 researchers and scientists round-the-clock.2

RIL is making significant progress towards building robust patent portfolio over the years. In 2019-20 alone 96 patent applications have been filed in India and abroad.

CentreFocus Areas
MumbaiCatalysis, chemistry, process engineering, modeling, simulation, material science, synthetic biology, biotechnology, polymer synthesis, downstream polymer processing, product applications and advanced analytical
HaziraPolyolefin, elastomers and other vinyl polymers synthesis, catalysis and pilot scale testing
VadodaraCatalysts, adsorbents, organic chemistry, process development, applied biology, environmental science, and polymer applications and technologies, elastomer application and technologies
PatalgangaPolyester materials, processes, products, and applications
JamnagarCrude characterisation, process research, and pilot scale facilities for supporting refining operations and renewable energy technology development
GagvaPilot plants in over 40 acres of land to develop algae on sea water and convert biomass to biofuel
SamalkotBiotechnology for biofuels
NarodaPerformance properties for apparel fabrics and auto textiles

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Business segments

Exploration & Production

Reliance is one of the largest exploration and production players in India having a portfolio mix of  domestic conventional and unconventional hydrocarbon.3

RIL’s upstream business comprises the complete chain of activity starting from exploration, appraisal, development and production of hydrocarbons.

The Reliance's KG D6 fields rank amongst one of the largest green-field deepwater oil and gas production facilities in the world. These fields were the first deepwater producing fields in India and remains among the most complex reservoirs in the world. Reliance, along with its partners, has committed ~$6 Billion for second wave of projects in KG D6 over the next few years. To supplement the existing asset base, the company continue to look at new opportunities that are a strategic fit with capabilities and integrated petroleum value chain.

Reliance entered the Exploration and Production (E&P) business by becoming a 30% partner in an unincorporated joint venture with Shell (erstwhile BG) and ONGC in the Panna Mukta and Mid and South Tapti blocks. As of Jan 1st, 2020, its domestic portfolio comprises of conventional oil and gas blocks in Krishna Godavari and Mahanadi basins and two Coal Bed Methane (CBM) blocks, Sohagpur (East) and Sohagpur (West) in Madhya Pradesh.

Reliance’s upstream joint ventures in US Shale gas include a 45% working interest (WI) partnership with Ensign Natural Resources in the Eagle Ford shale play and a 40% WI partnership with Chevron.

Petroleum Refining & Marketing

The Jamnagar manufacturing division is the world's largest refining hub with the processing capacity of 1.24 million Barrels Per Stream Day (BPSD). Fuels from Jamnagar refinery are exported to several countries across the world. This complex refinery is future ready and can produce gasoline and diesel of any grade. Reliance also has another refinery – the sixth largest in the world – in the Special Economic Zone at Jamnagar. This refinery has a capacity for processing 580,000 BPD of crude. RIL operated 1,394 fuel retail outlets across the country.4

Petrochemicals

is one of the leading petrochemicals producers, globally, with state-of-the-art, world-scale petrochemical plants. RIL has carved a niche for itself in terms of product quality and customer service. Its product portfolio includes Polymers, Polyester & Fibre intermediates and Chemicals & Elastomer. It has 1.4 MMTPA World's largest ethylene cracker based on refinery off-gases set up.5

Textiles

The company's manufacturing division at Naroda houses one of the largest and most modern textile complexes in the world, an achievement recognised by The World Bank. The company has capacity to process 1.8 million metres per month  and own iconic brand Vimal for textile products. Vimal became not only a flagship brand of Reliance, but also one of the most trusted in brands the country. It is also the first major retail chain in the country. The company supply premium finished fabrics to prestigious brands and export to over 58 countries. Reliance Industries is also a major player in global automotive furnishing business.6

Retail

Reliance Industries entered retail business in 2006. with the nation wide network of retail outlets Reliance Retail serves over 100,000 customers every hour, and has the patronage of more than 117 million registered customers. Reliance Retail operates over 11,300 stores pan India with 26 million square feet of retail space and is growing rapidly. The company has  established exclusive partnerships with many revered international brands such as Armani Exchange, Burberry, Canali, Pottery Barn,  Diesel, Superdry, Hamleys, Ermenegildo Zegna, Marks and Spencer, Paul & Shark, Brooks Brothers, Steve Madden, Grand Vision and many more.7

Jio

With Jio the company is capable of offering a unique combination of telecom, high speed data, digital commerce, media and payment services.8

Reliance Jio has laid more than 2.5 lakh kilometres of fibre-optic cables, covering 18,000 cities and over one lakh villages, with the aim of covering 100% of the nation’s population by 2018. It has an initial end-to-end capacity to serve in excess of 100 million wireless broadband and 20 million Fibre-to-Home customers. Reliance Jio has also built nearly half-a-million square feet of cloud data centres and a multi-Terabit capacity international network.

The company has pan India 2300 MHz spectrum and 1800 MHz in 14 circles, Jio invested over Rs 10,000 crore during this year's auction to acquire 800 MHz spectrum in 10 circles and 1800 MHz spectrum in 6 circles. This brings the cumulative investment in spectrum assets to nearly Rs 34,000 crores.

Financial highlight

On January 17 2020, Reliance Industries announced its Q3 results.

For the quarter ended 31 st December, 2019, RIL achieved revenue of 168,858 crore ($ 23.7 billion), a decrease of 1.4% as compared to  171,300 crore in the corresponding period of the previous year. Decrease in revenue is primarily on account of 10.6% decline in O2C business revenues, with lower product price realization and 6.6% fall in Brent crude price. This was partially offset by continuing growth momentum in consumer businesses. Digital Services and Retail business recorded an increase of 36.2% and 27.4% respectively, in revenue during the quarter compared to the corresponding quarter of the previous year.9

Exports (including deemed exports) from RIL’s India operations were lower by 13.7% at ` 53,804 crore ($ 7.5 billion) as against ` 62,378 crore in the corresponding period of the previous year due to lower price realization from Petrochemical and Refining business. Higher sales volume of Petrochemicals business products in domestic market also contributed towards reduction in exports.

Segment EBITDA increased by 4.7% to ` 23,500 crore ($ 3.3 billion) from ` 22,449 crore in the corresponding period of the previous year. The increase in Segment EBITDA was led by strong performance in Retail (62.3%), Digital Services (43.5%) and Refining (11.7%) businesses. Reliance’s consumer businesses continue to focus on delighting customers with a wide range of quality products and services at compelling value. This along with a widening footprint is reflected in customer acquisition and scaling-up of consumer businesses revenues.

Basic Earnings Per Share (EPS) for the quarter ended 31st December, 2019 was ` 18.4 as against 17.3 in the corresponding period of the previous year. Outstanding debt as on 31st December, 2019 was ` 306,851 crore ($43.0 billion) compared to  287,505 crore as on 31st March, 2019.

RIL has setup a Wholly Owned Subsidiary (WOS) viz. Jio Platforms Limited (JPL), for digital platform initiatives. RIL invested ` 1,65,000 crore in the WOS through OCPS and ` 4,961 crore in equity shares. The WOS has acquired RIL’s investment of ` 64,450 crore in Reliance Jio Infocomm Limited (RJIL). This New-age Digital Technology Platform entity is proposed for holding all digital platforms including RJIL, the digital connectivity platform. This will enable access to world class technology platforms across healthcare, education and agriculture

Business updates

Refining and Marketing Business

Global oil demand growth is estimated at 1.0 mb/d in CY2019 driven by growth in transport fuels as well as petrochemical feedstock. Demand growth was led largely by non-OECD countries mainly China, India and other Asia. Growth in OECD as well as non-OECD is expected to drive oil demand growth in 2020 at 1.2 mb/d.

RIL Jamnagar refinery throughput for 3Q FY20 stood at 18.1 MMT. The average refinery utilization rates globally in 3Q FY20 were 86.4% in North America, 79.9% in Europe and 85.5% in Asia. US refinery utilization decreased Q-o-Q due to series of planned and unplanned outages. Europe refinery utilization was impacted by unplanned outages due to disturbance caused by strikes and other industrial actions mainly in France. Some European refineries are reported to have also curtailed runs because of weak margins. Asian refinery utilization was up Q-o-Q on the back of return of refineries from maintenance during later part of the quarter and record runs in China during the quarter

During 3Q FY20, the benchmark Singapore complex margin averaged $ 1.6 /bbl as compared to $ 6.5 /bbl in 2Q FY20 and $ 4.3 /bbl in 3Q FY19. Refining margins weakened Q-o-Q on the back of steep declines in fuel oil cracks from the upcoming IMO spec change and lower middle distillate cracks more than offsetting the gains in light distillate cracks. Dubai oil price averaged at $ 62.1 /bbl, up $ 0.9 /bbl Q-o-Q and down by $ 5.3/bbl Y-o-Y. Dubai price was up Q-o-Q mainly driven by the OPEC+ decision to further cut the oil production by 500 kb/d and phase 1 trade deal agreement reached between US and China towards the end of the quarter.

Singapore gasoil 10-ppm cracks averaged $ 15.4 /bbl during 3Q FY20 as against $ 16.2 /bbl in 2Q FY20 and $ 15.8 /bbl in 3Q FY19. Gasoil cracks fell Q-o-Q on the back of rising supply due to return of regional refineries from maintenance in Nov and Dec and limited support from IMO related bunker demand. Supplies from start-up of refining capacities in China, Brunei and Malaysia also added to the regional surplus, pressurizing the cracks.

Singapore gasoline crack averaged $ 12.9 /bbl during 3Q FY20 as against $ 11.7 /bbl in 2Q FY20 and $ 4.7 /bbl in 3Q FY19. Gasoline cracks increased Q-o-Q on the back of tightness in high octane barrels during the quarter, due to reduction in MTBE exports from Saudi Arabia to Asia. FCC/RFCC outages in some Asian refineries have also supported the premium gasoline cracks.

Freight cost shot up significantly in end-September, 2019 on the back of US sanctions on a Chinese Shipping Company due to lifting of crude from Iran. This led to sudden reduction in global fleet (specifically, VLCCs), further compounded by Vessels undergoing Scrubber Retrofits. Arab Light – Arab Heavy (AL – AH) crude differential settled at $ 2.3 /bbl in 3Q FY20 as compared to $ 1.5 /bbl in 2Q FY20 and $ 2.2 /bbl in 3Q FY19, widening Q-o-Q on the back of increased gasoil fuel oil spread however it was capped by limited supply of heavy sour crudes.

Petrochemical Business

Polymer & Cracker

On Q-o-Q basis, Asian naphtha prices increased by 13% due to higher naphtha cracks amid increased demand from crackers post turnarounds. US ethane prices also increased by 9% Q-o-Q. Ethylene prices weakened and reached near 10 -year low with ample supply post start-up of new ethylene export facility in US and new ethane-based crackers in US. Propylene prices firmed up (2% up Q-o-Q) due to lower operating rate of on-purpose units in NE Asia which led to tighter availability in the region.

Polymer prices weakened during the quarter. On Q-o-Q basis, PP, HDPE and PVC prices softened by 5%, 7% and 4% respectively. PP margins over propylene reduced by 43% on Q-o-Q basis ($97/MT) and reached near 8 -year low on account of new PP capacity and higher propylene price. PE margins over naphtha weakened by 30% on Q-o-Q basis ($ 292/MT) due to persistent softness in PE led by ramp-up of Ethane based US capacities and strengthening of naphtha prices. PVC margins softened by 6% on Q-o-Q ($468/MT) amid firm naphtha price.

Policy and budgetary push in infrastructure and growth in e-commerce drove the polymer demand in India. On Y-o-Y basis, domestic polymer demand growth remained healthy, during 3Q FY20. RIL’s polymer production was up by 3% Y-o-Y and 4% Q-o-Q during the quarter to 1.53 MMT. RIL maintained leadership position in domestic polymer market.

Polyester Chain

Polyester chain margins were impacted by major capacity addition in PX and PTA in China. Polyester demand remained healthy at low prices leading to improved operating rates during the quarter. PX markets were stressed amidst concern of excess supplies from new PX units. However, output cut by refiners aided to balance supplies and limited the price drop. During the quarter, PX prices declined by 1% Q-o-Q, while PX-Naphtha margin weakened by 17% Q-o-Q ($255/MT), lower by 32% as compared to 5 years average margin of $376/MT.

During the quarter, PTA players cut losses and optimized operations by carrying out their long overdue plant maintenances. However, start-up of new PTA units facilitated steady supplies to polyester units. Operating rates for PTA units in China remained high at 89% during the quarter. However, weakness in PTA futures and declining PX prices dragged PTA prices down by 10% Q-o-Q led by commissioning of new capacities in China. PTA delta dropped by 39% Q-o-Q ($110/MT).

Polyester producers in China slashed prices to off-load the rising stocks, leading to bouts of brisk sales at low prices. Consequently, inventory levels dropped improving the cash flow and boosting operating rates in polyester plants. Q-o-Q, Polyester filament yarn prices were lower 10%, weakening margins by 17% ($257/MT). PSF prices dropped 9% Q-o-Q with margins declining 16% Q-o-Q ($140/MT).

Oli and Gas Exploration and Production

KG-D6 field produced 4.96 BCF of natural gas in 3Q FY20, lower by 18.4% Y-o-Y and 9% Q-o-Q.

Panna-Mukta fields produced 0.84 MMBBL of crude oil and 11.3 BCF of natural gas in 3Q FY20.

During the quarter, the CBM field produced 3.05 BCF of gas as compared to 3.21 BCF during 3Q FY19 and 3.03 BCF during 2Q FY20. Average production rate for the quarter was 0.94 MMSCMD. CBM Phase-II: With the start-up of additional Gas Gathering Station, 67 wells will be put in production from 4Q FY20.

Overall production from US Shale was 20% higher at 23.9 bcfe. New volumes mostly during second half of the quarter amitigated the natural decline of wells across both the JVs. Production is expected to increase further during 1QCY20.

WTI oil prices remained stable at 3Q CY2019 levels. NGL basket price was up ~14% Q-o-Q at $18.4/bbl, on back of higher C3 and C4 prices and higher export demand of LPG. Average HH Gas prices improved by 12% Q-o-Q but, Marcellus differentials to HH increased to ($0.72)/MMBtu.

Retail Business

Segment Gross Sales at ₹ 45,327 crore for the quarter, was up 27.4% over the corresponding period of the previous year, within which the Consumer Electronics, Fashion & Lifestyle and Grocery segments combined delivered accelerated growth of 35.7%. Underlying this is the quality of the growth, which continues to be delivered through a balanced mix of healthy double digit like-for-like sales from existing stores as well as new customers acquired from a rapid expansion of stores across formats and geographies.

The business continues to maintain its strong track record of profit growth, reflective of a business model that is working and delivering results. EBITDA for the quarter was at ₹ 2,727 crores, growing 62.3% year-on-year with margin on net revenue expanding by +140 bps, from 5.3% to 6.7%. Within this, EBITDA margin for the Consumer Electronics, Fashion & Lifestyle and Grocery business combined moved up from 8.0% same time last year to 9.6% in the current quarter.

The company expect the business continues to expand its store footprint, both geographically and across the consumption baskets. With 456 stores added in the quarter across Consumer Electronics, Fashion & Lifestyle and Grocery, the overall count of 11,316 stores covering an area of 26.3 million square feet, spread across the breadth of the country reaches nearly 7,000 towns. The benefits of modern retail are being brought to the real ‘Bharat’ as more than 2/3rd of stores are operated in Tier II, Tier III and Tier IV towns.

Media Business

Network18 Media & Investments Limited reported 3QFY20 consolidated revenue of ` 1,474 crores. Revenue ex-film was near-flat YoY as business mix pivoted towards subscription and syndication amidst advertising weakness. Monetization of content through partnerships and continued subscription revenue growth coupled with cost optimizations across verticals delivered step-up in profitability.  Network18’s News cluster clocked a 10.2% average viewership share and was the top-ranked news network at end of Q3.

Network18’s Entertainment cluster viewership share rose to 10.1% vs 9.2% last quarter. Success of marquee shows like Bigg Boss and Naagin pushed flagship channel Colors back to top rankings in GEC. Investments in new growth engines viz. regional movie channels (Kannada and Gujarati Cinema) and digital subscription-offerings (VOOT Kids, Freemium & International), apart from scale-up investments into VOOT and Colors Tamil continued during the quarter.

Digital Services Business

Jio has built a next generation all-IP data network with latest 4G LTE technology. It is the only network built as a Mobile Video Network and for providing Voice over LTE technology. It has built a future ready network with extensive fiber rollout across the country which can easily deploy 5G and beyond technology in the last leg. Jio has created an eco-system comprising network, devices, applications and content, service experience and affordable tariffs for everyone to live the Jio Digital Life.

Jio is now the second largest single-country operator globally with its subscriber base increasing to 370 million as of 31-December-2019. Net subscriber addition for the Company during the past twelve months was 90 million. Jio has become a service provider of choice across customer strata and seen unprecedented growth to market leadership (in terms of Adjusted Gross Revenue and Subscriber base as published by TRAI).

Customer engagement for Jio services continues to be strong with average data consumption at 11.1 GB per user per month, average voice consumption at 760 minutes per user per month. Affordable tariffs, wide network presence, and improving use cases on the Jio digital platform have been key drivers of industry leading engagement levels.

JioFiber services for Homes and Enterprise has been launched. Jio is in the process of converting the trial users to paid connections and ramping up sales across these 1,600 cities. Jio is focused on catalysing the underserved fixed broadband market in India with its next generation FTTX services.

References

  1. ^ https://www.ril.com/OurCompany/Manufacturing.aspx
  2. ^ https://www.ril.com/Innovation-R-D/R-D.aspx
  3. ^ https://www.ril.com/OurBusinesses/Exploration.aspx
  4. ^ https://www.ril.com/OurBusinesses/PetroleumRefiningAndMarketing.aspx
  5. ^ https://www.ril.com/OurBusinesses/Petrochemicals.aspx
  6. ^ https://www.ril.com/OurBusinesses/Textiles.aspx
  7. ^ https://www.ril.com/OurBusinesses/Retail.aspx
  8. ^ https://www.ril.com/OurBusinesses/Jio.aspx
  9. ^ https://www.ril.com/getattachment/322d592b-1377-48ad-96ab-09e7cf0cf5d2/Financial%20performance%20for%20the%20quarter/nine%20months%20ended%2031%20Dec%202019.aspx
Tags: IN:RELIANCE
Created by Asif Farooqui on 2020/04/06 08:19
     
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