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Reliance Industries Ltd. - Company Analysis (Part-5)

5) Petrochemicals

Source Reliance Industries Ltd. Annual Report 2019-20

RIL is the largest producer of petrochemicals in the country and among the top ten in the world. RIL has a unique portfolio of B2B businesses spread across polymer and polyester chains,  Reliance produces an extensive range of polymers (PP, PE, PVC), elastomers (PBR, SBR, Butyl), polyesters (PSF, PFY, IDY), aromatics (PX, OX, BT, LAB), fiber-intermediates (PTA, MEG, EO) and advanced materials (composites). RIL serves its global customers through an extensive network of offices, business partners, and distributors spread across the world.

RIL is the world's largest integrated producer of polyester fiber and yarn, second-largest of paraxylene, and among the top ten for purified terephthalic acid, mono-ethylene glycol, and polypropylene. RIL is also the largest producer of synthetic elastomers in India and has the world’s largest Refinery Off-Gas Cracker (ROGC) complex of 1.5 MMTPA ethylene capacity at Jamnagar in Gujarat, India.

In Petrochemical section of Reliance Industries Ltd. have a vision "To be among the Top 5 most profitable Petrochemical Companies in the World". 

COMPETITIVE STRENGTHS AND STRATEGIC ADVANTAGES

Robust Asset Profile 

• RIL is one of the most integrated petrochemicals producers globally 

• RIL has a leading market position across product categories 

• RIl has world-class production facilities 

• RIL has industry-leading operating rates across products

 • RIL has commissioning of High Purity Iso- Butylene (HPIB) unit for C4 value addition 

Sustaining Value Creation 

• RIL's refinery off-gas cracker, a unique project, and expansion of downstream capacity to cater to expected demand growth 

• RIL's ethane imports continue to enable a cost advantage and feedstock security 

• RIL has strong brand initiatives enabling Reliance’s shift in focus towards consumers 

Competitive Strengths 

• RIL has fully integrated operations providing cost competitiveness 

• RIL has captive and cost-effective feedstock supplies provide feedstock security 

• RIL has benefits of economies of scale 

• RIL has a high domestic market share across most products 

• RIL has proximity to key consuming markets and a diversified consumer base

Environment Polymer Chain(Margins)

polymer margins softened due to the weakening of prices. On a y-o-y basis, PP(Propylene) and PE(Polyethylene) margins were corrected by 33% and 32%, respectively. PVC margins remained largely stable.

RIL introduced some new products in Petrochemical 

• 30 MFI high crystalline PP impact copolymer grade was introduced for Injection molding applications. It is an ideal material where high stiffness, high flow, and good impact strength are required like automotive and appliances parts. The grade has a high flow and fast crystallization characteristics which makes it suitable for large-size articles with lower cycle times. 

• Anti-sea erosion works with PP Geo-bags and road stabilization works with PP Bi-Axial geogrids commenced in India. 

• Multi-layer PP containers were developed mainly for food packaging, which has the properties of a gas barrier and is treated with anti-mist agents to maintain a high shelf-life of the food products. 

• 20-liter containers for diesel storage and retail, have been manufactured using HDPE as per safety norms and regulations. 

• Recyclable pallets for material handling and transportation have been developed using LLDPE roto-molding grades. The existing pallets available in the market contain PU foam to achieve stiffness, which makes it difficult for recycling, as separation of PE and PU is technically difficult. Newly developed pallets by RIL contain LLDPE skin layer and in-situ rigid LLDPE foam to fill the cavity, replacing PU foam. This also helps to reduce the pallet weight by 7-10%, which in turn reduces the transportation cost.

RIL has always focused on launching new products.

R|ELAN

R|Elan has continued to grow by consolidating its brand partnership with more than 50 brands and extending its value chain globally, resulting in a major jump in exports of R|Elan specialty products in the last financial year. Apart from this, R|Elan has continued to penetrate new product categories such as ethnic wear, intimate wear, sportswear, etc., and initiated marketing activities that seamlessly sync and showcase the benefits of its growth engines.

RELWOOD

RelWood is a composite made with a proprietary blend of natural fibers and polymers with the look and feel of wood but without the problems associated with wood. The special attributes of RelWood — thermoforming, weatherability, water and termite-proof, and fire retardancy – enable usage in all applications where wood is used, and in many more where wood cannot be used.

RELX

Reliance Composite Solutions (RCS) under the trademark RELX, commissioned an Unsaturated Polyester resin plant during the year. Besides meeting in-house requirements, the capacity will be utilized to supply other composite manufacturers in India.

Financials

Source Reliance Industries Ltd. Annual Report 2019-20


RIL is working with 17.6% of margins on the Petrochemical business. In FY 2019-20, RIL had generated revenue of ₹1,45,264 cr. and saw a 15.6% downfall in Revenue compared to FY18-19 which was ₹1,72,065 cr. In FY 2019-20, RIL had generated EBITDA of ₹30933 cr. and saw an 18.3% downfall in EBITDA compared to FY18-19 which was ₹37,866 cr. EBITDA margins have also come down to 21.3% from 22.0% in 2018-19. In FY 2019-20, RIL had generated EBIT of ₹25,547 cr. and saw a 21.1% downfall in EBIT compared to FY18-19 which was ₹32,394 cr. EBIT margins have also come down to 17.6% from 18.8% in 2018-19.

The company's margins have come down due to lower margins in key products - Paraxylene, MEG, PET, Polypropylene, and Polyethylene. RIL optimized logistics and expanded its exports across both polymers and polyesters. 

6) Oil and Gas Exploration & Production

Deepwater 

• First and only greenfield deepwater project in India 

• Development of 3 TCFe resources in the KG D6 Block in progress 

Partnerships 

• JV with BP in India synergizing its strengths in project execution and operations with BP’s vast E&P experience 

• JV with Chevron and Ensign in US shale assets 

Coal Bed Methane 

• India’s largest surface footprint unconventional hydrocarbon project and highest CBM producer 

India’s premier gas producer 

Will be a major contributor to India’s quest for clean energy as a leading producer of gas 

Safety 

Over 12 years of safe operation, with a safety record among the best in the world since the commencement of production in deepwater block KG D6 and CBM

The global demand for gas is projected to grow by 4-5% y-o-y and in absence of investments in LNG projects in the next five years, gas prices are expected to rebound faster and continue their uptrend for most of the decade.

To be Continued...


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